Transforming Saudi Arabia's Debt Capital Market: An Insight into the CMA’s Key Regulatory Reforms
Financial Services Focus
Rafiq JafferPartner, Banking & Finance (Bahrain, KSA & UAE)
Ambreen BidiwalaSenior Counsel,Banking & Finance
Amelito Mutuc IITrainee Solicitor,Banking & Finance
In a move aimed at propelling the debt capital market in the Kingdom of Saudi Arabia (“KSA”) to new heights, the Capital Market Authority (the “CMA”) has amended the Rules on the Offer of Securities and Continuing Obligations (“ROSCO”). These amendments, coupled with changes to the Saudi Exchange’s (Tadawul) (the “Exchange”) listing rules (the “Listing Rules”) and the recent changes made to the Companies Law have simplified the issuance of bonds and Sukuk by joint stock companies, simple joint stock companies, and limited liability companies.
By reducing the regulatory burden on issuers, empowering key institutions, enhancing the efficiency of carrying out public and private offerings, and strengthening investor protection, the CMA is sending a clear signal of its commitment to fostering a vibrant and accessible debt capital market in KSA. This article will focus on the key changes to the rules surrounding the issue of debt instruments under ROSCO and the Listing Rules, as well as explore its potential impact on issuers, investors, and the broader Saudi economy.
The ROSCO has introduced a new exempt offer category specifically for debt instruments issued by the Kingdom's development funds and banks, as well as its sovereign funds (which have a public legal personality in accordance with statutory provisions).1 This exemption allows these entities to offer debt securities without the typical regulatory requirements set out in ROSCO, subject to certain conditions. These conditions include the preparation of an offering document, disclosure of financial statements and annual reports, and adherence to specific timelines for submission of documents and deposit of securities with the Securities Depository Centre Company (Edaa) (the “Depository Centre”). Notably, these entities are also granted flexibility regarding listing on the Exchange. To compliment this, the Listing Rules have also been amended to permit the Kingdom’s development funds, banks, and sovereign funds from listing on the Exchange without being offered to the public.2 It should be noted that if such entities opt not to list, they may be exempt from certain disclosure requirements under ROSCO, however, such offering will be restricted only to qualified and institutional investors.
These strategic amendments aim to enhance the accessibility of the Saudi debt market for key public sector entities and promote the use of debt instruments as a viable and efficient form of financing.
The recent amendments to the ROSCO and the Listing Rules introduced by the CMA reflect a significant step forward in the development and diversification of the Saudi financial market.
Previously, all offerors of debt instruments by way of private placement were required to notify the CMA at least 10 days prior to the proposed date of the offer (along with submission of the relevant documents and forms). Under the amended Article 10(a)(2), this period is now waived where the offeror is established in KSA, or offering is by a special purposes entity (“SPE”) in which a Saudi company is the sponsor. While a notification is still required to be made to the CMA in accordance with ROSCO prior to the offering, issuers can now initiate the offering process once such notice is issued – providing a more flexible timeline that caters to issuers’ needs.
Lastly, to ensure greater investor protection, there is now an express obligation on Capital Market Institutions (“CMI”) to ensure that the offeror of debt instruments fulfils all relevant conditions necessary to undertake the private offering and that all requisite information and documentation are submitted to the CMA under ROSCO.
One of the most notable changes to ROSCO is the insertion of a dedicated chapter which specifically captures the conditions and requirements for a public offer of debt instruments, including those offered by way of private placement for the purpose of direct listing on the Exchange. This separation provides greater clarity to issuers looking to list their debt instruments on the Exchange.
Below are some key aspects for companies and issuers to consider under the amended ROSCO:
Enhancing Advisors’ ObligationsThe amended ROSCO prescribe further obligations on financial and legal advisors to the issuer. For example, financial advisors now have a responsibility to, among other things, ensure that the directors of the issuer understand their responsibilities and have established adequate procedures, controls, and systems that enable the issuer to comply with the Capital Market Law, the Implementing Regulations, and the Exchange Rules (collectively, the “Relevant Laws”).5 Similarly, legal advisors must ensure that (in conjunction with the financial advisor) there is no material non-compliance by the issuer under the Relevant Laws, including requirements related to the content of the prospectus.
Further, there is a new requirement under Article 39 for the issuer to appoint a CMI to represent the holders of the debt instruments. Such representative will have an obligation to carry out its work with due care and skill – taking into consideration the holder’s interests and rights, in accordance with the rules of its profession.
Publication of the Prospectus Currently, all issuers are required to publish the prospectus and ensure it is made publicly available at least 14 days prior to the start of the offering. However, the amended ROSCO now provides for a shorter period of 5 days prior to the start of offering for issuers who already have securities listed on the Exchange.
Supporting Documents The CMA have substantially reduced the number of supporting documents, (including various letters and forms) to be submitted alongside the application for registration and offer of debt instruments to the public, which serve to ease the regulatory burden on issuers including SMEs who are seeking entry into the Saudi bond market.
Continuing Obligations Under Article 65(35) of ROSCO, issuers are now obligated to immediately disclose to the CMA and the public any breach of the terms and conditions of the debt instruments, regardless of whether or not it qualifies as a material development under Article 64. This new obligation highlights the CMA’s intent on ensuring that, despite providing a regulatory easement on issuers, the interests of investors remain protected.
To encourage growth and domestic investment in the Saudi market, issuers with shares listed on the Exchange who wish to offer convertible debt instruments outside KSA must now ensure that such shares into which convertible debts instruments may be converted do not exceed 15% of the issuer’s total number of shares.
The Listing Rules have also been amended to reduce the minimum issuance size for sukuk and bonds. Previously, for an issuer to list debt instruments on the exchange, the expected aggregate value of all debt instruments to be listed (or in the case of a debt issuance programme, each separate tranche) needed to be at least SAR 100 million; SAR 50 million if the issuer has existing securities listed on the Exchange.11 In a move to further encourage the issuance of sukuk and debt instruments among a broader range of issuers, this number has substantially reduced to SAR 5 million, irrespective of whether the issuer has existing securities listed on the Exchange.
In addition, the Depository Centre Rules issued by the Securities Depository Centre have introduced a new type of special account – an “Omnibus Account”. This account, to be opened through a “Custody Member”12 on behalf of an independent CMI, shall be used for the purposes of depositing non-convertible debt instruments for its end beneficiaries (the “End Beneficiaries”). The Custody Member will have certain obligations including, among others, maintaining a segregated record for each End Beneficiary in the Omnibus Account and the publication of monthly ownership reports to the Depository Centre.
The recent amendments to the ROSCO and the Listing Rules introduced by the CMA reflect a significant step forward in the development and diversification of the Saudi financial market. By reducing the regulatory burden on the issuer, the CMA has created a more conducive environment for both public and private sector entities to access the debt capital market. Additionally, through enhancing and clarifying the obligations of the issuer and its advisors, the new ROSCO ensures that investors’ interests remain sufficiently protected. As such, this regulatory reform, in conjunction with the recent changes to the Companies Law serve to demonstrate the Kingdom’s responsiveness and adaptability to the changing needs and demands of companies.
For further information,please contact Rafiq Jaffer, Ambreen Bidiwala and Amelito Mutuc II.
Published in March 2025
