The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) calls for fairness, accountability and transparency in its regulatory framework for digital investment managers, reports Jane Connolly.
In the guidance, the FSRA outlines the regulatory permissions that may be required for digital investment managers who use algorithm-based technology in their tailored investment management services – also known as ‘robo-advisors’ – to operate in or from ADGM.
The FSRA also explains its authorisation criteria for technology governance, suitability, disclosure and algorithm governance.
Principles of fairness, transparency and accountability are incorporated into the FSRA’s requirements for algorithm governance. These include protection for the algorithm model’s integrity, along with human oversight of its design, performance and security.
Digital investment managers must also guard against behavioural biases and ensure that outcomes from algorithm models are explainable, traceable and repeatable.
“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,” says Richard Teng, CEO of the FSRA of ADGM. “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.”
He adds: “As an international financial centre, ADGM actively enhances its framework and platform to support innovation and the varying financial needs of businesses, investors and consumers. We look forward to welcoming more robo-advisors to establish their presence in Abu Dhabi in ADGM and support investors with their innovative solutions.”
The guidance – which can be read in full here – also states the FSRA will allow digital investment managers to hold a lesser amount of prudential capital if they meet the stipulated criteria and requirements.