CMA approves amendments to investment fund, REIT regulations

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The Capital Market Authority's (CMA) board issued a resolution today, March 1, 2021, approving amendments to investment funds and real estate investment funds (REIT) regulations, as well as the glossary of definitions used in these regulations.

The amendments aim at regulating and developing the capital market, enhancing the growth of asset management in the Kingdom’s financial sector, improving the services provided to investors, as well as developing the securities business activities.

They also aim at diversifying finance and refinance sources in the economy, regulating aspects of institutional investment, creating a competitive environment, and continuing to regulate and develop entities under the CMA's supervision, developing the governance of investment funds, and enhancing investor protection, in line with the international best practices and standards.

The main elements of the amendments are:

1) Enabling fund managers to establish a special purpose entity to grant the investment fund a legal personality.

2) Developing many aspects related to investment funds’ governance in order to raise governance level in the CMA.

3) Regulating procedures of termination and liquidation of public and private funds.

4) Enabling offering and listing of REITs funds, closed-end funds (CEFs), Exchange-traded funds (ETFs) on Nomu-Parallel Market.

5) Enabling CEFs and REITs funds to buy-back its units, and to sell its treasury units according to specific provisions stated in the investment funds regulations and the real estate investment funds regulations;

6) Merging the closed-ended investment traded funds instructions issued on June 6, 2018 with the investment funds regulations. Similarly, merging the real estate investment traded funds instructions issued on Oct. 24, 2016, amended on Oct. 22, 2018 with the real estate investment funds regulations.

7) Enhancing the levels of transparency and disclosure in the periodic investment funds reports.

8) Align the deadlines for disclosing the financial statements and annual reports of public investment funds and public real estate investment funds including REITs.

9) Enhancing the role of the board of directors of the public funds and real estate private funds in monitoring and supervising the fund manager and protecting unitholders.

10) Allowing public investment funds to subscribe to debt instruments issued under a private placement through a particular framework.

The CMA added that the amendments to investment funds and REIT regulations included amendments related to the development of licensing categories for management business, client classification categories, “Know Your Client” requirements, as well as client perception of risks, and client suitability.

The amended regulations and glossary of defined terms used in the CMA’s regulations and rules be viewed via the following links:

The Investment Funds Regulations

The Real Estate Investment Funds Regulations

Amended Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority