Saudi Arabia Limits Foreign Investment in Securities to 49% Ownership
The Saudi Capital Market Authority (CMA) has established rules regulating foreign investment in securities.
RIYADH — The Board of the Saudi Capital Market Authority (CMA) has approved new rules that govern foreign investment in securities.
According to these guidelines, foreign investors are now limited to a combined ownership of no more than 49% of shares in any listed company or its convertible debt instruments.
However, this restriction does not apply to foreign strategic investors who have the freedom to exceed this threshold due to their strategic importance and long-term commitment to the nation's economy.
Notably, these strategic investors are required by the CMA to retain their shares for a minimum period of two years.The rules, published in the Umm Al-Qura newspaper, which serves as Saudi Arabia's official gazette, impose additional restrictions on non-resident foreign investors.
They stipulate that such investors can only hold up to 10% of the issued shares of any listed entity.
Furthermore, these investors are prohibited from converting debt instruments into equity unless they fall within certain approved categories or engage in swap agreements authorized by the CMA.The guidelines categorize non-resident foreign investment in shares traded on Saudi Arabia's main market into six distinct categories.
These include qualified foreign investors and foreign strategic investors, among others.
The rules also outline specific requirements that financial market institutions must fulfill when entering into swap agreements.
These conditions ensure full segregation of client assets and funds, cover the transactions fully for the duration of the agreement, grant the institution sole voting rights associated with the swapped shares, and adhere strictly to anti-money laundering laws.It is worth noting that the Saudi Capital Market Authority reserves the right to exempt any individual or entity from all or part of these provisions upon request or at its discretion.
This flexibility allows the CMA to adapt the rules to specific circumstances or to accommodate special cases as needed.
According to these guidelines, foreign investors are now limited to a combined ownership of no more than 49% of shares in any listed company or its convertible debt instruments.
However, this restriction does not apply to foreign strategic investors who have the freedom to exceed this threshold due to their strategic importance and long-term commitment to the nation's economy.
Notably, these strategic investors are required by the CMA to retain their shares for a minimum period of two years.The rules, published in the Umm Al-Qura newspaper, which serves as Saudi Arabia's official gazette, impose additional restrictions on non-resident foreign investors.
They stipulate that such investors can only hold up to 10% of the issued shares of any listed entity.
Furthermore, these investors are prohibited from converting debt instruments into equity unless they fall within certain approved categories or engage in swap agreements authorized by the CMA.The guidelines categorize non-resident foreign investment in shares traded on Saudi Arabia's main market into six distinct categories.
These include qualified foreign investors and foreign strategic investors, among others.
The rules also outline specific requirements that financial market institutions must fulfill when entering into swap agreements.
These conditions ensure full segregation of client assets and funds, cover the transactions fully for the duration of the agreement, grant the institution sole voting rights associated with the swapped shares, and adhere strictly to anti-money laundering laws.It is worth noting that the Saudi Capital Market Authority reserves the right to exempt any individual or entity from all or part of these provisions upon request or at its discretion.
This flexibility allows the CMA to adapt the rules to specific circumstances or to accommodate special cases as needed.
