Saudi Arabia is proposing tighter rules for investors using borrowed money to trade in overseas financial markets, as regulators seek to strengthen safeguards around foreign investments.
Under the Capital Market Authority’s proposed framework, investors using Saudi-regulated financial institutions to buy foreign securities on margin would need to fund at least 50% of the transaction themselves.
Financial institutions would also have to assess whether certain overseas investments are suitable for clients. Margin financing would be restricted for highly leveraged products and shares in companies whose accumulated losses exceed half their capital.
The consultation is open until October 27, with the framework scheduled to take effect on November 1. Sico Bank said the measures mainly target higher-risk leveraged retail traders and could support stronger risk management. It described the proposed initial margin requirement as broadly consistent with rules in several global markets.
The CMA has also proposed new rules for initial public offerings. Institutional investors involved in book-building would need to demonstrate sufficient liquidity to pay for orders, while underwriting agreements would take effect before book-building begins. Public feedback on those proposals is open until October 22.
Source: AGBI
