UAE Approves Federal Robo-Advisory Rules for Licensed Investment Managers

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UAE robo-advisory rules let licensed firms offer AI‑driven portfolios while tightening governance and investor protection.

The Securities and Commodities Authority approved a federal robo-advisory framework on 30 June 2025, restricting services to licensed portfolio managers.
Platforms must use artificial intelligence and advanced algorithms to deliver automated investment recommendations under discretionary or non-discretionary mandates.
Mandatory independent IT audits, rigorous cybersecurity controls and regular algorithm reviews are required to uphold system integrity and data protection.
The federal framework complements existing free-zone regimes in DIFC and ADGM, reducing regulatory fragmentation across the UAE.
Oversight transferred to the Capital Market Authority on 1 January 2026, with firms required to regularise their status by January 2027.
Retail investors gain lower-cost access to diversified portfolios through regulated digital channels with mandated transparency on fees and risks.

Federal Framework Brings Automated Investment Under Capital Market Authority Oversight

The Securities and Commodities Authority introduced a nationwide regulatory framework for robo-advisory services on 30 June 2025, requiring firms to hold a portfolio management licence before offering AI-driven investment platforms to UAE clients. The rules establish mandatory algorithm governance standards and independent IT audits, aligning digital wealth management with the We the UAE 2031 vision for a secure, knowledge-based economy. From 1 January 2026, oversight transferred to the newly created Capital Market Authority, which inherited the SCA's regulatory responsibilities and enforcement powers.

While robo-advisory platforms operating in the free zones of DIFC and ADGM have been subject to separate regimes administered by the Dubai Financial Services Authority and the Financial Services Regulatory Authority respectively since 2019, the federal framework now extends regulated robo-advisory access to mainland UAE investors. This reduces the previous fragmentation where automated investment services were available only under free-zone licences, allowing licensed portfolio management firms to integrate robo-advisory capabilities into their offerings subject to strict cybersecurity, disclosure and technology-resilience requirements.

SCA Restricts Robo-Advisory to Licensed Portfolio Managers

Under the new framework, only entities already licensed by the SCA for portfolio management are authorised to provide robo-advisory services to clients. These typically include banks, investment firms and asset managers holding the relevant SCA permissions. While unlicensed technology providers cannot directly offer automated investment advice to clients, they may operate as technology partners to regulated institutions.

Robo-advisory services must be delivered exclusively through digital platforms that use artificial intelligence and advanced algorithms to generate automated investment recommendations. The regulation permits both discretionary arrangements, where the licensed firm executes investment decisions under a client mandate, and non-discretionary arrangements that require client approval before execution. All services remain subject to existing portfolio management agreements and must comply with broader SCA conduct-of-business rules.

Governance and Technology Compliance Requirements

The SCA framework embeds stringent governance and risk-management standards for robo-advisor platforms, with emphasis on technology resilience and data security. Firms must undergo mandatory independent IT audits with scope sufficient to assess system integrity, data protection and operational resilience. Additionally, rigorous cybersecurity controls are required, including measures to protect client data, prevent unauthorised access and mitigate cyber-attack risks.

Platforms must conduct regular reviews of algorithms and systems, including ongoing testing of model performance, monitoring for errors or unintended biases, and ensuring that algorithm changes are appropriately controlled and documented. Full disclosure of fees and risks is mandatory, requiring firms to clearly explain how the robo-advisory service works, detail all charges including management fees, platform fees and transaction costs, and provide prominent warnings about investment risks, market volatility and the limitations of automated advice.

According to the SCA, these safeguards are intended to uphold high standards of governance, transparency and investor protection while fostering innovation in digital financial services.

Relationship with DIFC and ADGM Free-Zone Regimes

Before the SCA regulations took effect, digital investment managers in the UAE largely operated under free-zone rules in the Dubai International Financial Centre, regulated by the DFSA, or Abu Dhabi Global Market, regulated by the FSRA. Platforms such as Sarwa are licensed by the FSRA in ADGM, while StashAway operates under DIFC regulation, meaning their governance, capital and risk requirements were aligned with those free-zone regimes rather than federal law.

The ADGM FSRA has operated a dedicated regulatory framework for Digital Investment Managers since 2019, clarifying the regulatory permissions needed to provide digital investment services in or from ADGM. The framework explains how the FSRA applies its authorisation criteria in areas such as technology governance, suitability, disclosure and algorithm governance, requiring human oversight over algorithm design, performance and security. Outcomes produced by algorithms must be explainable, traceable and repeatable, aligning with international best practice. Subject to certain conditions, Digital Investment Managers can benefit from reduced prudential capital requirements, reflecting the FSRA's risk-proportionate approach.

The SCA's nationwide framework now complements these free-zone regimes by allowing SCA-licensed portfolio management firms to offer robo-advisory directly to mainland UAE clients, thereby reducing the previous fragmentation where robo-advisers were regulated only at free-zone level.

Transition to Capital Market Authority Supervision

Federal Decree-Laws that took effect on 1 January 2026 replaced the SCA with a new Capital Market Authority, which inherited the SCA's rights, obligations and contracts. The CMA's remit covers a broad spectrum of securities-market activities, including issuance, brokerage, asset management, intermediation, alternative finance and related services.

Robo-advisory falls within this perimeter as a form of portfolio management and investment advisory delivered through digital platforms, with existing SCA licences and regulations expected to transition into the CMA framework over a defined period. Entities caught by the new CMA laws must regularise their status within one year of entry into force, by 1 January 2027, unless the CMA Board extends the deadline.

The CMA has enhanced enforcement powers, including administrative fines up to AED 200 million or ten times the gains made or losses avoided, whichever is greater. The regulator can also suspend or revoke licences, impose management bans and issue public censures. Criminal-law penalties have increased as well, with courts able to impose fines up to AED 250 million for serious offences.

Practical Implications for Firms and Investors

Licensed portfolio management firms in the UAE can now integrate robo-advisory capabilities into their offerings to serve retail, mass-affluent and smaller institutional clients more cost-effectively. However, platforms must build robust technology and compliance infrastructure, including AI and algorithm management frameworks aligned with CMA standards and, where applicable, ADGM or DIFC standards.

This requires strong cybersecurity and data-protection measures, along with independent IT audits featuring documented testing, governance committees and board oversight. For retail investors in the UAE, the framework delivers lower-cost access to diversified portfolios via regulated digital channels while mandating transparency on fees and risks and imposing oversight on algorithms and IT systems.

For financial advisers, brokers and fintech founders, the robo-advisory regime is part of a broader regulatory reset that includes the creation of the CMA, expanded market-conduct rules, and tougher anti-money laundering and governance requirements for all intermediaries. The regime actively encourages AI-enabled financial services under strict supervision, aligning with national digital-economy objectives outlined in the We the UAE 2031 vision.