The Board of Directors of the Capital Markets Authority approved amendments to the list of financial market institutions. This includes regulating the implementation of automated advisor services using algorithms and modern technological means for managing customers’ investments according to predefined investment strategies, which services are provided through financial market institutions licensed to manage investments or to manage investments and manage funds, after experience provided by financial technology companies licensed within the Institute of Financial Technology, and are permitted to be provided by financial market institutions licensed to manage investments.
market efficiency
The approved amendments aim to increase market efficiency, expand the range of financial services offered through modern technologies, offer investors innovative and effective solutions and open new investment channels suitable for different segments, especially retail investors.
The approved regulatory amendments include a number of requirements aimed at ensuring the safety and efficiency of services provided through automated advisors. The amendments required financial market institutions to notify the authorities in advance of the strategies used to construct and manage investment portfolios and any updates that occur to the strategies before making them available to customers on the platform. The proposed amendments also include requiring market institutions to establish systems and supervisory procedures to ensure the safety and efficiency of the algorithms and technologies used, and to conduct regular tests to ensure the reliability and effectiveness of these technologies in achieving their goals at least 10 days before they are made available to customers on the platform. day to day.
Standards and requirements
The approved amendments would allow financial market institutions with investment management or investment management and fund management licenses to provide automated advisory services, provided that the investments in the investment portfolio are not concentrated in a single asset or security of a single issuer. If automated advisor services are provided for securities issued or listed outside the Kingdom, those securities must be supervised by a regulatory authority in accordance with standards and regulatory requirements at least similar to those applied by the authorities.
The Regulation sets standards for financial market institutions to disclose to customers the operational details and mechanisms of robo-advisor services, such as clarifying the strategies used to construct and manage investment portfolios, asset selection criteria, allocation provisions, and mechanisms for rebalancing investment portfolios, as well as additional responsibilities related to job registration, such as requiring financial institutions to register information technology officers responsible for the management and follow-up of the technical systems used to provide robo-advisor services.
Disclosure obligation
The approved amendments would require financial market institutions to disclose, on the platforms on which automated advisor services are provided, the role of the algorithms and mechanisms they rely on in providing automated advisor services, and the risks associated with them, in a manner that is fair, clear, accurate, non-misleading, and consistent with the classification categories of their customers.
According to the approved amendments, financial market institutions will be required to clarify the criteria and basis for measuring the performance of investment portfolios and the total return achieved after deducting actual costs, and display the performance record of investment portfolios since inception, including publishing this information on the financial market institution’s website.
The Board of Directors of the Capital Markets Authority has approved proposed amendments to the Regulation of Financial Market Institutions, which include organizing the practice of providing robo-advisor services using algorithms and modern technological means to manage customers’ investments according to predetermined investment strategies. These services are provided through financial market institutions licensed to perform investment management or fund management, and after a trial period conducted by licensed fintech companies within financial technology labs, financial market institutions licensed to manage investments are permitted to provide the services.
market efficiency
The approved amendments aim to increase market efficiency, expand the range of financial services offered through modern technologies, offer investors innovative and effective solutions and open new investment channels suitable for different segments, especially retail investors.
The approved regulatory amendments include several requirements aimed at ensuring the safety and efficiency of services provided through robo-advisors. The amendments required financial market institutions to inform the authorities in advance of the strategies used to construct and manage investment portfolios and any updates that occur before making them available to customers on their platforms. The amendments also required market institutions to establish monitoring systems and procedures to ensure the safety and efficiency of the algorithms and technologies used, and to conduct regular tests to verify the reliability and effectiveness of these technologies in achieving their objectives at least 10 days before they are made available to customers on the platform.
Standards and requirements
The approved amendments would allow financial market institutions with an investment management or fund management license to provide robo-advisory services, provided that the investments in the investment portfolio are not concentrated in a single asset or security of a single issuer. If we provide robo-advisory services to securities issued or listed outside the Kingdom, those securities must be subject to regulatory oversight in accordance with standards and regulatory requirements at least similar to those applied by the regulatory authority.
The regulation sets standards for financial market institutions to disclose details and mechanisms of robo-advisor services to customers, including clarifying the strategies used to construct and manage investment portfolios, asset selection criteria, distribution provisions, and rebalancing mechanisms for investment portfolios, as well as defining additional responsibilities related to job registration, such as requiring financial institutions to register a chief information officer responsible for managing and monitoring the technical systems used to provide robo-advisor services.
Disclosure obligation
The approved financial amendments required market institutions to disclose, on the platforms on which robo-advice services are provided, the role and mechanisms of the algorithms they rely on in providing robo-advisory services, and the associated risks, in a manner that is fair, clear, accurate and non-misleading and appropriate to the target customer classification.
According to the approved amendments, financial market institutions will be required to present the performance record of their investment portfolios since inception, including clarification of the criteria and basis for measuring the performance of their investment portfolios and the total return achieved after deducting actual costs, and to publish this information on the financial market institution’s website.
