UAE Law and Practice Contributed by: Stefan Mrozinski, Gabrielle Margerison (nee Lowe) and Arnold Krutilins, White & Case LLP
3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Incumbent legacy players within the UAE invest - ment management market use robo-advisers largely in the context of assessing the risk appetite of clients at a retail level and provid - ing investment advice on the basis of this risk assessment. The UAE robo-advisory segment in wealth man - agement is still at a nascent stage compared to its popularity in the US and the UK. However, with banks taking the lead and the UAE’s grow - ing status as a home for future-facing technology companies, the region represents one of the key markets for robo-advisory services in the MENA region with a new wave of digital investment platforms aiming to provide low-cost options for young professionals and affluent clients. Due to the increased use of robo-advisers in general, it is expected that regulators in the UAE will start to implement regulatory frameworks governing the licensing and use of robo-advisory services in the coming years. 3.3 Issues Relating to Best Execution of Customer Trades Depending on the nature of the regulated finan - cial activity offered, best execution principles will also apply to companies providing robo-adviser services. These best execution principles require companies to take reasonable care to determine the best execution available for an investment under the prevailing market conditions and to offer and deal in prices and conditions that are no less advantageous to the relevant client than the prevailing market conditions. Best execution principles are largely set out in the Conduct of Business (COB) Rulebook Mod - ules issued by both the DFSA and the FSRA.
Unlike the position in “onshore UAE” , in the DIFC and the ADGM, no codified reverse solici - tation exemptions exist with respect to offering regulated products and services from another jurisdiction. However, certain financial promo - tion restrictions may not be applicable in reverse solicitation scenarios. 3. Robo-Advisers 3.1 Requirement for Different Business Models Robo-advisers are found in the UAE’s investment and asset management space. Although busi - ness models will largely depend on the particular business proposition being offered, hybrid mod - els are common, combining traditional asset and investment management services with automat - ed solutions in respect of assessing risk appetite or providing algorithm-based financial planning. Arranging, advising and dealing in investments, and managing assets, constitute regulated financial activities in the ADGM and the DIFC. Similarly, promotion and carrying on the activi - ties of a financial adviser are licensed financial activities under the SCA Rulebook. Where com - panies wish to carry on these services they will fall within the scope of these licensing regimes. In 2019, the FSRA issued supplementary guid - ance for obtaining regulatory authorisation to conduct digital investment management (robo- advisory) activities in the ADGM. The guidance lays down the applicable permissions that a company will need to apply for in order to carry on digital investment management activities, along with the key controls surrounding tech - nology and algorithmic governance that a digital investment manager will need to implement.
914 CHAMBERS.COM
Powered by FlippingBook