CMA amendments to securities business aim to simplify licensing requirements: officials

The amendments made to the Capital Market Authority's Securities Busines Regulations, Authorized Persons Regulations, Glossary and Rules, are aimed at achieving several objectives, including the simplification of licensing requirements so as to enhance the attractiveness of securities transactions in the financial market, CMA officials told Argaam in an exclusive.

The amendments were approved in August.

Bader Bin Mohammed Balghonaim, CMA’s Deputy of Legal Affairs and Enforcement, said in late 2019, the Authority published on its website draft amendment to the Securities Business Regulations and Authorized Persons Regulations to explore the views of the public towards them.

"During the survey, the CMA received several views that helped develop the provisions of its regulations, thus serving the financial market and all traders," he said.

In a virtual meeting with Argaam, Balghonaim added that the regulations amendments are part of CMA’s strategic objectives for developing the financial market, in line with Saudi Arabia’s Vision 2030, and within the context of regulating the market, supporting the growth of the financial sector, and enhancing investor protection.

He also said the CMA found areas in the regulations that need amendments, including the development of requirements for the client's understanding of the risks of the deals they intend to carry out.

"The amendments to the financial market institutions have required enabling the clients to understand these risks, taking into account several factors, including the client’s educational and knowledge levels, as well as the practical field and experience in financial markets; in addition to developing the requirements to ensure the suitability of these deals to the client, as the amendments stipulated that a report be submitted to the client about the suitability of the advice or the deal presented to them by the financial market institution.

"These amendments are also aimed to boost the level of services offered to investors, as well as the continued organization and development of the entities supervised by the CMA, which carry out securities activities, and to bolster regulatory procedures, in line with the international best practices and standards," he added.

On his part, Raed Bin Ibrahim Al-Humaid, CMA's Deputy for Market Institutions, stressed that the amendments are aimed to keep pace with the development seen by the Saudi market recently, which required the development of the regulations that govern the exercise of securities dealing, in line with international practices.

He also indicated that the name of the "List of Authorized Persons" was changed to become “Financial Market Institutions Regulations” to reflect the activities of these institutions. Furthermore, the amendments included expanding the provision of advisory activities in financial planning and wealth management, and the development of licensing categories for dealing and management activities.

The licensing requirements were reduced to make them more attractive. The minimum paid-in capital requirement for the arrangement and advising activities were reduced from SAR 2 million and SAR 400,000, respectively, to a value that covers the expected expenditures for one year, Al-Humaid added.

The amendments include an update on the licensing categories for the exercise of dealing activities -- the licensing categories were merged to be under one license in the name of dealing.

In this regard, CMA’s officials clarified that the aim of this update is to boost the flexibility and volume of business that can be exercised through the transacting activity. In addition, an update was carried out for the licensing categories for exercising the management activities, with the minimum paid-in capital requirement for management licenses being readjusted to become SAR 20 million for the management of investments and operation of funds.

It was stipulated that such a capital should cover the expected expenditures of managing investments for one year. This update is aimed to motivate the asset management industry, lift restrictions on total assets under management for experienced investors, and to be in line with the international best practices.

These adjustments were approved after the CMA published a draft amendment to the Securities Business Regulations and the Authorized Persons Regulations on its website for a period of 30 calendar days to gauge the public response towards them.

Furthermore, the CMA held a workshop for financial market institutions to obtain the opinions of the public. The workshop included an introduction to these amendments, as well as a discussion about them, and a response to the comments, suggestions, and questions of participants.

During the survey period, the CMA received 671 suggestions, in light of which it made a number of amendments, including, but not limited to: increasing the clarification of the appropriate solvency requirements with respect to the founders of the financial market institution, the applicant, the controlling partners, or the registered employees, according to CMA officials.