The Capital Market Authority (the "CMA") Board approved the final draft of the amended Rules for Qualified Foreign Financial Institutions Investment in Listed Securities (the “Rules”) after the draft was published on the CMA's website for 30 days for consultation. CMA clarifies that it has studied carefully all opinions, observations and recommendations received from investors, specialists and related parties.
The Rules include 24 Articles comprising procedures, requirements and conditions for the registration of the qualified foreign investors (“QFIs”) with the CMA to invest in the listed securities, and to specify their and the authorised persons' obligations in this regard.
The Rules can be viewed on the following link: http://cma.org.sa/en/Documents/QFI-en-amended.pdf
The Rules include lowering the minimum value of the assets under management to be SAR 3,750,000,000, rather than SAR 18,750,000,000 (US$ one billion or more instead of US$ five billion or more).
Furthermore, in the Rules the types of foreign financial institutions is increased to include governments and government related entities.
Moreover, the Rules eliminated the QFI client`s concept and removed some of the ownership thresholds/limits and relaxed the others.
It should be noted that the Rules include the option that a QFI may engage with a Saudi or non-Saudi portfolio manager to manage its investment in the Saudi Capital Market, including the GCC portfolio managers.
The CMA announced that the amended Rules will be effective in 3/12/1437H corresponding to 4th September 2016G. The current Rules for Qualified Foreign Financial Institutions Investment in Listed Shares shall continue to be effective until the effective date of the Rules.
In addition, the CMA will announce soon the updated Frequently Asked Questions on the Rules, which addresses questions that CMA received during the preparation of the Rules.
The amendment of the Rules is in line with the CMA's efforts that aim to develop the capital market given that the approach to free the capital market is based on a gradual method, and on the basis of the CMA`s strategic objectives to expand the base of institutional investment.
The CMA highlighted that allowing QFIs to enter the capital market contributes in achieving several objectives in the short and long term, such as the addition of the expertise of specialists international investors to the local market, enhancement of the market efficiency, motivate the listed companies to improve the level of transparency and financial information disclosure and governance practices, raise the level of research, studies and evaluations of the capital market generally and the listed companies in particular, which should result in all participants having better access to accurate information and fair evaluations.
As for the authorized persons (financial institutions licensed by the CMA), this step should contribute to the growth of their businesses, and will be accompanied by an increase in awareness activities and various conferences specified for the investment in the Saudi market and to promote the awareness generally about the capital market.
The CMA explained that the Rules allow qualified foreign financial institutions to exercise all the rights associated with the listed securities, including voting rights and trading rights issues in the market.