Publications

The Private Placement Of A Foreign Investment Fund

الطرح-الخاص-لصناديق-الاستثمار-الاجنبية-جديد-انجليزي

 

The nature of capital markets enjoys laws and systems enacted to regulate and organize securities products. The laws impose obligations on companies that offer securities, for the purpose of regulating the securities markets and protecting  investors. Since  risk management, requires the investors to diversify their investment portfolio through buying shares in opportunities varied in their fields, and to avoid preference of one stock, one product, or one field over the others, according to paragraph (3) of article (14) of the Investment Funds Regulations . Therefore, the necessity has emerged to invent an investment product in the capital market defined as Foreign Fund.

The foreign funds in general is a type of different investment activities managed by  institutions which must be qualified and experienced while individuals and institutions can invest in those foreign funds with their money and the fund shall collect the invested money as capital fund. The contributed money invested is used for the purpose of buying and selling shares to earn returns and profits that will be distributed to individuals investing in the fund  against the fund’s costs and management fees.

the Investment Funds Regulations specified the management fees and fund costs. One of those specifications Article 19: Services, Commissions and Management Fees
Any fees, commissions or charges levied on the fund for its management must be on arm’s
length terms (and at least equivalent to the terms entered into by persons dealing independently)
and in no event shall such charges exceed the limit specified in the Fund’s Terms and Conditions.

While the rights and obligations apply to individual investors as participants, and founders and managers of investment funds, the Capital Market Authority used its power to control, provide protection and monitor all deals in the capital market, including monitoring founders of investment funds, managers of investment funds and individual investors.

As for the investment fund established in a foreign country and whose founders wish to offer the foreign fund in the Saudi capital market, the Capital Market Authority stipulated conditions that must be adhered to. The Capital Market Authority has also defined requirements that must be met, and procedures to be taken before the approval of the Capital Market Authority on the offering process. These procedures are known as the private placement of the foreign investment fund in accordance with the provisions included in Chapter (6) of the Investment Funds Regulations issued by the Board of the Capital Market Authority pursuant to Resolution No. 1-219-2006 dated 12/03/1427 Hijri corresponding to 12/24/2006 AD based on the Capital Market Law issued By Royal Decree No. M/30 dated 2/6/1424 Hijri, as amended by CMA Board Decision No. 2-22-2021, dated 7/12/1442 AH corresponding to 2/24/2021.

The most prominent requirements of the Capital Market Authority regarding the private placement of the foreign investment fund are that; the offering shall be submitted by a licensed institution according to paragraph (d) of article (97). As for the procedures that the licensed institution (the distributor) shall take can be found in article (99) which indicates the (6) procedures and the Capital Market Authority may require additional procedures as decided upon reviewing each submission. These procedures include notifying the Capital Market Authority, submitting information, documents, and declarations to the Capital Market Authority, and paying the fees. In other words, article (99) consists of (6) paragraphs that specify, in their entirety, the details of these procedures and what information required, in addition to the other procedures.

For more details, reference shall always be relied on the official resources updated by the competent authorities (the Capital Market Authority) through the website of the Capital Market Authority https://cma.org.sa/