The Capital Market Authority (CMA) of Saudi Arabia has approved a regulatory framework to develop financing investment funds by introducing amendments to their governing instructions, aimed at strengthening their role as financing channels in the Saudi capital market and enabling additional products that support economic growth and meet investor needs.
According to the CMA, the amendments enable the public offering of financing investment funds, which were previously limited to private placements, and allow their listing on both the Main Market and the Parallel Market.
This contributes to the diversification of investment products and increases assets under management. The amendments also consolidate the provisions governing financing investment funds into a single regulatory document, unifying the legislative framework and enhancing regulatory clarity.
Additionally, the CMA approved changing the title from ‘Instructions on the Direct Financing Investment Funds‘ to ‘Instructions on the Financing Investment Funds‘ to cover both direct and indirect financing funds, reflecting the broader scope of activities and the updated regulatory framework. The amendments further refine requirements for fund operations and management, improving efficiency and aligning with best practices.
Risk-management for public financing funds
The new framework introduces key risk-management requirements for public financing funds, including a cap on total borrowing at 15 percent of net asset value. For funds listed on the Parallel Market, total borrowing must not exceed 50 percent of the fund’s total size. Public indirect financing funds must not have exposure of 25 percent or more to a single beneficiary or to beneficiaries within the same group, consistent with requirements for direct financing funds.
The amendments define investment scopes to limit exposure to highly volatile or low-liquidity assets, supporting effective liquidity management until suitable financing opportunities arise. They also allow private financing investment funds to be structured as open-ended funds under specific regulatory conditions and classify public financing funds as a category of specialized public funds.
Updated definitions for direct and indirect financing funds were introduced, along with additional obligations on fund managers and enhanced disclosure requirements in quarterly and annual reports to unitholders, strengthening transparency and governance.
CMA’s governance, disclosure & market development efforts
The move is part of the CMA’s ongoing efforts to develop the capital market’s regulatory infrastructure, open new financing channels, support economic growth, and reinforce the Saudi capital market’s position as an attractive destination for local and international investors. The framework follows the CMA’s publication in August of the draft regulatory framework for financing investment funds on the Public Consultation Platform of the National Competitiveness Center and the CMA website for a 30-day public consultation period.
