Saudi Arabia's Capital Market Authority Approves Amendments To The Registration Requirements For Qualified Foreign Financial Institutions, Change The Settlement Cycle For Securities Transactions And The Introduction Of Securities Lending And Covered Short-Selling

In its continuous efforts to improve the capital market environment, in accordance with the strategic objectives of fostering the development of the capital market and expanding the institutional investment base, the CMA on 15.06.2015 approved the rules for qualified foreign financial institutions in listed shares, allowing QFIs to invest directly in Saudi listed shares. These rules were implemented with the aim of raising the bar in relation to investing strategies, equity research and market valuations, and would expand and strengthen the growth of the Saudi capital market, and enhance the expertise of local institutions and investors, Thus providing stability of market prices and support growth. 

Due to the gradual approach that the CMA has chosen to undertake in the liberalization of the capital market, the CMA board has approved amendments to the criteria and requirements, to register qualified foreign financial institutions which would include the following: 
1- lowering the minimum value of the assets under management to be SAR 3,750,000,000, rather than SAR 18,750,000,000. Furthermore, The board has agreed the inclusion of new foreign financial institutions, including sovereign wealth funds, university endowments and others, as per CMA approval. 

2- The elimination of investment limits as per sub paragraph (A/1), (A/2), (A/4) and (A/5) of article 21 of the qualified foreign investor regulations. In addition, the CMA has lower investment limitations on foreign investors in order to allow for higher holding percentage in listed companies as follows: 

allowing foreign investors to own larger stakes in listed companies not reaching 10% of the shares outstanding of a single issuer for each investor. 
All foreign investors jointly ( whether resident or non-resident ) to own no more than 49 % of the shares of any listed company on the market, unless company's bylaws or any other regulation provides for foreign ownership to be limited to a lower percentage . 

The amended rules and its effective date will be published by the end of the first half of 2017. 

In addition, the CMA and Saudi Stock Exchange (Tadawul) have continuously endeavored to align the market infrastructure development with the market regulatory environment, under international best practices. In this regard, the CMA has approved Saudi Stock Exchange (Tadawul) request for amending the transactions settlement cycle of listed shares from (T+0) to (T+2).This change is to take effect first half of 2017. Furthermore, the CMA board has approved the introduction of securities lending and covered short-selling as per the regulations to be issued before the end of the first half of 2017. 
The CMA aims for these measures to provide greater stability to the overall capital market environment, through applying international best practices, incentivizing investors in an environment that supports the national economy.