CMA Invites Public Feedback On Draft Amendments For Offering Private And Foreign Funds To Retail Clients

The Capital Market Authority (CMA) has invited stakeholders in the capital market to provide feedback on the Draft Amendments of Investment Funds Regulations. This public consultation will last for 15 days, concluding on 5 November 2024. The project aims to refine the rules governing investment funds, particularly focusing on private and foreign investment funds offered to retail clients, with an emphasis on boosting investor protection.

In 2021, the CMA permitted retail clients to invest in private and foreign investment funds without a defined subscription percentage relative to qualified and institutional clients. However, each retail client's subscription was capped at SAR 200,000 or its equivalent. The new amendment proposes setting a specific percentage for retail client subscriptions to these funds, aiming to enhance their protection and mitigate risk exposure.

The proposed changes include a rule that prevents offering units of private funds to retail clients unless fund managers gather total cash subscriptions from qualified and institutional clients equal to or exceeding those from retail clients. This aims to ensure that retail clients are not disproportionately exposed compared to more experienced investors.

Additionally, the draft suggests prohibiting the private offering of securities issued by a foreign fund to retail investors unless similar conditions are met. Fund managers must collect cash subscriptions from qualified and institutional clients within the Kingdom that match or surpass those intended from retail clients.

The CMA stressed the importance of considering feedback from relevant parties when finalising the Draft. Comments can be submitted through various channels, including the Unified Electronic Platform for Consulting the Public and Government Entities, affiliated with the National Competitiveness Center. The prescribed form is available via email at [email protected].

The Draft can be accessed online for detailed review at: https://cma.org.sa/RulesRegulations/Consulting/Documents/The_Draft_to_Develop_the_Provisions_for_Offering_Private_and_Foreign_Funds_to_Retail_Clients_en.pdf.

The proposed amendments aim to strengthen investor protection by setting clear guidelines on how private and foreign investment funds can be offered to retail clients. By ensuring that these offerings are balanced with those made to qualified and institutional investors, the CMA seeks to safeguard less experienced investors while maintaining market integrity.

With inputs from SPA