Riyadh: The Capital Market Authority (CMA) has approved a regulatory framework aimed at developing financing investment funds, allowing for their public offering and listing on both the Main Market and the Parallel Market. This development is intended to strengthen their role as financing channels within the Saudi capital market, providing additional products that support economic growth and meet investor needs.
According to Saudi Press Agency, the new amendments permit the public offering of financing investment funds, which were previously restricted to private placements. This change is expected to diversify investment products and increase assets under management. The amendments also consolidate provisions governing financing investment funds into a single regulatory document, enhancing regulatory clarity and unifying the legislative framework.
The CMA has also approved a name change from ‘Instructions on the Direct Financing Investment Funds’ to ‘Instructions on the Financing Investment Funds’ to encompass both direct and indirect financing funds. This reflects a broader scope of activities and aligns with the updated regulatory framework. Additionally, the amendments aim to improve fund operations and management, enhancing efficiency and compliance with best practices.
The press release highlighted new risk-management requirements, including borrowing caps for public financing funds. Total borrowing is capped at 15% of net asset value for these funds, while those listed on the Parallel Market cannot exceed 50% of the fund’s total size. Public indirect financing funds must also adhere to exposure limits, ensuring no more than 25% exposure to a single beneficiary or related group.
Further, the amendments define investment scopes, limiting exposure to highly volatile or low-liquidity assets. This supports effective liquidity management until suitable financing opportunities emerge. Private financing investment funds may now be structured as open-ended funds under specific conditions, and public financing funds are classified as a category of specialized public funds.
The updated regulatory framework introduces definitions for direct and indirect financing funds, imposes additional obligations on fund managers, and enhances disclosure requirements in reports to unitholders. These changes are designed to strengthen transparency and governance.
This initiative is part of the CMA’s ongoing efforts to develop the capital market’s regulatory infrastructure, opening new financing channels to support economic growth. It aims to reinforce the Saudi capital market’s position as an attractive destination for both local and international investors.
The framework follows the publication of a draft regulatory framework by the CMA in August, which was available for public consultation for 30 days on the Public Consultation Platform of the National Competitiveness Center and the CMA’s website.