As part of the Capital Market Authority's ("CMA") strategic objectives to develop the capital market, and based on the Capital Market Law issued by Royal Decree No. (M/30) dated 2/6/1424 H, the CMA Board issued its Resolution approving the amendments to the Investment Funds Regulations and Real Estate Investment Funds Regulations and Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority.
The approved amendments aim to further regulate and developed the Capital Market, supporting the growth of asset management industry in Saudi financial sector, diversifying sources of financing and refinance in the economy, regulating aspects of institutional investment, improving the services provided to investors, developing the securities business activities, creating a competitive environment, and continuing to regulate and develop entities under the CMA's supervision. These amendments also aim to develop the governance of investment funds, and enhance investors protection, in line with the international best practices and standards.
The main elements of the amendments are:
- Providing fund managers with an additional option to establish a special purpose entity to grant the investment fund a legal personality, while having the option of carrying on the current contractual relationships between fund managers and unitholders.
- Developing many aspects related to the governance of investment funds aiming to raise the level of governance in the capital market, in line with the international best practices and standards.
- Regulating procedures for termination and liquidating of public and private funds in line with the international best practices and standards.
- Enabling closed-ended funds and real estate investment traded funds to buy-back its units, and to sell its treasury units according to specific provisions stated in the Investment Funds Regulations and the Real Estate Investment Funds Regulations.
- Allowing offering and listing of the closed-ended funds units, real estate investment traded funds units and exchange traded funds units in the Parallel Market (Nomu).
- Merging the Closed-ended Investment Traded Funds Instructions issued on 22/9/1439H corresponding to 6/6/2018G with the Investment Funds Regulations, and merging the Real Estate Investment Traded Funds Instructions issued on 23/1/1438 H corresponding to 24/10/2016G, amended on 13/2/1440H corresponding to 22/10/2018G with the Real Estate Investment Funds Regulations.
- Enhance the level of transparency and disclosure in Investment funds reporting.
- Align the deadlines for disclosing the financial statements and annual reports of public investment funds and public real estate investment funds including real estate investment traded funds (REITs).
- Enhance the role of the board of directors of the public funds and real estate private funds in monitoring and supervising the fund manager and protecting unitholders.
- Allowing public investment funds to subscribe to debt instruments issued under a private placement through a particular framework.
Also, the amendments to Investment Funds Regulations and Real Estate Investment Funds Regulations included amendments in alignment with the Securities Business Regulations issued on 21/5/1426 H corresponding to 28/6/2005G, amended on 22/12/1441H corresponding to 12/8/2020G, and the Capital Market Institutions Regulations issued on 21/5/1426 H corresponding to 28/6/2005G, amended on 22/12/1441H corresponding to 12/8/2020G, in relation to developing the types of authorisation for managing activities, client classification, requirements for Know Your Client, client understanding of risk, and client suitability.
The CMA Board Resolution included that the amendments to Investment Funds Regulations, Real Estate Investment Funds Regulations and Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority to be effective as of 19/9/1442H corresponding to 1/5/2021G. Except for the amendments to the provisions specified in paragraph (a) of tables (1) and (2) below, which will become effective as of 28/5/1443H corresponding to 1/1/2022G, and the amendments to the provisions specified in paragraph (b) of tables (1) and (2) below, which will become effective as of 8/6/1444H corresponding to 1/1/2023G, and the amendments to the provisions specified in paragraph (c) of tables (1) and (2) below, which will become effective as of 28/7/1443H corresponding to 1/3/2022G. The resolution also included that the provisions specified in tables (3) and (4) of the Investment Funds Regulations issued on 3/12/1427H corresponding to 24/12/2006G, amended on 16/8/1437H corresponding to 23/5/2016G, and the Real Estate Investment Funds Regulations issued on 19/6/1427H corresponding to 15/7/2006G, shall continue to be effective until the date on which the amendments referred to in tables (1) and (2) come into effect.
Table No. 1
| A) Provisions of Investment Funds Regulations which amendments to them will become effective as of 28/5/1443H corresponding to 1/1/2022G |
| Article 8: Eligibility Requirements |
| Paragraphs (b) and (j) of Article 17: Delegation by the Fund Manager |
| Paragraph (a) of Article 31: Application to the Authority for the Offer of Units in a Public Fund |
| Paragraph (a) of Article 78: Submitting a Notice to the Authority for the Offer of Units in a Private Fund |
| Paragraph (a) of Article 80: Private Placement of a Private Fund and Eligibility of Investors |
| Paragraphs (2) and (3) of Article 96: Restriction on Secondary Market Activity |
| Paragraph (c) of Article 97: Offer of Securities Issued By a Foreign Fund in the Kingdom |
| Paragraph (a) of Article 98: Private Placement of a Foreign Fund and Eligibility of Investors |
| Paragraphs (2) and (3) of Article 105: Restriction on Secondary Market Activity |
| B) Provisions of Investment Funds Regulations which amendments to them will become effective as of 8/6/1444H corresponding to 1/1/2023G |
| Sub paragraph (2) of Paragraph (e) of Article 90: Valuation |
| C) Provisions of Investment Funds Regulations which amendments to them will become effective as of 28/7/1443H corresponding to 1/3/2022G. |
| Article 22: Termination and Liquidation of the Fund |
| Paragraph (b) of Article 26: Segregation of Assets |
| Annex 1: Requirements of the Fund's Terms And Conditions |
Table No. 2
| A) Provisions of Real Estate Investment Funds Regulations which amendments to them will become effective as of 28/5/1443H corresponding to 1/1/2022G |
| Paragraph (a) of Article 7: Authorisation Requirements |
| Paragraphs (b) and (j) of Article 15: Delegations by the Fund Manager |
| B) Provisions of Real Estate Investment Funds Regulations which amendments to them will become effective as of 8/6/1444H corresponding to 1/1/2023G |
| Sub paragraph (2) of Paragraph (b) and Paragraph (f) of Article 35: Valuation |
| Sub paragraph (4) of Paragraph (b) of Article 46: Conditions of Offering the Real Estate Investment Traded Fund |
| C) Provisions of Real Estate Investment Funds Regulations which amendments to them will become effective as of 28/7/1443H corresponding to 1/3/2022G. |
| Paragraph (e) of Article 29: Custody of Fund Assets and Related Documents |
Article 34: Appointment of Developer and Engineering Office (in accordance with the developer independence of any of the related parties, in relation to real estate investment traded funds) |
| Article 43: Termination and Liquidation of the Fund |
Table No. 3
| Provisions of Investment Funds Regulations issued on 3/12/1427H corresponding to 24/12/2006G, amended on 16/8/1437H corresponding to 23/5/2016G, that shall continue to be effective until the date on which the aforementioned amendments provided in table (1) come into effect. |
| Article 8: Eligibility Requirements |
| Paragraph (b) and (h) of Article 17: Delegation by the Fund Manager |
| Paragraph (b) Of Article 25: Segregation of Assets |
| Paragraph (a) Article 30: Application to the Authority for the Establishment of, and Offering of Units in, a Public Fund |
| Paragraph (c) of Article 32: Contractual Form Structure of a Public Fund |
| Article 37: Termination of a Public Fund |
| Paragraph (a) of Article 73: Submitting a Notice to the Authority for the Establishment of a Private Fund, and Offering of Units in a Private Fund |
| Paragraphs (a) and (b) of Article 74: Private Placement of a Private Fund and Eligibility of Investors |
| Paragraph (c) of Article 76: Contractual form of Organisation Private Fund |
| Article 78: Termination of Private Funds |
| Paragraphs (2) and (3) of Article 92: Restriction on Secondary Market Activity |
| Paragraph (c) of Article 93: Offer of Units in a Foreign Fund in the Kingdom |
| Paragraph (a) of Article 94: Private Placement of a Foreign Fund and Investors Eligibility |
| Paragraphs (2) and (3) of Article 101: Restriction on Secondary Market Activity |
| Annex 1: Requirements of the Fund's Terms and Conditions |
| Annex 2: Information Memorandum |
| Annex 3: Contents of Key Fact Sheet |
Table No. 4
| Provisions of Real Estate Investment Funds Regulations issued on 19/6/1427H corresponding to 15/7/2006G, that shall continue to be effective until the date on which the aforementioned amendments provided in table (2) come into effect. |
| Paragraph (a) of Article 3: Authorization Requirements |
| Paragraph (b) of Article 12 : Segregation of Fund Assets |
| Article 18 : Termination of the Fund |
This comes after the CMA published the draft Amendments to Investment Funds Regulations and Real Estate Investment Funds Regulations on its website for public consultation for (60) calendar days. The number of comments received by CMA during the public consultation period reached (1039), and CMA has made several amendments based on what was received. Among the main amendments are; adding more clarification to the procedures of termination and liquidation of investment funds, and to articles related to the activity of operating investment funds, in addition to amending the consent of unitholders on the fundamental change in the maturity date or termination of the closed-ended Fund, that the fund manager must obtain the consent of the unitholders to the change by way of a special fund resolution instead of an ordinary fund resolution.
The amended Investment Funds Regulations, Real Estate Investment Funds Regulations and Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority can be viewed via the following links:
The Investment Funds Regulations
The Real Estate Investment Funds Regulations
Amended Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority
