Can a QFI be the Foreign Counterparty under a Swap Agreements Framework?
Yes, a QFI can be the Foreign Counterparty in Swap Agreements, but a QFI cannot participate as ultimate beneficiary under the Swap Agreements Framework.
How do the Rules define GCC citizens?
Yes, all foreign investors (in all categories, whether residents or non-residents), including strategic foreign investors, cannot own more than 49% of the issued shares for each listed company, including interests under the Swap Agreements Framework.
How can the information on ownership limits in listed companies stipulated in the Rules be obtained?
The Saudi Stock Exchange shall publish on its website statistical information reflecting ownership percentage as per the paragraphs (a/2) of Article 16 of the Rules. In addition, according to the information received from listed companies, the Saudi Stock Exchange shall also publish on its website the limits stated in paragraphs (a/3) and (a/4) of Article 16 of the Rules.
What are the responsibilities of capital market institutions and QFIs with regard to the ownership limits in listed companies stipulated in the Rules?
• APs must comply with the relevant rules set out in the Capital Market Law and its Implementing Regulations, in particular the Authorised Persons Regulations, Market Conduct Regulations and the Rules.
• QFIs must comply with the ownership limits specified in sub-paragraphs (a/1), (a/3), and (a/4) of Article 16 of the Rules for investments in their account. It should be noted that the Saudi Stock Exchange will automatically control the ownership limits specified in Article 16 of the Rules. An automatic control of a limit means that the Saudi Stock Exchange’s systems will reject orders that are not considered to be compliant with the ownership limits in listed companies stipulated in the Rules.
Who is responsible of complying with the investment limits and disclosure requirements when the QFI engages with foreign portfolio manager?
The QFI is responsible of complying with investment limits and disclosure requirements and abide by the Capital Market Law and its Implementing Regulations and the rules of the Exchange and other relevant laws.
What are the consequences for non-compliance of qualified foreign investor with the ownership limits in listed companies stipulated in the Rules?
In the case of non-compliance with the ownership limits, the foreign investor is considered in breach of the Rules, and the CMA can take the action it sees fit in accordance with Article (23) of the QFI Rules which includes the action stipulated in sub-paragraph (7/a) that enables the CMA to exercise any of its other powers under the Capital Market Law specifically the power stipulated under paragraph (a) of Article (59) that states: "If it appears to the Authority that any person has engaged, is engaging, or is about to engage in acts or practices constituting a violation of any provisions of this Law, or the regulations or rules issued by the Authority, or the regulations of the Exchange, the Authority shall have the right to bring a legal action before the Committee to seek an order for the appropriate sanction. The sanctions include the following: (3) obliging the person concerned to take the necessary steps to avert the violation, or to take such necessary corrective steps to address the results of the violation".
Is the QFI required to provide the CMA with notifications?
Where a notifiable event, as set out in Annex 3.1 of the Rules, has occurred and the QFI reasonably believes that disclosure of the event to the AAP in accordance with paragraph (a) of Article 18 of the Rules would materially prejudice the operations and businesses of the QFI or a third party, the QFI may make a notification to the CMA in substitution for notifying the AAP.
What is the required period of time for the QFI to notify the assessing capital market institution if any of the notifiable events occurs?
A QFI must within a reasonable period of time not exceeding 5 days notify the AAP engaged by it if any of the notifiable events occurs.
Are the QFI required to provide the Exchange with notifications regarding their ownership in listed companies?
Yes, the QFI is required to notify the issuer and the CMA as per the events stipulated in Listing Rules as follows:
a. becoming the owner of, or interested in, 5% or more of any class of voting shares or convertible debt instrument of the issuer
b. the ownership or interest of the person increasing or decreasing by 1% or more of the shares, or convertible debt instruments of the issuer. Except where the increase or decrease was a result of capitalisation issue, capital increase for acquiring a company or purchasing an asset, issuer's capital reduction, or the issuance of rights issues where the person or any of the persons deemed to be interested in did not trade or exercise their right to subscribe.
What is meant by a person who is interested in shares or convertible debt instruments?
A person will be deemed interested in any shares or convertible debt instruments owned or controlled by any of the following persons:
a. A relative of that person;
b. A company controlled by that person;
c. Any other persons with which that person has agreed to act in concert to acquire interest in or exercise voting rights in the shares or in the convertible debt instruments of the issuer.
The term "person" is defined in the in the Glossary of Defined Terms Used in the Regulations and Rules of the CMA as: "any natural or legal person recognised as such under the laws of the Kingdom”.
Is there a special notification form with regards to the ownership in listed companies?
Yes, the notification shall be in accordance with a form prepared by the CMA, which may be viewed through the following link:
https://cma.org.sa/en/RulesRegulations/FormsSite/Pages/default.aspx
Can a QFI engage with more than one assessing capital market at the same time?
No, a QFI may not engage with more than one AAP at the same time.
Can a QFI become a client of another capital market institution for the purpose of investing in listed securities?
Yes, a QFI can be a client of any other AP when investing in listed securities.
Can a QFI change its assessing capital market institution ?
Yes, the QFI can change its AAP.
Can the QFI trade listed securities during the 30 day period after the lapse or termination of the QFI assessment agreement?
Yes, the QFI can trade listed securities during this period, provided that it adheres to its responsibilities to comply with the Rules.
