Boutique Investment Banks Resist Saudi Arabia's Regional HQ Rules

Several elite Wall Street advisory firms are resisting Saudi Arabia's rules requiring a significant local headquarters to win government business, arguing the mandates are ill-suited for their lean operational structures, according to a Financial Times report.

Firms including Moelis, Rothschild, PJT Partners, and Evercore have opened offices in Riyadh but continue to use Dubai as their primary regional hub and have not yet secured the required Regional Headquarters (RHQ) license.

Sticking Point on Staffing

The RHQ program, which took effect in 2024, is central to the kingdom's strategy to become a dominant regional business hub. A key provision is that companies without a licensed RHQ in Riyadh risk being barred from lucrative contracts with government entities, including the nation's $900 billion sovereign wealth fund, the Public Investment Fund (PIF).

However, the program's terms pose a challenge for boutique investment banks. The rules require:

• A minimum of 15 full-time employees to be based at the Saudi RHQ within one year of licensing.
• These roles must be senior executives in managerial or strategic functions, rather than direct revenue-generating positions.

This structure adds significant operational costs that do not align with the simpler, more agile business models of advisory firms, which typically operate with fewer administrative staff compared to large, full-service international banks.

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An Uncertain Path Forward

In response to the requirements, some boutique firms have reportedly sought clarification or exemptions from Saudi Arabia's Ministry of Investment, which oversees the RHQ program. According to the report, one bank's application is currently "on hold," while another is considering abandoning its plan to secure a license.

This contrasts with the approach of firms like Lazard, which entered the Middle East market by establishing Riyadh as its regional base from the outset. The pushback highlights a potential friction point between the kingdom's ambitions and the operational realities of specialized financial services firms.

Market Context and Government Stance

The Saudi Ministry of Investment stated it has already exceeded its 2030 target of 500 companies, with more than 700 registered in the RHQ program. As of July, 19 financial institutions had obtained licenses, with another 30 in the pipeline.

This development comes as capital markets and M&A activity in Saudi Arabia saw a slump in the first six months of this year, according to data from Dealogic. Bankers also noted the PIF is expected to pivot to a more domestic focus, making access to its deals even more critical for firms operating in the kingdom.