Are there punishments for people who practice brokerage in the stock market without obtaining a license?
Practicing brokerage in the stock market requires a license from CMA. Whoever practices brokerage without a license is subject to punishment as per Article 60 of the Capital Market Law. To view the full article, you can go back to the Capital Market Law.
What is the definition of a Qualified Foreign Investor (QFI)?
A QFI is a Qualified foreign investor to invest in securities listed in the Saudi Stock Exchange, in accordance with the Rules,
What are the securities that the Rules permit QFIs to invest in?
The Rules are governing the investment of foreign financial institutions in listed securities in the domestic market, including equity, debt instruments, and ETFs.
Can a QFI invest in fund not managed by him and invest directly in the Saudi Exchange?
How can non-resident foreign investors that do not qualify as QFIs be able to gain exposure to the Saudi listed securities?
Non-resident foreign investors that do not qualify as QFIs may enter the Saudi capital market through the Swap Agreements Framework or investment funds, in accordance with the procedures issued by the CMA in this regard.
How is investing through the QFI Framework different from investing through the Swap Agreements Framework?
The QFI Framework allows for legal ownership of Saudi listed shares under the name of the QFI, and participants in the Framework are able to exercise all rights as shareholders that are related to that shares including voting rights, appointing a representative to the board of directors of listed companies in accordance with the Companies Law, as well as trading rights during rights issues in accordance with CMA regulations. In contrast, the Swap Agreements Framework does not allow for legal ownership of the underlying shares. The investor only receives economic benefits from the securities under the Swap Agreements Framework.
Are QFIs subject to the Saudi Income Tax Law?
As per the Saudi Income Tax Law, QFIs are subject to a 5% withholding tax from the total dividends distributed by the listed company. The Saudi Income Tax Law and its Implementing Regulations may be viewed through the following link:
https://www.gazt.gov.sa/
Who is responsible for deducting the withholding tax on dividends distributed to QFIs?
Listed companies are responsible for deducting the withholding tax from dividends that they distribute to QFIs.
Can QFIs participate in Initial Public Offerings (IPOs)?
Yes, in accordance with the relevant IPO prospectus.
Can QFIs vote in general assembly meetings?
Yes, in accordance with the Companies Law.
Are QFIs able to vote by proxy in relation to the shares they own?
Yes, in accordance with the Companies Law.
Are QFIs able to vote electronically in respect of the shares owned by them?
Yes, in accordance with Tadawulaty system.
Can QFIs nominate representatives for the board of directors of listed companies?
Yes, in accordance with the Companies Law.
Can GCC citizens and foreign residents invest in listed securities through the QFI Framework?
No, GCC citizens and foreign residents are prohibited to invest in listed securities through the QFI Framework. Both GCC citizens and foreign residents, by virtue of the rights already offered to them, can invest directly in Saudi listed securities in accordance with regulations set by the Authority.
Does the fact that I am unaware of CMA’s regulations and instructions exempts me from questioning?
The Rules define GCC citizens as citizen meeting either of the following conditions:
A natural person holding the citizenship of one of the Cooperation Council for the Arab States of the Gulf countries.
A legal person that (i) capital of which is majority owned by citizens or governments of the Cooperation Council for the Arab States of the Gulf, and (ii) holding the citizenship of one of the Cooperation Council for the Arab States of the Gulf countries.
