Capital Market Authority Approves New Framework For Issuing Depositary Receipts Linked To Foreign Shares

The Capital Market Authority (CMA) has approved a new regulatory framework for Saudi depositary receipts. These receipts represent shares issued in foreign countries and listed on their capital markets. This approval marks the introduction of a new security, aiming to regulate the issuance of depositary receipts for shares listed abroad. The framework is effective from its publication date.

By allowing foreign companies to register and offer depositary receipts in the Saudi market, the CMA aims to deepen the capital market's role in capital formation. This move is expected to increase market attractiveness by offering more listing options and diversifying investment products. Foreign companies can now seek approval to list their shares through depositary receipts in Saudi Arabia.

The requirements for registering and offering these depositary receipts will align with existing rules for securities offerings. These rules are outlined under the Rules on the Offer of Securities and Continuing Obligations. Issuers of Saudi depositary receipts must adhere to ongoing obligations similar to those for foreign companies listing shares on the Main Market, with some exceptions.

In 2020, the CMA permitted local companies to issue certificates of deposit outside Saudi Arabia. These certificates corresponded to shares traded within the Saudi market. This initiative aligns with Saudi Vision 2030, which aims to make the Saudi capital market appealing to both domestic and international investors.

The introduction of depositary receipts for foreign companies represents a significant step towards enhancing investment opportunities in Saudi Arabia. By providing additional listing options, it supports the diversification of investment products available in the market. This change is expected to attract more investors, contributing positively to the overall growth of the capital market.

Foreign companies can now offer depositary receipts in exchange for their shares listed abroad, broadening their reach into the Saudi market. This development aligns with efforts to strengthen economic ties and expand investment channels between Saudi Arabia and other countries.

This strategic move by the CMA underscores its commitment to fostering a robust financial environment that supports economic growth and diversification. By aligning with global standards, it positions Saudi Arabia as an attractive destination for international investments.

With inputs from SPA