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The Capital Market Authority (CMA) approved the rules for foreign investment in securities, amendments to the investment accounts instructions, amendments to the executive regulations of the companies law for listed joint stock companies, amendments to the glossary of defined terms used in the regulations and rules of the capital market authority, which shall be effective as of the date of publication.
The approval of the rules, instructions and glossary aim to develop the provisions regulating foreign investment in securities, and facilitate access to the regulatory frames governing foreign investment in securities. This will be attained by collecting provisions in a single document, and facilitating qualified foreign investors' (QFIs) entry procedures to the Saudi capital market, the market regulator said in a statement.
The recent amendments comprised facilitating the QFIs' requirements, facilitating disclosure requirements and continuous obligations to ease entry to the Saudi capital market and minimize the differences between QFIs and other investor categories in the market.
The amendments also comprised developing the qualification conditions that must be met by QFIs to invest in the stocks listed on the Main Market and canceling requirements to apply for qualification and QFI's assessment agreement. The approved rules only require QFIs to open an investment account in accordance with the Investment Accounts Instructions issued by CMA. This measure aims to ensure that QFIs are meeting all relevant qualification conditions.
Furthermore, the amendments included developing conditions on the investment of non-resident foreign investors in listed securities through swap agreements, including removing requirements for the duration of such agreements, as well as canceling requirements to notify the CMA prior to entering into a swap agreement.
The amendments also included adding a new channel for foreign investment in securities listed on the main market by allowing all foreign natural and legal persons to invest in securities listed on the main market through discretionary portfolios management by Capital Market Institutions.
The rules shall replace the rules for qualified foreign financial institutions investment in listed securities, instructions for the foreign strategic investors' ownership in listed companies and the guidance note for the investment of non-resident foreigners in Nomu-Parallel Market once effective.
The approval of these rules is expected to have a positive impact on boosting liquidity in the Saudi market, deepening and raising its attractiveness, and enhancing its global status. The rules will also contribute to the transformation of knowledge and experiences in local capital institutions and investors, thereby enhancing the role played by institutional investors in the Saudi capital market.
It is worth noting that the CMA issued the updated edition of the Rules in 2018, which resulted in a 179% increase in the number of QFIs from 2018 to 2022. In addition, the foreign investors' ownership ratio of the free float total market value increased from 3.77% in 2018 to 14.21% by the end of 2022.
The rules were approved after the CMA published the amended draft rules for foreign investment in securities on the unified electronic platform for consulting the public and government entities (Public Consultation Platform) affiliated with the National Competitiveness Center (NCC), and the CMA's website for public consultation for a period of (30) calendar days.
In line with Vision 2030, the Kingdom aims to be an attractive and instigating investment destination to continue expanding, as it has developed structural reforms in the financial and economic aspects that have contributed to raising economic growth rates and maintaining financial stability and sustainability, which in turn, helps in attracting foreign investments.
Through its strategic plan, the CMA seeks to position the Saudi capital market as main market in the Middle East and one of the leading financial markets in the world, and to be an advanced market and attractive to domestic and foreign investment, enabling it to play a pivotal role in developing the economy and diversifying its sources of income in line of the Kingdom's Vision 2030.
To view the rules for foreign investment in securities, amendments to the investment accounts instructions, amendments to the executive regulations of the companies law for listed joint stock companies, amendments to the glossary of defined terms used in the regulations and rules of the capital market authority, click here:
The Rules for Foreign Investment in Securities
The Amended Investment Accounts Instructions
The Amended Implementing Regulation of the Companies Law for Listed Joint Stock Companies
The Amended Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority
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