CMA Seeks Public Input on Investment Account Reforms

The Capital Market Authority (CMA) of Saudi Arabia has called on capital market participants and interested parties to submit feedback on a new draft framework designed to facilitate the procedures for opening and operating investment accounts for various categories of investors. Announced in Riyadh on November 21, 2024, the initiative forms part of a broader project titled “Amendments of the Investment Accounts Instructions and the Rules for Foreign Investment in Securities and the Capital Market Institutions Regulations.” The public consultation period will remain open for 30 calendar days, concluding on 19/06/1446H, corresponding to December 20, 2024. The CMA’s move reflects the Kingdom’s ongoing commitment to aligning its regulatory environment with rapid technological and market developments, while enhancing the attractiveness, accessibility, and competitiveness of the Saudi capital market on the global stage.

Why does this consultation matter for investors around the world? Because it signals a deliberate, structured opening of one of the Middle East’s largest and most dynamic capital markets to a wider array of participants. The proposed amendments are not merely technical adjustments; they represent a strategic step toward deepening market liquidity, broadening the investor base, and reinforcing Saudi Arabia’s position as a leading financial hub in line with Vision 2030. By inviting public input, the CMA demonstrates a transparent, consultative approach to regulation — one that seeks to balance innovation with robust investor protection. The draft aims to accommodate new categories of investors, streamline account-opening procedures, and regulate operations related to these accounts, all while strengthening market confidence and safeguarding the interests of both local and international participants.

Context and Background

How did Saudi Arabia’s capital market reach this pivotal moment? Over the past decade, the Kingdom has undertaken a comprehensive transformation of its financial sector under the Financial Sector Development Program, a key pillar of Vision 2030. The CMA, established in 2003 as the sole regulator and supervisor of the Saudi capital market, has consistently updated its regulatory framework to keep pace with global best practices. The current initiative builds on that legacy, recognizing that technological advancements — from digital onboarding to automated compliance — have reshaped how investment accounts can be opened and managed. The proposed amendments to the Investment Accounts Instructions and the Rules for Foreign Investment in Securities are therefore a natural evolution, designed to remove friction for investors while maintaining rigorous oversight.

The consultation period, which runs until December 20, 2024, offers a window for stakeholders to shape the final rules. The CMA has emphasized that comments from relevant and interested persons will be taken into full consideration when finalizing the draft. This inclusive approach is characteristic of the Kingdom’s regulatory philosophy, which values collaboration between the public and private sectors. The draft itself is accessible through official channels, and submissions can be made via the Unified Electronic Platform for Consulting the Public and Government Entities (Public Consultation Platform), affiliated with the National Competitiveness Center, at istitlaa.ncc.gov.sa, or through a prescribed form via email at [email protected]. Such mechanisms ensure that the final regulations reflect a broad spectrum of perspectives, from institutional investors to individual market participants.

What are the core objectives driving these amendments? At the highest level, the CMA seeks to align Saudi capital market regulations with the latest regulatory and technological developments in the Kingdom. This includes accommodating new categories of investors and regulating operations related to investment accounts more efficiently. The ultimate goal is to enhance the attractiveness of the Saudi capital market for both local and international investors, bolster investor protection, and strengthen overall market confidence. By facilitating investment, the CMA aims to support the broader national economy, channeling capital into productive sectors and contributing to the diversification goals of Vision 2030. The proposed changes are thus both a technical upgrade and a strategic enabler of Saudi Arabia’s long-term economic vision.

Key Details of the Proposed Amendments

What exactly does the draft propose? One of the most significant elements is the revision of requirements for opening investment accounts for individual foreign investors residing in one of the Gulf Cooperation Council (GCC) countries. Currently, these investors face restrictions: their participation in the Saudi market is largely limited to the debt market, the parallel market known as “Nomu,” investment funds, and the derivatives market. Their ability to trade in the main market is restricted to swap agreements as ultimate beneficiaries through capital market institutions or as clients of these institutions, where investment decisions are made on their behalf. The new draft would expand the range of securities they can directly invest in, notably including shares listed on the main market. This change provides a direct channel for these investors to participate in the Kingdom’s flagship equities, a move expected to attract more foreign investment, enhance market liquidity, and support the local economy.

Another key element introduces a new category of investors to shares listed on the main market, further broadening the investor base. This category is not explicitly detailed in the announcement, but its inclusion signals the CMA’s intent to create a more inclusive market structure. Additionally, the amendments allow individual foreign investors who previously resided in Saudi Arabia or a GCC country to continue operating their investment accounts and investing in shares listed on the main market even after their residency ends, provided they had previously opened an investment account in Saudi Arabia. This provision offers continuity and encourages long-term engagement with the Saudi market, rather than forcing investors to liquidate or transfer assets upon relocation. On the local level, the amendments aim to simplify the requirements for opening investment accounts for endowments, as part of facilitating procedures for capital market institution clients. Endowments, or waqf, play a vital role in Saudi society, and easing their access to capital market instruments can unlock new funding streams for charitable and developmental purposes.

How will these changes be implemented? The draft is subject to public consultation, after which the CMA will review all feedback and finalize the regulations. The 30-day consultation period is designed to be sufficient for stakeholders to analyze the proposals and submit detailed comments. The CMA’s use of the Public Consultation Platform and a dedicated email address underscores its commitment to transparency and accessibility. Once finalized, the amendments will be published, and capital market institutions will need to adjust their procedures accordingly. The CMA is expected to provide guidance and support to ensure a smooth transition. The entire process reflects a careful balance between opening the market and maintaining robust regulatory safeguards, a hallmark of Saudi Arabia’s approach to financial sector development.

International and Regional Impact

Why should international investors outside the GCC pay attention? The proposed amendments are part of a broader trend in Saudi Arabia to liberalize and modernize its capital market, making it easier for foreign capital to participate. For global investors, the changes could mean simplified access to one of the largest and most liquid markets in the Middle East. The Saudi Exchange (Tadawul) is already one of the most prominent in the region, and its inclusion in major emerging market indices has attracted significant passive and active flows. By allowing individual foreign investors residing in GCC countries to directly invest in main market shares, the CMA is removing a layer of intermediation that often added cost and complexity. This could encourage more foreign individuals to consider Saudi equities as part of their portfolios, particularly those who live in the region and have a natural affinity for the Saudi economy. The move also aligns with the Kingdom’s efforts to position Riyadh as a global financial center, complementing initiatives like the Saudi Green Initiative and the Public Investment Fund’s (PIF) international investments.

Regionally, the amendments could set a precedent for other GCC markets. The GCC is home to several exchanges, and Saudi Arabia’s regulatory evolution often influences its neighbors. By facilitating investment for GCC-resident foreign individuals, the CMA is fostering greater integration within the Gulf’s capital markets. This could lead to increased cross-border investment flows and deeper regional financial cooperation. Moreover, the provision allowing former residents to maintain their accounts after leaving the Kingdom or the GCC enhances the attractiveness of Saudi Arabia as a long-term investment destination. It signals that the market values ongoing relationships with investors, even if their personal circumstances change. For international asset managers and brokers, the changes may simplify client onboarding and expand the addressable market, creating new business opportunities. Overall, the amendments reinforce Saudi Arabia’s reputation as a forward-thinking, investor-friendly jurisdiction that is open for business while maintaining high standards of regulation.

Economic and Strategic Significance

What does this mean for Saudi Arabia’s economy? The CMA’s initiative is strategically significant because it targets a key driver of economic growth: capital formation. By making it easier for a wider range of investors to open accounts and trade directly, the amendments can increase market liquidity, narrow bid-ask spreads, and improve price discovery. Higher liquidity and a broader investor base can also reduce volatility and make the market more resilient. For Saudi companies, especially those listed on the main market, a larger pool of potential investors can lower the cost of capital and support expansion. This is particularly important as the Kingdom pursues ambitious projects under Vision 2030, from NEOM to the Red Sea Project, which require substantial private sector investment. Foreign direct investment (FDI) is a key metric, and while portfolio investment is different from FDI, a vibrant and accessible stock market can complement efforts to attract long-term capital. The proposed amendments also support the development of the asset management industry, as more investors may seek professional advice and products.

Furthermore, the inclusion of endowments in the simplified procedures is socially and economically significant. Endowments in Saudi Arabia are increasingly being professionalized and integrated into the financial system. By facilitating their access to capital market accounts, the CMA enables these institutions to invest more efficiently, potentially generating higher returns to fund their charitable and social mandates. This aligns with the Vision 2030 goal of a vibrant civil society and a diversified economy. The amendments also reflect the CMA’s proactive stance in adapting to technological developments. As digital onboarding and fintech solutions become more prevalent, the regulatory framework must evolve to allow for remote account opening and digital identity verification. The draft likely incorporates such considerations, making the Saudi market more accessible to tech-savvy investors. In essence, the CMA is not just tweaking rules; it is future-proofing the market to ensure it remains competitive in a rapidly changing global financial landscape.

Vision 2030 Alignment

How does this initiative fit into Saudi Arabia’s long-term vision? Vision 2030, launched in 2016 by Crown Prince Mohammed bin Salman, aims to diversify the economy away from oil, develop public service sectors, and create a thriving private sector. A key component is the Financial Sector Development Program, which seeks to create a diversified and effective financial sector to support economic growth and job creation. The CMA’s proposed amendments directly contribute to this program by enhancing the efficiency and attractiveness of the capital market. They support the goal of increasing the private sector’s contribution to GDP and boosting non-oil revenues. By attracting more foreign and domestic investment, the amendments help channel savings into productive investments, fueling entrepreneurship and innovation. They also strengthen investor protection, which is essential for building trust and encouraging broader participation. Ultimately, a robust and open capital market is a cornerstone of a modern, diversified economy, and the CMA’s initiative is a clear step in that direction.

What happens next? The CMA will collect feedback until December 20, 2024, and then finalize the amendments. Once implemented, the new rules are expected to make the Saudi capital market more accessible, efficient, and competitive. For international observers, this is a signal that Saudi Arabia continues to reform and open its economy, creating opportunities for global investors. For the Kingdom, it is another milestone on the road to Vision 2030, reinforcing its position as a leading financial hub in the Middle East and a destination for smart, long-term capital. As the consultation process unfolds, all eyes will be on the CMA’s final draft, which will shape the future of investment in Saudi Arabia for years to come. The initiative underscores the Kingdom’s commitment to transparency, collaboration, and sustainable economic growth — values that are central to both its national vision and its global engagement.

20 Questions

Q1. What is the Capital Market Authority (CMA) consulting the public about?

A1. The CMA is seeking feedback on a draft framework to facilitate the procedures for opening and operating investment accounts for various categories of investors, as part of amendments to the Investment Accounts Instructions and related regulations.

Q2. How long is the public consultation period?

A2. The consultation period lasts for 30 calendar days, ending on 19/06/1446H, which corresponds to December 20, 2024.

Q3. What is the main goal of these proposed amendments?

A3. The amendments aim to align Saudi capital market regulations with regulatory and technological developments, enhance market attractiveness, bolster investor protection, and strengthen market confidence.

Q4. Which investors are specifically targeted by the changes?

A4. The changes target individual foreign investors residing in GCC countries, a new category of investors for main market shares, former residents of Saudi Arabia or GCC countries, and endowments.

Q5. What can individual foreign investors residing in GCC countries currently invest in?

A5. Currently, their participation is limited to the debt market, the parallel market “Nomu,” investment funds, and the derivatives market, with main market trading restricted to swap agreements.

Q6. How will the amendments change the ability of GCC-resident foreign investors to invest?

A6. They will be allowed to directly invest in shares listed on the main market, expanding beyond their current limited channels.

Q7. What is the significance of allowing direct investment in main market shares?

A7. It is expected to attract more foreign investments, enhance market liquidity, and support the local economy by broadening the investor base.

Q8. What new category of investors is introduced?

A8. The proposal introduces a new category of investors to shares listed on the main market, providing them with a direct channel to invest in the Saudi capital market.

Q9. Can former residents continue to operate their investment accounts after leaving Saudi Arabia or a GCC country?

A9. Yes, provided they had previously opened an investment account in Saudi Arabia, they can continue to operate it and invest in main market shares.

Q10. How do the amendments affect endowments?

A10. They simplify the requirements for opening investment accounts for endowments, as part of facilitating procedures for capital market institution clients.

Q11. Why are endowments included in this initiative?

A11. Endowments play a vital social role; easing their access to capital market instruments can unlock new funding streams for charitable and developmental purposes.

Q12. How can stakeholders submit their feedback?

A12. Feedback can be submitted via the Unified Electronic Platform for Consulting the Public and Government Entities (istitlaa.ncc.gov.sa) or through a prescribed form via email at [email protected].

Q13. Will the CMA consider all comments?

A13. Yes, the CMA has emphasized that comments from relevant and interested persons will be taken into full consideration when finalizing the draft.

Q14. What is the expected impact on market liquidity?

A14. The changes are expected to enhance market liquidity by allowing a broader range of investors to participate directly in the main market.

Q15. How does this initiative align with Vision 2030?

A15. It supports the Financial Sector Development Program by enhancing the efficiency and attractiveness of the capital market, contributing to economic diversification and private sector growth.

Q16. What is the role of the National Competitiveness Center in this consultation?

A16. The National Competitiveness Center oversees the Unified Electronic Platform for Consulting the Public and Government Entities, which is one of the submission channels.

Q17. Are there any restrictions that remain for foreign investors?

A17. The amendments expand access, but foreign investors must still comply with applicable regulations and open accounts through authorized capital market institutions.

Q18. What happens after the consultation period ends?

A18. The CMA will review all feedback, finalize the amendments, and publish the final regulations for implementation.

Q19. How does this initiative affect the competitiveness of the Saudi capital market?

A19. It enhances competitiveness by making the market more accessible and aligned with global best practices, attracting a wider range of investors.

Q20. Where can the draft amendments be accessed?

A20. The draft can be accessed through the links provided in the CMA’s announcement, including the Public Consultation Platform and the CMA’s official channels.

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