The Capital Market Authority Announces the Approval of Amendments to the Securities Business Regulations, Authorised Persons Regulations and Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority
Tuesday, August 25, 2020 at 5:51 PM
Tue Aug 25, 2020 17:51
As part of the Capital Market Authority's ("CMA") strategic objectives to develop the capital market, and in line with the Saudi Vision 2030, and based on the Capital Market Law issued by Royal Decree No. (M/30) Dated 2/6/1424 H, the CMA Board issued its Resolution approving the amendments to the Securities Business Regulations, Authorised Persons Regulations and Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority, in addition to amending the name of “Authorised Persons Regulations" to be “Capital Market Institutions Regulations".
The amendments approved by the CMA aim at regulating and developing the Capital Market, enhancing the growth of the financial sector in the Kingdom, improving the services provided to investors, developing the securities business activities, working to create a fair competitive environment, continuing to regulate and develop entities under the CMA's supervision, which carry out securities business activities, raising the level of knowledge and professionalism of employees of those entities, enhancing systems and controls, developing the minimum capital requirements, achieving investors' protection, increasing the attractiveness of authorisation to carry out securities business and facilitating the conduct of business in line with the international best practices and standards.
The main elements of the amendments are:
a) Amending the term of “Authorised Persons" to be “Capital Market Institutions".
b) Developing the scope of Arranging and Advising activities, and the types of authorisation for Dealing and Managing activities.
c) Developing and facilitating the requirements for authorisation to carry out securities business, commencement of business, and capital requirements.
d) Developing the requirements for registrable functions, conduct of business, system and controls and client money and assets.
e) Developing the requirements for client's understanding of risk, and the requirements for client suitability, including the provisions related to client classifications and Know Your Client.
The CMA Board Resolution included that the amendments to be effective as of 15/3/1442H corresponding to 1/11/2020G, except for the amendments to the provisions specified in the table below, which will become effective as of 28/5/1443H corresponding to 1/1/2022G. The resolution also included that the Articles and Annexes, which their numbers are mentioned in the table below, of the Securities Business Regulations issued on 21/5/1426H corresponding to 28/6/2005G and the Authorized Persons Regulations issued on 21/5/1426H corresponding to 28/6/2005G amended on 27/12/1438H corresponding to 18/9/2017G, shall continue to be effective until the date on which the aforementioned amendments come into effect.
Provisions of Securities Business Regulations which amendments to them will become effective as of 28/05/1443H corresponding to 01/01/2022G
Article 2: Securities Activities
Provisions of Capital Market Institutions Regulations which amendments to them will become effective as of 28/05/1443H corresponding to 01/01/2022G
Article 31: The Liability of the Capital Market Institution
Article 36: Client Classification
Article 38: Terms of Business with Clients
Article 39: Know Your Client
Article 42: Understanding Risk
Article 43: Suitability
Article 45: Margin Requirements
Article 50: Employees' Personal Dealings
Article 51: Recording Telephone Calls
Annex 5.2: TERMS OF BUSINESS REQUIREMENTS
Annex 5.3 (A): KNOW YOUR CLIENT FORM
Annex 5.3 (B): INVESTMENT INFORMATION FORM
Article 59: Outsourcing
Moreover, the CMA Board Resolution exempted the capital market institution, which its activity is limited to Managing Investment from complying with the provisions of the Prudential Rules, provided that the capital market institution must, at all times, maintain owners' equity of not less than half of the paid-up capital, have six months working capital and comply with all requirements set forth in Chapter 22 of the Prudential Rules except Article (71) thereof.
This comes after the CMA published the draft amendments to the Securities Business Regulations and Authorised Persons Regulations on its website for public consultation for (30) calendar days. The CMA also held a workshop for capital market institutions after publishing the draft amendments of the two regulations for public consultation. The workshop included introducing and discussing these amendments and exploring the comments and suggestions from the participants, as well as answering their questions and inquiries. The number of comments received by CMA during the public consultation period reached (671), and CMA has made several amendments based on what was received. One prominent amendment of these amendments is adding more clarification to the requirements of the proper financial solvency for the founders of capital market institutions, the applicant, controlling shareholders or registered person.
The amended Securities Business Regulations, Capital Market Institutions Regulations and amended Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority can be viewed via the following links:
The amended Securities Business Regulations
The Capital Market Institutions Regulations
The amended Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority