Revamped Regulations: Saudi Arabia’s CMA Liberalizes Foreign Investment in Securities

The Capital Market Authority (CMA) of Saudi Arabia has unveiled its newly minted Rules for Foreign Investment in Securities. This monumental step marks a significant relaxation of the boundaries set for foreign investors eager to delve into securities listed on the renowned Saudi Stock Exchange, Tadawul.

Key Highlights of the New Framework:

1. Diverse Categories for Foreign Investors: As per Article 6, foreign investors from abroad can venture into shares on the Main Market under several categories, such as:

• Qualified Foreign Investor (QFI)
• Foreign Strategic Investor
• Ultimate beneficiary via a swap agreement with a capital market institution (CMI)
• Foreign entities, both natural and legal, aligned with a CMI for discretionary investment management.

2. Broadened Definition of QFIs: The spectrum of who can be a QFI has been significantly widened. While the previous requisite of having a hefty SAR 1,875,000,000 in assets still holds, several investor categories are now exempted from this condition. These include pension funds, endowment funds catering to education, culture, and science, government-owned entities, and international organizations affiliated with the Kingdom.

3. Simplified Qualification Process: A conspicuous shift is the eradication of the prior assessment process for QFIs. This transition implies foreign investors no longer need to navigate through intricate assessment agreements with CMIs to qualify.

4. Enhanced Engagement Scope for QFIs: QFIs now have the leeway to collaborate with foreign investment institutions for their investment endeavours in listed securities. These foreign firms can now extend asset management, advisory, and custody services without the need for a CMA stamp of approval.

5. Revamping Swaps Agreement: The new rules have also refined the conditions tied to foreign investors dealing with listed securities via Swap Agreements. Notably, certain prerequisites, like a specific duration for these agreements and prior notification to the CMA, have been done away with.

In essence, these transformative regulations signal the Kingdom’s commitment to fostering a more inclusive and liberalized financial environment, opening its gates wider to global investors and enhancing the allure of the Saudi financial market.