Saudi Arabia’s Capital Market Authority (CMA) has invited relevant stakeholders in the capital market to provide feedback on the draft regulation permitting capital market institutions to offer robo-advisory services.
The consultation period will last 30 calendar days, ending on September 24 2025.
The draft regulation aims to allow licensed capital market institutions engaged in investment management, or in investment management and fund operation, to provide robo-advisory services.
These services would use algorithms and modern technological tools to manage client investments according to pre-defined strategies.
The initiative aligns with the CMA’s objectives to support fintech, improve market efficiency, and expand the availability of financial services delivered through technology, particularly for individual investors and those with limited experience.
The draft sets out requirements to ensure the soundness and reliability of robo-advisory services.
Capital market institutions would be required to notify the CMA in advance of the strategies used in constructing and managing investment portfolios, and of any updates, before making them available to clients.
The draft also specifies that institutions must establish systems and control procedures to ensure the effectiveness of algorithms and technologies, and conduct periodic tests to verify their reliability.
Under the proposed regulation, a licensed institution may offer robo-advisory services provided that investment portfolios are not concentrated in a single asset or in securities issued by a single issuer.
Where the service involves securities issued or listed outside the Kingdom, these must be regulated by authorities with standards and requirements equivalent to those applied by the CMA.
The draft also requires institutions to provide clients with clear information on the robo-advisory service, including the strategies for portfolio construction and management, asset selection criteria, allocation rules, and portfolio rebalancing mechanisms.
Institutions must register the Information Technology Officer responsible for managing and overseeing the systems used for the robo-advisory service.
In addition, institutions must disclose the performance track record of investment portfolios since inception, including the performance measurement methodology and total returns after deducting actual expenses.
These disclosures must be published on the institution’s website.
The draft also sets ongoing prudential requirements to ensure service continuity and protect investor interests.
The draft defines robo-advisory services as “the use by a licensed capital market institution of algorithms and modern technological tools to manage clients’ investments based on pre-determined investment strategies, with no or limited human intervention.”
As of the end of 2024, assets under management through robo-advisory platforms reached approximately SAR 3.4 billion, with 382,616 investment portfolios, of which 99.76% belonged to retail clients.
Featured image credit: Edited by Fintech News Middle East, based on image by albertyurolaits via Freepik
