Mubasher - Thabet Shehata: The year 2024 witnessed several bold regulatory decisions by the Saudi Capital Market Authority and Tadawul to enhance the efficiency and attractiveness of markets, increase transparency, and encourage companies to list.

Mubasher monitors the most important decisions and amendments of the Capital Market Authority and the Saudi Stock Exchange since the beginning of this year, as part of plans to develop financial market laws, to enhance the status of Saudi financial markets, and attract local and international investors.

Launch of the "TASI 50" Index

The first stop was in January, when the Saudi Stock Exchange announced the launch of the “TASI 50” index, starting from Sunday, January 7, 2024, which monitors the performance of the 50 largest companies listed on “Tadawul” in terms of market value.

The companies included in the index constitute 90% of the free market value, and achieve an average annual trading value of no less than 5%, so that the index allows monitoring the performance of the largest companies in the market.

The TASI 50 can be used as a benchmark for ETFs, futures, options and other financial products.

On February 8, 2024, the Saudi Stock Exchange announced the Capital Market Authority’s decision to exempt financial market institutions from the requirements of Articles 42 and 43 of the Financial Market Institutions Regulations in several cases.

Tadawul explained that market institutions are exempted from the requirements of the two articles when they practice securities business with or on behalf of a client (ultimate beneficiary) who is a client of a financial market institution licensed to practice management business and make investment decisions on behalf of its client.

It is also exempted when it practices securities business with financial technology companies authorised by the Authority to test the robo-advisor service, and when it practices securities business with or on behalf of a client (ultimate beneficiary) who is a client of a financial technology company authorised by the Authority to test the robo-advisor service.

Instructions for issuing real estate contribution certificates

In mid-February 2024, the Capital Market Authority Board approved the instructions for offering real estate contribution certificates, amending the rules for offering securities and ongoing obligations, and the list of terms used in the Capital Market Authority’s regulations and rules, and they were implemented starting from the date of their publication.

These instructions aim to regulate the registration and offering of real estate contribution certificates, including specifying the requirements that must be met before offering, marketing, advertising or collecting funds for these certificates, and the requirements for the private offering and public offering of these certificates, in addition to regulating the obligations of the Capital Market Authority through which the offering will take place.

Adoption of amended listing rules

November 2024 witnessed the largest number of decisions by the Capital Market Authority and Saudi Tadawul, as Tadawul announced on November 13 the issuance of a decision by the Capital Market Authority Board to approve the amended listing rules, to be implemented from the date of their publication.

These amendments aim to facilitate the listing requirements for debt instruments by reducing the minimum size of sukuk and bond issues, and to exempt debt instruments issued by development funds, banks and sovereign funds in the Kingdom that are offered as an exempt offering in accordance with the rules for offering securities and continuing obligations from the provisions of Chapter Three of the amended listing rules.

It also aims to stimulate the issuance of sukuk and debt instruments and activate the sukuk and debt instruments market as one of the main channels for financing businesses and the economy, without compromising the level of investor protection.

The largest package of improvements since the launch of the Sukuk and Debt Instruments Market

On November 13, the Capital Market Authority also announced the decision of the Authority’s Board of Directors to adopt the largest package of regulatory improvements made to the Sukuk and Debt Instruments market since its launch.

These improvements came through amending the provisions of the rules for offering securities and ongoing obligations related to offering debt instruments, which included easing the requirements for the offering prospectus in its various categories (public offering, private offering, and exempted offering), to be implemented starting from the date of its publication.

The approved amendments aim to develop the regulatory framework for offering debt instruments in the Kingdom in a way that contributes to attracting diverse segments of issues and issuers, in order to contribute to deepening the market for sukuk and debt instruments and investing in them.

The amendments approved allowing the Kingdom’s development funds and banks and the Kingdom’s sovereign funds to offer debt instruments as an exempt offering according to specific controls and conditions, in a way that provides flexibility to finance their financing needs through the debt instruments market and achieve national strategic and developmental targets.

The amendments also included easing the requirements for preparing the prospectus for public offerings, and facilitating the requirements for preparing the prospectus for debt instruments (supporting documents) by more than 50% of the applicable requirements, in addition to developing the provisions related to this type of offering.

Allowing market institutions to open “pooled accounts”

On November 14, the Capital Market Authority revealed that it would allow financial market institutions to open “pooled accounts” for their clients, by amending one of the articles of the Financial Market Institutions Regulations and the Investment Accounts Instructions related to enabling the registration or recording of the client’s securities in the name of the financial market institution, and they were implemented starting from the date of their publication.

The amendments were approved with the aim of developing the trading mechanisms available in the Saudi financial market and stimulating investment, in addition to increasing the attractiveness and efficiency of the market, by allowing the opening of omnibus accounts.

The roles of the Capital Market Authority will be more effective through the approved amendment, as the Authority will be responsible for maintaining customer records under each pooled account and the individual ownership details of each beneficiary and obtaining the prior written consent of the beneficiaries to register or record their assets in the name of the Capital Market Authority and disclosing any risks that may arise from that.

The approved draft regulatory framework includes provisions regarding financial market institutions maintaining separate records and accounts that enable them to distinguish between their assets and the assets of each client who joins the combined account separately, in order to enhance the protection of clients’ assets.

Launch of the combined account in the debt instruments market

On November 17, 2024, the Securities Depository Center Company (Edaa) announced the launch of the omnibus account in the Saudi debt instruments market, in an important step that contributes to enhancing the attractiveness of the Saudi financial market and raising levels of operational efficiency.

The combined account provides a powerful tool that enhances the efficiency of transaction processing operations by pooling the assets of several investors into one account, which contributes to providing them with a distinctive investment experience and enhancing their ability to access opportunities available in the Saudi financial market.

“Edaa” noted that through this important step, it seeks to provide a new model for custody services, with the aim of enabling financial market institutions to manage the assets of a number of investors in a more efficient and flexible manner.

Second package of post-trade infrastructure improvements

On November 25, the Saudi Stock Exchange announced the implementation of the second package of post-trading infrastructure improvements through its subsidiaries: Saudi Stock Exchange, Depository and Clearing.

Tadawul explained that the launch of the second package of these improvements comes as a continuation of the first phase that was launched in 2022. These improvements are the largest of their kind in the history of the Saudi financial market, with the aim of increasing investment opportunities, enhancing access to a variety of financial instruments, and facilitating access for local and international investors to new financial instruments.

She pointed out that implementing these improvements comes within the framework of the Saudi Tadawul Group’s efforts to enhance the progress of the Saudi financial market and consolidate its position as an attractive global investment destination, in line with the objectives of the Financial Sector Development Program.

Launching improvements to listed companies’ share purchases

On November 28, 2024, the Capital Market Authority revealed that the Authority’s Board of Directors had approved amending the executive regulations of the Companies Law for listed joint-stock companies, and they were implemented starting from the date of their publication.

The Authority explained that the amendment aims to grant more flexibility to the purchase or sale of shares by listed companies, by easing the restrictions imposed on them, which will positively reflect on the efficiency of investment in the Saudi financial market, and is in line with appropriate international practices.

The amendment granted greater flexibility to listed companies by developing controls for the purchase and sale of shares by the listed company, so that share purchases in one trading day do not exceed 25% of the average daily trading volume of the company’s shares during the last 5 trading days preceding the purchase.

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