SAUDI ARABIA Law and Practice Contributed by: Zain Satardien, Chadi Hourani and Hayel Hourani, Hourani & Partners
5. Capital Markets 5.1 Capital Markets Overview
5.3 Investment Funds Foreign investment through funds in Saudi Arabia is governed by the CMA Investment Fund Regulations, which establish comprehensive guidelines for public and private funds. These Regulations ensure compli - ance with governance standards, operational trans - parency, and fiduciary responsibilities. Fund Management and Fiduciary Responsibilities Fund managers must be authorised persons licensed by the CMA to manage public or private funds. They are required to implement effective risk assessment procedures, ensure transparency, and act with fidu - ciary duty toward unitholders. Custodians must be appointed to safeguard fund assets. The Regulations mandate that fund managers prepare financial state - ments in Arabic, which must be audited according to the standards issued by the Saudi Arabian Organisa - tion of Certified Public Accountants (SOCPA). Fund managers must disclose conflicts of interest in fund documentation and annual reports, key investment strategies and practices in the terms and conditions, and fees, commissions, and management costs. 6. Antitrust/Competition 6.1 Applicable Regulator and Process Overview See 3.2 Regulation of Domestic M&A Transactions . Merger control in Saudi Arabia is generally governed by the Competition Law, and its Implementing Reg - ulations, which aim to protect fair competition and prevent monopolistic practices that could harm con - sumer interests. The Competition Law mandates the notification of “economic concentration” transactions when specific thresholds are met, as set out in more detail in 3.2 Regulation of Domestic M&A Transac- tions . Enforcement and Penalties Failure to notify a notifiable transaction, closing prior to clearance, or breaching conditions imposed by the GAC can result in significant penalties. The GAC may impose fines of up to 10% of the total annual sales value of the products or services that are the subject of the violation, or, where it is not possible to determine
The Tadawul is the principal equity market in Saudi Arabia, complemented by the Nomu – Parallel Mar - ket, which provides a less regulated environment to encourage small and medium-sized enterprises (SMEs) to access public capital. As of 2023, the Tadawul ranks as the largest stock exchange in the MENA region and one of the top exchanges globally by market capitalisation, hosting some of the King - dom’s largest companies, including Saudi Aramco. Saudi Arabia’s capital markets offer a diverse range of funding mechanisms. In recent years, the Kingdom has experienced a surge in IPO activity, underscoring its position as a regional leader in public offerings. For in-depth discussions on the CMA and law, see 3. Mergers and Acquisitions , 4. Corporate Govern- ance and Disclosure/Reporting and 5.2 Securities Regulation . 5.2 Securities Regulation The CMA is the principal regulator of the securities markets and governs public offerings, securities trad - ing, and the obligations of listed companies. These include specific rules which govern: • IPOs, rights issues, and the obligations of listed companies; • Merger and Acquisition Regulations, which provide a framework for mergers, takeovers, and other corporate transactions; • Rules for Qualified Foreign Financial Institutions Investment in Listed Securities, which outline the conditions under which foreign institutional inves - tors may access Saudi Arabian capital markets; and • Listing Rules, which detail the Tawadul’s require - ments for companies seeking to list on the Tadawul or Nomu. The CMA Rules also cover corporate governance, financial disclosure, and the minimum requirements for IPOs.
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