Prime Highlights
- Saudi Arabia’s Capital Market Authority updates fund and REIT regulations to enhance transparency, competitiveness, and investor protection.
- New rules permit unit distribution via licensed online platforms and permit REITs to invest in development ventures from inception.
Key Fact
- Voluntary change of funds managers is subject to cma approval and selection of a new manager within 60 days.
- New framework aligns with global best practices and is in accord with general Saudi Vision 2030.
Key Background
The Saudi Arabian Capital Market Authority (CMA) has just undertaken significant reforms of its Investment Funds Regulations and Real Estate Investment Funds Regulations, with the aim of elevating the Kingdom’s capital market regime. The reforms are a strategic move towards enhancing governance of the market, competitiveness, and more robust investor protection, which is closely in line with the Vision 2030 vision.
One of the most significant alterations allows distribution of investment fund units by authorized financial institutions, such as digital investment platforms and e-money institutions. By broadening distribution channels to mobile applications and online platforms, the CMA is allowing more retail and institutional investors access to capital markets, promoting wider market participation.
In a significant regulatory shift, the CMA has now permitted Real Estate Investment Traded Funds (REITs) quoted on Saudi Arabia’s parallel market to invest in real estate development ventures from the beginning. This reform offers REITs greater autonomy to be involved in value-enhancing projects and diversify their portfolios, which would attract more strategic investments into the property sector.
The laws also accompany more specific terminologies of fund manager succession. The fund managers intending to depart require CMA approval and name a replacement within 60 days to guarantee business continuity and protect investors’ interests. This action further increases accountability and guarantees the integrity of fund operation.
These reforms are part of Saudi Arabia’s general efforts to encourage foreign investment, increase market liquidity, and internationalize financial services. By the reform of the regulatory system and enhancing transparency, the CMA is building trust in the Kingdom’s financial markets and progressing towards its goal of becoming the preeminent regional financial hub.
