Key highlights of the amendments
- Expanded Distribution Channels:
- Electronic money institutions licensed by the Saudi Central Bank and Investment Fund Distribution Platforms (defined under the Glossary) are now permitted to distribute fund units via websites and mobile applications.
- Capital market institutions licensed to conduct managing investments activities are now permitted to distribute foreign funds and offer their securities in the Kingdom, subject to specific requirements.
- Governance and Fund Manager Regulations
- The IFRs now regulate the voluntary withdrawal of a fund manager.
- A 60-day transition period is mandated for the transfer of fund management responsibilities.
- Clearer procedures for termination of public and private funds have been introduced.
- The CMA may now impose a cap on any of the service fees and commissions charged by the fund manager.
- Disclosure/Investor Protection Enhancements
- Public fund managers must disclose credit ratings of the top 10 debt holdings in quarterly reports.
- Enhanced transparency is required during fund liquidation and unitholder meetings.
- Fund managers must now make all relevant agenda information and documents available on their website and any other public platform approved by the CMA, to ease informed decisions by the unitholders.
- Operational Adjustments
- Both interim and annual financial statements must be prepared in accordance with SOCPA standards.
- The fund operator may now appoint a capital market institution (licensed to carry out the activity of managing investments and operating funds) or an investment fund distribution platform, to establish and maintain the unitholders' register, based on a written agreement.
- The liquidation period following the expiry of a fund's term has been extended from 6 months to 12 months.
- Fund managers must cease charging fees immediately upon CMA dismissal or the commencement of the fund's liquidation.
Fund-specific enhancements: Investment flexibility and concentration controls
- Public Funds
- Public funds are now permitted to invest in debt instruments offered privately if issued by issuers within the Kingdom, enabling public fund managers to subscribe to offerings from a broader range of debt instrument issuers, following the removal of previously imposed restrictions.
- New rules require independent benchmark selection for fund performance measurement.
- Private Funds/Foreign Funds
Retail investor subscriptions in private and foreign funds are capped at 50% of total cash contributions in the fund at the time of offering its units. In the case of closed-ended private funds, the transfer of fund units must not result in retail investors holding more than 50% of the total value of the fund's units through cash contributions.
A new restriction has been introduced prohibiting feeder funds from investing in private investment funds. This is in addition to the existing restriction from the previous regulations, which prohibited feeder funds from investing in other feeder funds.
- Money Market Funds/Capital Protection Funds
Money market and capital protection funds are now subject to stricter concentration limits, capping exposure to a single debt instruments issuer at 10% of the fund's net asset value and total exposure to a single entity at 25%.
- Closed-Ended Investment Traded Funds
It is now strictly prohibited to dispose of units allocated to subscribers through in-kind contributions as a means of increasing the total asset value of a closed-ended investment traded fund. Previously, such disposals were permitted up to a maximum of 5% of those units.
The manager of an investment fund which has been formed as a special purpose entity must have its by-laws certified by the relevant authority before offering the fund's units.
Real estate investment traded funds listed on the Parallel Market (Nomu) which invest in real estate development projects and now exempt from the investment ratios and asset restrictions specified in the Real Estate Investment Funds Regulations that previously applied.
Strategic implications
We believe that the regulatory amendments introduced by the CMA represent a key development within the broader framework of regulatory reform aimed at enhancing the Kingdom's financial ecosystem. These amendments are expected to contribute to the reinforcement of investor trust and strengthening market integrity through improved transparency and operational resilience. In our view, the changes introduce clearer governance expectations and accountability standards for fund managers, with the objective of ensuring that oversight structures remain both robust and responsive. In addition, the amendments are intended to facilitate smoother transitions in fund management, supporting continuity and stability across asset management operations. Another key focus is the growth of digital fund platforms, which will now operate under a more comprehensive and secure regulatory framework. Overall, we consider these reforms to be aligned with the strategic objectives of Vision 2030, particularly in relation to fostering sustainable economic diversification and the creation of long-term value creation through enhanced governance, disclosure, and innovation.
Recommended actions
- Fund managers should:
- Review and update the terms and conditions of their existing funds and update other funds' documents to reflect the new requirements where necessary.
- Ensure compliance with distribution, disclosure, and risk management obligations.
- Communicate changes to investors and the CMA.
- Engage legal and regulatory advisors to assess the impact of the amendments if deemed necessary.
Useful links
For further details on the Investment Funds Regulations and its practical impact on your funds in Saudi Arabia, please do not hesitate to contact our team.
