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CMA moves to regulate independent financial services consultants

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The proliferation of private individuals offering financial advisory services to investors on an informal basis is sought to be regulated by the Capital Market Authority (CMA) of the Sultanate of Oman.

Draft regulations, titled ‘Rules for Independent Financial Planners (IFPs), were published by the Authority last week with the goal of eliciting feedback from market stakeholders and members of the general public.

The goal, say officials, is to create a regulatory framework to support the growth of a cadre of qualified private professionals offering financial advisory services outside of the scope of well-established and regulated corporate service providers. Furthermore, by regulating and professionalizing such individual financial advisors, it is hoped that they will play an important role in advising and encouraging small investors to consider investment opportunities offered via the country’s securities market.

The CMA defines Independent Financial Planners (IFP) as any individual who, for a consideration, is engaged in the business of providing financial advice to individual clients or a group of individuals. Such advisors may include those who provide financial analysis, help clients plan their financial goals, and recommend strategies for investment in different asset classes, investment funds and other portfolios.

Once approved and enacted, the new guidelines require Independent Financial Planners to obtain a license from the Capital Market Authority (CMA) to practise financial advisory consultancy services. Exempt from this requirement are banks and finance companies licensed by the Central Bank of Oman, authorised staffers or agents of service providers licensed by the CMA, and those of brokerage or investment or portfolio management firms already authorised by the Authority.

Importantly, candidates seeking a license from the Authority should be suitably qualified and must also clear an examination prescribed by the CMA for the purposes. However, ineligible for the license are board members of any public joint stock company or employees of a business operating in the field of securities.

Further, to ensure transparency and accountability in their dealings with investors, IFPs are mandated to explain in writing the risks related to any investments recommended by them, and to obtain in writing confirmation that the investor concerned has understood those risks.

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