The Capital Market Authority board approved the instructions for licensed financing investment funds, which stipulate that the total borrowing of a public financing fund must not exceed 15% of its net asset value.
The details of the instructions for licensed financing investment funds are as follows:
Chapter One – General Provisions
First: Preamble
A- These instructions aim to regulate the offering of units of investment funds established for the purpose of engaging in financing activities, the management of such funds, and their operations.
B- These instructions do not prejudice the provisions contained in the Capital Market Law and its implementing regulations, including the provisions contained in the Investment Funds Regulations and other relevant regulations.
Second: Definitions
A- The word “Law” wherever it appears in these instructions refers to the Capital Market Law issued by Royal Decree No. M/30 dated 2/6/1424 AH.
B- Subject to paragraph (D) of this clause, the words and expressions used in these instructions have the meanings assigned to them in the Law and in the Glossary of Terms used in the Capital Market Authority Regulations and Rules, unless the context requires otherwise.
C- The definitions of terms used in the Investment Funds Regulations contained in the Glossary of Terms used in the Capital Market Authority Regulations and Rules apply to the words and expressions used in these instructions, unless the context requires otherwise.
D- For the purpose of applying the provisions of these instructions, the following words and expressions have the meanings set forth opposite each, unless the context requires otherwise:
– Financing Fund: Direct financing fund and indirect financing fund.
– Direct Financing Fund: An investment fund established for the purpose of engaging in direct financing activities for legal entities and investment funds.
– Indirect Financing Fund: An investment fund established for the purpose of engaging in indirect financing activities.
– Default: The beneficiary’s total or partial failure to pay any due installment under the financing contract for a period of 90 days or more from its due date.
– Beneficiary: The recipient of financing.
– Fund Size: The total value of the fund’s assets plus any committed capital to be paid by unit holders.
Third: Compliance with the Provisions of the Instructions and the Investment Funds Regulations
A- The offering, operations, and management of financing fund units in the Kingdom must be in accordance with these instructions and the Investment Funds Regulations.
B- The Authority may exempt any person subject to these instructions from the application of any of its provisions, in whole or in part, based on a request received from them or on its own initiative.
Fourth: Areas of Financing Fund Investments
The financing fund manager may only invest the fund’s assets and monies in the following areas:
A- Financing activities.
B- Money market transactions concluded with a party subject to the regulation of the Saudi Central Bank or a party subject to a regulatory authority similar to the Saudi Central Bank outside the Kingdom.
C- Bank deposits with institutions subject to the assessment of the Saudi Central Bank or subject to a regulatory authority similar to the Saudi Central Bank outside the Kingdom.
D- Units of money market funds registered with the Authority or units of money market funds outside the Kingdom subject to the supervision of a regulatory authority that applies standards and regulatory requirements similar to those applied by the Authority.
Fifth: Conditions for Offering Financing Fund Units
A- When offering and establishing financing fund units, the following conditions must be met:
1- The fund must be of the closed-end type, and if it is a private fund, it may be of the open-end type provided that the fund’s terms and conditions include a clear policy for handling subscription and redemption requests and managing liquidity to execute those requests.
2- Defining the risk management procedures and policies for the fund, including the fund’s risk level.
B- In addition to the conditions in paragraph (A) of this clause, when offering and establishing direct financing fund units, the following conditions must be met:
1- The fund must take the form of a special purpose vehicle in accordance with the Capital Market Law and its implementing regulations.
2- The minimum total fund size at the time of establishment must not be less than</
