Business & Money | Sunday 2 October, 2016 4:13 am |

The Capital Market Authority (CMA) has the right to intervene in eight cases in order to control investments by Qualified Foreign Institutions (QFI) to protect the local market, Makkah Arabic daily said citing regulations.

The Saudi market regulator can ask licensed QFIs to provide it with any information or documents on their dealings in the market.

CMA can intervene in the following eight cases:

1. If QFIs fail to fulfill conditions, commitments and requirements mentioned in the rules for investment.

2. If QFIs fail to meet the requirements of the rules organizing investment within 60 days from the date of registration.

3. If QFIs become insolvent.

4. If they violate any of the commitments stated in the regulations and executive bylaws or any other regulations in the Kingdom.

5. If they obtain registration on the basis of incomplete, unclear, wrong or misleading information.

6. If they have faced regulatory or legal penalties in any country.
7. If they introduce any structural changes.

8. Any other case that CMA deems necessary for protecting investors or the Kingdom’s financial market.

In May this year, the Capital Market Authority (CMA) approved a number of amendments to its Qualified Foreign Institutions (QFI) scheme, which allows foreign institutions to buy stocks directly.

The amendments allow each foreign investor to own a stake of under 10 percent of a single company.

Previously, each QFI together with its affiliates could only own a maximum of 5 percent of the shares of any listed company.

To qualify as a QFI, foreign institutions will now only need to have a minimum SR3.75 billion ($1 billion) of assets under management, rather than SR18.75 billion as required previously, the CMA said.

Furthermore, the CMA agreed to the inclusion of new foreign financial institutions, including sovereign wealth funds and university endowments.

All foreign investors jointly (whether resident or non-resident) can own no more than 49 percent of 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 new rules and their effective date will be published by the end of the first half of 2017, it added.

Saudi Arabia opened up its stock market to foreigners last June as part of a broad overhaul aimed at gradually opening the Arab world’s largest economy more generally to outside investors. The Tadawul market, with a capitalization of more than $560bn, is expected to be upgraded from frontier to emerging markets status by 2017, encouraging more asset managers to allocate funds to Saudi Arabia.

Until now, foreign firms have been using swap instruments to gain limited access and account for $9bn, or 1.6 percent, of the overall market.