In a new regulatory move aimed at enhancing transparency and stability in the financial sector, the Saudi Central Bank (SAMA) has issued strict instructions requiring all financing companies and non-bank financial institutions under its supervision to notify it before embarking on any investment rounds. The decision stipulates that notification must be submitted at least five working days before the round begins, giving the central bank sufficient time to review the details of the transaction and ensure its compliance with applicable regulations.
This requirement encompasses a wide range of financial entities, including finance companies, payment service providers, exchange bureaus, and other entities supporting financing activities licensed by the Saudi Arabian Monetary Authority (SAMA). This step is part of the central bank's ongoing efforts to develop the regulatory environment and keep pace with the rapid growth of the financial technology (Fintech) sector in the Kingdom, which is a key pillar for achieving the goals of Saudi Vision 2030.
Decision dimensions and strategic objectives
This decision cannot be viewed in isolation from the significant developments taking place in the Saudi economy. With the increasing activity of financing companies and the influx of substantial local and foreign investments into the market, a regulatory framework has become essential to ensure the governance of these operations and safeguard the stability of the financial system. Through this measure, SAMA aims to achieve several strategic objectives, most notably enhancing the principle of full transparency in financing and investment operations, protecting the rights of investors and shareholders, and ensuring that these investment rounds do not negatively impact the financial solvency of companies or their ownership structure in a way that violates their regulatory obligations.
Disclosure requirements and their impact on the market
The central bank did not merely require prior notification; it also stipulated that companies seeking financing through investment rounds must submit a comprehensive file containing all essential data related to the round. This data includes, but is not limited to, the proposed timeline, the main objective of the round, its estimated value, and the target investor segment. Furthermore, the impact of the round on the company's ownership structure and financial position must be clearly explained, as well as the type and structure of the investment instrument used, whether it be equity, convertible debt, or other instruments. This level of disclosure will enhance market maturity, bolster international investor confidence in the Saudi investment environment, and make it more attractive to capital seeking promising opportunities in well-regulated and stable markets.
SAMA stressed in its circular the importance of full compliance with all relevant regulations and instructions, including the need to obtain prior “no objection” from the central bank in cases that require it, stressing that it will not hesitate to apply the regulatory procedures against any entity that violates these instructions.
