The Financial Services Regulatory Authority of Abu Dhabi Global Market (ADGM) has revealed its regulatory framework for ‘Digital Investment Managers’ operating in its international financial centre.
In a statement, the regulator defined robo-advisers as Digital Investment Managers who provide investment management services using algorithm-based tools and technology to interact with more tech-savvy clients.
This technology allows investment managers to provide tailored investment management services to clients in a cost-effective and scalable way, it said.
Richard Teng, chief executive of the Financial Services Regulatory Authority of ADGM, said: “Robo-advice leveraging AI and data analytics is an area of FinTech that has enormous potential to improve investment decision making in the Middle East and Africa region.
“With this guidance, we aim to make it easier for digital investment businesses to operate in ADGM and in turn provide investors with greater access to professional investment tools to help achieve their financial goals.”
In new guidance it shows how the regulatory framework applies to these businesses and how robo-advisors can operate more effectively in ADGM, including permission for digital investment managers to hold less prudential capital if they meet the stipulated requirements.
Authorisation criteria covers key existing areas of technology governance, suitability and disclosure, and newer areas such as algorithm governance which has various safeguards including that the algorithm model is not affected by possible behavioural biases and ensuring the outcomes are explainable, traceable and repeatable.