Tadawul opens to all foreign investors today

Question

Answer

What restrictions apply to foreign investors’ investments?

A non-resident foreign investor (excluding a foreign strategic investor) may not own 10% or more of the shares of any listed issuer.

Foreign investors collectively—whether resident or non-resident, excluding foreign strategic investors—may not own more than 49% of the shares of any listed issuer.

Is a market institution required, when opening an investment account for a foreign investor or relying on a third party to do so, to obtain copies of the IDs of its owners, directors, authorized signatories, and account managers?

A market institution is not required, when opening an investment account for a foreign investor, to obtain copies of the IDs of its owners, directors, authorized signatories, or persons authorized to manage the account, without prejudice to the market institution’s obligation to identify and verify their identities using documents, data, or information from a reliable and independent source in accordance with relevant laws, regulations, and instructions.

This also applies where a market institution relies on a third party to open an investment account for a foreign investor, provided that the market institution has taken adequate measures to ensure that identification data and other due diligence-related documents will be made available upon request and without delay by the third party relied upon, in accordance with applicable laws, regulations, and instructions.

How can a foreign strategic investor acquire strategic stakes in companies?

This may be done through:
• Purchasing directly through the market
• Purchasing through a private transaction
• Submitting a takeover offer for shares
• Participating in IPOs in accordance with the prospectus

Are foreign investors entitled to vote at general assemblies? Can they vote electronically?

Yes, foreign investors are entitled to vote in accordance with the approved regulations.

Is a non-resident foreign investor subject to income tax?

Yes, through the imposition of a 5% withholding tax on total distributed dividends, while capital gains are not subject to tax.

Who is responsible for complying with ownership limits when appointing a foreign portfolio manager?

The non-resident foreign investor.

Who is responsible for withholding tax on dividends distributed to a non-resident investor?

The listed company that distributed the dividends.

May a foreign investor run for membership on company boards of directors?

Yes, in accordance with the Companies Law.

Can a foreign investor subscribe to IPOs?

Yes, subject to the relevant provisions and in accordance with the prospectus.

Can a foreign investor invest in listed derivatives and in the Parallel Market?

Yes, this is permitted.

Can a non-resident foreign investor deal with more than one portfolio manager?

Yes, whether the manager is a market institution licensed by the authority or a foreign portfolio manager, including a GCC portfolio manager.

Can a foreign investor obtain financing from local banks for investments in listed securities?

Yes, in accordance with the regulations of the authority and the Saudi Central Bank (SAMA).

Does a non-resident foreign investor need to obtain a license from the Authority to conduct dealing activities when acting as principal in listed securities?

There is no need to obtain a license from the Authority.

Is a foreign investor required to submit ownership notifications to the market?

Any person must notify the market when they become an owner of, or have an interest in, 5% or more of any class of voting shares of a listed issuer or voting convertible debt instruments of the issuer.

Such notification must not be later than the end of the third trading day following execution of the transaction or occurrence of the event that resulted in such ownership.