Sub Advisor Agreement Template for Saudi Arabia

A Sub Advisor Agreement is a specialized contract that allows a primary investment advisor to delegate specific investment management duties to another qualified firm while maintaining overall responsibility for client relationships. In Saudi Arabia, this arrangement requires careful attention to Capital Market Authority (CMA) regulations and must ensure all parties maintain proper licensing and compliance standards.

When do you need this document?

You need a Sub Advisor Agreement when your primary advisory firm lacks expertise in specific asset classes, geographical markets, or investment strategies that your clients require. This is particularly relevant when expanding into international markets, managing specialized portfolios like Islamic finance products, or accessing niche investment expertise. The agreement becomes essential when you want to maintain client relationships while leveraging another firm's specialized capabilities. In Saudi Arabia's growing capital markets, this arrangement helps local advisors access global expertise while ensuring compliance with CMA requirements and Shariah principles where applicable.

Key legal considerations

The agreement must clearly define the scope of delegated responsibilities while ensuring the primary advisor retains ultimate accountability to clients. Key provisions include detailed service descriptions, performance benchmarks, compliance obligations, and liability allocation between parties. Fee structures require careful documentation, including how sub-advisory fees relate to overall client charges. Risk management protocols must be established, covering operational risks, investment risks, and regulatory compliance failures. Confidentiality clauses protect client information and proprietary investment strategies. Termination provisions should address notice periods, transition arrangements, and ongoing obligations. The agreement must also specify reporting requirements, audit rights, and dispute resolution mechanisms.

Legal requirements in Saudi Arabia

Under the Capital Market Law and CMA's Authorized Persons Regulations, both primary advisors and sub-advisors must maintain appropriate licenses for their respective roles. The primary advisor cannot delegate its fiduciary duties to clients, even when utilizing sub-advisory services. All arrangements must comply with CMA's outsourcing guidelines and notification requirements. The agreement must address Anti-Money Laundering Law compliance, ensuring both parties maintain appropriate AML procedures. Documentation must be maintained in Arabic or accompanied by certified translations for regulatory purposes. Shariah compliance considerations may apply depending on the nature of investments and client requirements. The agreement should reference jurisdiction under Saudi commercial courts and comply with Saudi Labor Law if the arrangement involves personnel secondments or shared resources.