The Capital Market Authority Approves "Instructions on Issuing Depositary Receipts Out of the Kingdom"

The Capital Market Authority (CMA) Board approved the "Instructions on Issuing Depositary Receipts Out of the Kingdom" which aim to set out the regulatory framework for the issuance of depository receipts out of the Kingdom of Saudi Arabia for shares issued in the Kingdom and listed in the Saudi Stock Exchange; or shares issued in the Kingdom and its issuer has made the necessary arrangements for listing them in the Exchange. These instructions come for the purpose of opening the Saudi financial market to foreign markets and contributing to build an advanced global financial market, in addition to providing additional financing methods for Saudi issuers whose shares are listed in the Exchange, or who have made the necessary arrangements for listing their shares in the Exchange.

These instructions enable the company (the issuer) to allocate a percentage of the company's shares for which depository receipts are issued, where such depository receipts will be offered and listed in a foreign financial market. Listed or non-listed Companies on emerging markets typically use depository receipts for the purpose of offering and listing in advanced foreign markets, as depository receipts contribute to increasing the efficiency of pricing the issuer's securities between the local and foreign markets. It is also one of the flexible methods for the issuer to offer securities in the currency of the foreign market.

In this regard, Mr. Bader Balghonaim, the CMA Deputy for Legal Affairs and Enforcement clarified that one of the key objectives of these instructions is to set out the regulatory framework for the issuance of depository receipts out the kingdom for shares of companies listed on the Saudi Stock Exchange, or shares for which necessary arrangements for listing in the Exchange have been made, which enables diversifying the investors base in the Saudi Stock Exchange to include foreign investors in those depository receipts out the kingdom, taking into consideration international best practices and standards.

The CMA studied all views and comments received during the public consultation, and among the views that were taken into consideration is clarifying the conditions to be met in order to enable the holder of depositary receipts, if such holder is among the categories of investors allowed to invest in the listed shares in the Kingdom, to cancel such receipts and become the holder of the corresponding shares.

Moreover, the CMA has prepared the instruction in line with the its strategic objectives and responsibilities in further developing the financial market; it also comes in line with the CMA's strategic initiative "Financial Leadership Program" to contribute in achieving the Saudi Vision 2030.

The Instructions can be viewed via the following link:

Instructions on Issuing Depositary Receipts Out of the Kingdom