Aiming to provide better protection to retail clientele, the Saudi Arabian Capital Market Authority (CMA) is taking steps to ensure qualified and institutional investors comprise an equal or higher ratio of subscriptions for private and foreign investment funds.
This initiative is in the form of draft amendments to Articles 80 and 98 of the Capital Market Law issued by Royal Decree No (M/30) – which CMA is seeking public feedback for 15 days ending on the 5th November 2024.
Specifically, the CMA proposal “prohibits offering units of private funds to retail clients unless the fund manager collects total cash subscriptions from qualified clients and institutional clients equal to or greater than the total cash subscriptions intended to be collected from retail clients”.
A similar prohibition was proposed for “the private offering of securities issued by a foreign fund to retail investors”.
The latest proposal comes about three years after the 2021 leeway granted for retail clients to subscribe to private and foreign investment funds.
The previous rules did not specify the subscription percentage of retail investors – compared to qualified and institutional clients. The main restriction still enforced is the SAR200,000 (US$53,220) cap on each retail client’s subscription.
These proposals are aligned with an earlier Royal Decree No. M/19, issued on the 22nd July 2024, and published on the 11th August 2024. This new Foreign Investment Law comes into effect from February 2025, replacing existing regulations in place since April 2000.
“The new Law provides greater protection for investors from the expropriation of their investments, with guaranteed equal treatment of domestic and foreign investors, and protections for intellectual property and trade secrets,” noted Peter Smith, dispute resolution legal director at Charles Russell Speechlys.
Apart from allowing authorities to incentivise investment in specific areas, this solicitor said the July regulations will expressly permit investors to use dispute resolution mechanisms alternative to litigation – including arbitration, mediation and conciliation.
