#1- The Kingdom is opening up its capital markets to more investors under a sweeping overhaul of its fund regulations, clearing fintechs to distribute fund units and approving new investment freedoms for REITs and public funds, the Capital Markets Authority (CMA) said in a statement.

The rationale: The amendments — following a three-phase consultation that began in June 2024 — aim to widen market access, enhance distribution, and support the growth of the asset management industry, the statement said.

What was relaxed?

  • Easier access to foreign funds: Local institutions licensed to conduct investment management activities can now distribute foreign funds to local clients as long as the offering is done via private placement and the foreign fund is based out of a CMA-recognized jurisdiction.
  • REITs investment ratios relaxed on Nomu: Traded real estate investment trusts listed on Tadawul’s parallel market Nomu can now invest in development-stage real estate projects from the time of launch, without having to comply with the usual investment ratio limits.
  • New channels: Investment fund platforms and e-money institutions can now distribute fund units through their websites and mobile apps.
  • New products unlocked: Public funds are now allowed to subscribe to privately offered debt instruments issued within the Kingdom.

New restrictions were introduced, though:

  • Money market and capital protection funds are now subject to tighter risk thresholds, with exposure to a single issuer capped at 10% of net asset value and 25% across all entities. Public funds that invest in debt instruments are also required to disclose credit ratings for their top ten debt holdings in quarterly reports.
  • Retail protections were also beefed up: Retail investors can no longer contribute more than 50% of total banknote subscriptions in private and foreign funds. That cap will also hold after any secondary transfers for closed-ended funds, meaning retail investors can’t end up holding a majority stake down the line.
  • Fund manager exits: New governance provisions require fund managers — both public and private — to seek regulatory approval before stepping down or being dismissed. Managers must transfer fund responsibilities to a CMA-approved successor within 60 days.

DATA POINT- CMA-approved investment funds accounted for the largest share of AUM in 2024, reaching SAR 700 bn — a 25% y-o-y increase. The authority approved 44 new funds over the year, including equity, waqf, money market, real estate, and ETFs.

#2- Saudi Depositary Receipts (SDRs) are set to launch on Tadawul, giving local investors access to foreign-listed shares without needing to open international trading accounts, according to separate statements from the CMA, and Tadawul. The move was first announced back in January.

SDRs? Think of SDRs as a mirror. Each receipt represents a share in a foreign company, held by a custodian on behalf of the local investor. The key twist? These receipts are listed, traded, and settled in SAR on the Saudi Exchange — no need for a foreign brokerage account or conversion into a foreign currency. Investors receive the same rights as shareholders in the underlying company, including voting rights and dividends.

Investors can also redeem the SDRs for the underlying foreign shares, giving them flexibility to switch between the company’s original overseas listing venue and that of Tadawul.

The ball is rolling: CMA-licensed financial firms have been in ongoing discussions with Tadawul on the issuance of SDRs, with approvals yet to be issued, Chief of Listing at Tadawul Nasser Alajaji told Al Arabiya. Some 6.9 mn investors — including institutions and individuals — will be allowed to trade SDRs on Tadawul, Alajaji added.

#3- The authority also approved amendments making it easier for clients to open investment accounts in the Kingdom, according to a separate statement. GCC-based retail investors can now invest directly in TASI by opening an investment account and taking their pick of a wider range of securities. This marks a change from previous regulations which restricted investments to debt markets, the Nomu parallel market, investment funds, and derivatives.

Moved on? No problem: Investors who opened investment accounts while residing in the GCC can continue investing in TASI shares even after they leave.

WATCH THIS SPACE- The Shura Council urged the CMA to study the creation of a dedicated platform for qualified investors to trade real estate mortgage-backed securities, state news agency SPA reports. The move would mark a significant shift from mortgages sitting on bank balance sheets to a tradable debt market, unlocking liquidity and paving the way for broader securitization.

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