Saudi Gazette report

RIYADH — The Board of the Saudi Capital Market Authority (CMA) has approved the rules regulating foreign investment in securities, setting a ceiling for combined ownership of foreign investors at 49 percent of the shares of any listed company or its convertible debt instruments. However, foreign strategic investors are exempt from this. The CMA confirmed that foreign strategic investors are required to hold their shares for a period of no less than two years.

The CMA rules, published in Umm Al-Qura newspaper, the official gazette, restrict ownership of non-resident foreign investors to a maximum of 10 percent of the shares of any listed issuer. It also prohibits the conversion of debt instruments into shares unless the investor is within the authorized categories or through swap agreements.

According to the rules, non-resident foreign investment in shares listed on the main market is limited to six categories. They include qualified foreign investors, foreign strategic investors, ultimate beneficiaries of swap agreement concluded with a financial market institution, foreign investor, who is a client of a financial market institution licensed by the CMA to conduct management activities, foreign investor residing in a GCC country, and foreign investor who previously resided in the Kingdom or a GCC country and opened an investment account during that period.

The rules emphasize the need for financial market institutions to comply with 10 conditions when concluding swap agreements. These include ensuring complete segregation of client funds and assets, covering transactions in full throughout the term of the agreement, granting the institution sole voting rights associated with the swapped shares, and strict adherence to anti-money laundering regulations.

The rules stipulate that the Capital Market Authority may exempt any person from applying any of the provisions of these rules, in whole or in part, either upon a request from the person or on its own initiative.