Saudi CMA Seeks Public Feedback on Draft Rules for Dealing in Foreign Financial Markets

RIYADH — The Capital Market Authority (CMA) called upon all interested and relevant persons and participants in the capital market to share their feedback on the Draft Regulatory Provisions for Conducting Dealing Activities in Financial Markets Outside the Kingdom. The consultation period will last for 30 days, ending on October 27.

The draft aims to enhance the supervisory framework regulating the activities of capital market institutions when dealing with their clients in financial markets outside the Kingdom. The draft clarifies that the suitability requirements apply to transactions concluded in financial markets outside the Kingdom, where those markets are equivalent to the Main Market or the listed debt instruments market, in accordance with the requirements set out in the Capital Market Institutions Regulations.

Accordingly, the institution must fulfill the suitability requirements before commencing dealing with the client in those markets, without the need to reassess suitability upon the execution of each subsequent transaction, unless a material change occurs in the client's information or circumstances that warrants reconsideration.

As for margin transactions involving securities in external markets, the draft aims at supervisory controls to mitigate the associated risks. Most notably, these require the client to pay a margin of no less than 50% of the transaction value and to monitor it periodically, alongside prohibiting the execution of this type of transaction on highly leveraged instruments or on companies whose accumulated losses exceed half of their capital.

The CMA emphasized that the comments from the public shall be taken into full consideration for the purpose of approving the final version of the Draft Provisions Regulating Dealing Activities in Financial Markets Outside the Kingdom, which shall come into effect as of November 1.