CFCL Investment regulation – Saudi Arabia

Regulatory structure

Please refer to the CBL Market infrastructure – Saudi Arabia for the complete information about the regulatory structure.

Holding restrictions – CSD Market – Saudi Arabia

Holding Restrictions

Market entry requirements

Only legal or natural persons, that are non-Saudi or non-residents of Saudi Arabia and are a customer or an underlying client of a customer of CFCL can access the Saudi link and hold Saudi Arabian securities via CBL.

Customers who wish to access the Saudi Arabian market via CFCL should familiarise themselves with the local market requirements. In particular, customers should ensure that neither they, nor their underlying clients, are mentioned as nationally designated names as per the attached link in Saudi Arabia including sanctions requirements which will be applicable to customers who engage on the local market subject to such requirements.

General ownership limits and restrictions:

• No single foreign investor may own more than 10% of the issued units in local-share mutual funds managed by a local fund manager.

Instructions for international central securities depositories:

• Only legal or natural persons, that are non-Saudi or non-residents of Saudi Arabia and are a customer or an underlying client of a customer of CFCL can access the Saudi link and hold Saudi Arabian securities via CFCL.
• No ownership limits for Saudi ETFs.

Disclosure requirements

Introductory information and categories

This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements.

Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.

Disclosure Requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.

For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.

In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.

In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.

The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.

Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.

It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.

In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.

N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.

Disclosure categories

Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:

Category 1

Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;

Category 2

Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;

Category 3

Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.

Disclosure requirements – CSD Market – Saudi Arabia

Disclosure Category: 1

Clearstream Fund Centre S.A. (“CFCL”) falls under a legal obligation to disclose, to the Securities Depository Centre Company (CSD), the identity and holdings of clients or the ultimate end beneficiary owner (UBO) of the Saudi Arabian securities held in Saudi Arabia as well as periodic reporting of internally settled transactions.

Consent

In order to comply with the applicable legislation, Clients with holdings in Saudi Arabian investment funds or entering into transactions in The Saudi Arabian market must consent, and are hereby deemed to consent, to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the Fund Manager, Transfer Agent, Regulator) as their attorney-in-fact, under power of attorney, to collect from CFCL the required information to be disclosed. Clients who do not grant such authority cannot hold such investment funds / financial instruments in their accounts with CFCL.

Disclosure Requirement

Clients are advised that the local laws and regulations may oblige CFCL to disclose the requested information on CFCL Clients and ultimate beneficial owners to the party that is entitled by law to receive such information.

Background and legal basis

The monthly disclosure reporting requirement for Saudi Arabian securities is made in accordance with Section 6 of the Instructions for International Central Securities Depositories, approved by the board of the Capital Market Authority (CMA) pursuant to its Resolution number (1-57-2021) dated 22/9/1442H corresponding to 4/5/2021G to the CSD. Under these regulations, the CSD is entitled to require Clearstream Fund Centre and/or its clients to disclose any data, information or document related to the positions recorded with the local custodian by Clearstream Banking on a monthly or ad-hoc basis. This obligation of disclosure covers, without being limited to, the identity and holdings of all underlying clients, as well as the identity of the ultimate beneficial owners of such recorded positions. Likewise, Clearstream Fund Centre is required to provide the CSD with a daily report that discloses details regarding any internal settled transactions that have taken place within Clearstream Centre’s books.

Obligation to report threshold crossings

It is each shareholder’s obligation to monitor their shareholding and shareholders must notify the Saudi Exchange if they become the owners of, or hold an interest of 5% or more in the form of any class of voting shares or convertible debt instruments of, the issuer. The notification has to be filed by the end of the third trading day following the execution of the transaction or the event which results in such ownership or interest. The shareholder should also notify the CMA and shall include a list of the persons who hold the shares or convertible debt instruments.

Shareholders could face regulatory action in the event of failure to comply with the above requirements. Such regulatory action could be in the form of legal action by the CMA.

Sanctions

The investment fund may refuse or even terminate the business relationship if CFCL Clients or ultimate beneficial owners fail to comply with the disclosure request.

The Client undertakes to hold CFCL harmless and to indemnify CFCL from any loss, claim, liability, or expense asserted against or imposed upon CFCL as a result of the Client failure, whatever the failure, to comply with these disclosure requests.