SAUDI ARABIA INTRODUCES REGULATORY ENHANCEMENTS TO BOOST SUKUK AND DEBT MARKET

03 December 2024

Josleen Deeb

The Capital Market Authority (CMA) in Saudi Arabia has approved a series of regulatory reforms to enhance the Sukuk and debt instruments market. These changes are aimed at attracting a wider range of issuers,, simplifying procedures, and stimulating investment, aligning with the Kingdom’s broader economic development goals.

Riyadh: In a significant move aimed at bolstering the financial sector, the CMA of Saudi Arabia has approved a series of regulatory enhancements for the Sukuk and debt instruments market. These enhancements are designed to stimulate economic growth within the Kingdom.

I. Key Changes and Their Implications

1. Exempt Offerings: One of the most notable changes is the introduction of exempt offerings for development funds, development banks, and sovereign funds/ entities with public legal status. Under the new regulations, these entities can issue debt instruments without undergoing the standard regulatory process, provided they meet specific conditions. This change is expected to streamline the issuance process and attract more entities to the market. One key amendment allows development funds, development banks, and sovereign entities with public legal status to issue debt instruments under exempt offerings.

2. Private Placement Offer: The CMA has also made significant changes to the private placement offer process to render it more flexible. Local issuers can now notify the CMA and begin their offering immediately, without the need to wait for approval. This expedited process is anticipated to enhance the efficiency of the market and provide issuers with quicker access to capital.

3. Public Offering: The requirements for preparing a prospectus for public offerings have been simplified. The streamlined process is expected to make it easier for companies to access financing through the Sukuk and debt market, encouraging more public issuances and contributing to market liquidity. Issuers now face fewer requirements when preparing prospectuses and supporting documents for public debt issuances. Furthermore, a dedicated section outlining rules for public offerings has been introduced, improving clarity and safeguarding investor interests.

II. Broader Impact on the Market and Economy

These regulatory enhancements are part of the CMA's ongoing efforts to develop a robust financial sector in line with Saudi Arabia's Vision 2030. By creating a more attractive and accessible market for Sukuk and debt instruments, the CMA aims to meet the financing needs of companies and support the growth of the national economy.

The new regulations are also expected to diversify the investor base, attracting both local and international investors. With increased participation from a broader range of issuers and investors, the market is poised for significant growth in the coming years.

The improved Regulatory Framework, as the CMA has revised the Rules on the Offer of Securities and Continuing Obligations, which form the foundation for issuing securities in the kingdom, aims to create a more streamlined and efficient regulatory environment, supporting the growth of the debt market.

These regulatory updates represent a significant milestone for Saudi Arabia's Sukuk and debt market. By encouraging more issuances and offering greater flexibility, the enhancements will help companies diversify their funding sources. This, in turn, is expected to strengthen the debt market as a key channel for financing businesses and stimulate overall economic growth.

With these updates, Saudi Arabia continues to position itself as a leading destination for innovative financial instruments, promoting a robust and inclusive capital market that meets the needs of both issuers and investors.

Conclusion

The CMA's approval of these regulatory enhancements marks a pivotal moment for the Sukuk and debt instruments market in Saudi Arabia. By simplifying processes and creating new opportunities for issuers and investors, these changes are set to drive market growth and contribute to the broader economic development of the Kingdom.

ALKETBI TOUCH

ALKETBI Professionals can help you overcome the complexities of the new regulatory framework, ensuring compliance and optimizing issuance strategies for Sukuk and debt instruments. Our expertise can guide issuers through legal requirements, reducing risks and enhancing market opportunities. We can assist in creating comprehensive documentation such as prospectus and related legal paperwork, ensuring compliance with regulatory standards. Additionally, we provide tailored advice and can take the lead in managing private placements and public offerings, guiding you through each step of the issuance process to optimize outcomes.