KSA tightens rules

Saudi Arabia's market regulator has further tightened its restrictions on anonymous investors trading shares through brokers, citing the need to prevent money laundering and financing of militant groups.

The Capital Market Authority (CMA) told licensed brokers last month that they would have to open an account in the name of each client rather than using the name of the broker or someone else.

The new rules apply to Saudi and Gulf-based brokers and banks which offer opportunities to invest in the Saudi stock market through funds called ‘nominee accounts’. Under these arrangements, investors pool their money and the broker buys indirect ownership in stocks through participatory notes.

The new rules follow the introduction of regulations in 2012 that obliged Saudi institutions trading on behalf of clients to register ownership of shares under the names of individual clients. Participatory notes are on      e of the main channels through which foreigners invest in the Saudi stock market; exchange data suggest the notes account for about 1 percent of ownership of Saudi shares.

In mid-June, Saudi Arabia began allowing Qualified Foreign Investors (QFIs) to buy Saudi shares directly after obtaining permits. The new rules on nominee accounts may have the effect of pushing more foreigners to invest through QFIs rather than via participatory notes.