The Saudi Capital Management Authority (CMA) recently issued a public consultation with investors on the regulatory framework for investment funds listed on the Saudi Stock Exchange (Sata).

The public consultation period is 90 days, ending September 10, 2025.

The CMA's proposed "Draft Regulatory Framework for Financing Investment Funds" aims to improve the current regulatory framework and introduce innovative financial products to the Saudi Stock Exchange. Investment funds engaged in direct and indirect financing activities will be listed on the main market (TASI) and the parallel market (Nomu) and sold shares to the market through public offerings. Previously, such funds were limited to private placements for financing.

The CMA stated in a statement that this move will help provide additional financing channels to support economic growth and meet funding needs, promote the development of the asset management industry and increase total assets under management, and provide more diversified investment options for investors on all stock exchanges.

Other core provisions of the draft include: improving specific regulatory requirements for financing funds; and consolidating the currently fragmented regulatory provisions for financing funds into a unified document.

In addition, the CMA recommends renaming the previous "Guidelines on Direct Financing Investment Funds" to the "Guidelines on Financing Investment Funds," clarifying that the guidance now covers both direct and indirect financing by public and private investment funds. New regulations have also been added for indirect financing, requiring future financing and investment activities to be conducted through three legal channels:

1. Purchasing an existing portfolio of financing assets issued by financial institutions regulated by the Saudi Arabian Central Bank (SAMA);

2. Joint financing partnerships, through entering into agreements or establishing partnerships with financing companies licensed by SAMA;

3. Joint investments with financing companies licensed by SAMA, provided that credit approval decisions are made independently by the financing companies.

All three channels are based on the SAMA regulatory system and aim to ensure that indirect financing activities are aligned with SAMA's monetary policy and regulatory requirements, while also attracting international capital to the Saudi financing market through standardized financing channels.

In addition, the draft also makes significant adjustments to the market information disclosure system. Under the new regulations, public financing funds must disclose core information and data in their annual and quarterly reports, including actual asset ratios, default rates for 90 days and 180 days or longer, and details of their top ten financing partners. Private equity funds are also required to include key risk indicators in their annual reports.

This move is expected to effectively address information asymmetry, helping investors more accurately assess risk while providing regulators with a more comprehensive basis for market monitoring. Increased market transparency is expected to further enhance Saudi Arabia's international recognition of its capital market and support the achievement of its "Vision 2030."

The CMA has positioned the draft regulatory framework for financing investment funds as part of its strategic goal to develop its capital markets. The CMA has confirmed that it will consider all feedback before finalizing the revisions.