The ownership restrictions imposed on citizens of the Gulf
Cooperation Council countries (GCC) other than Saudi Arabia
(Bahrain, Kuwait, Oman, Qatar and United Arab Emirates) with
respect to the shares of Saudi Arabian public joint-stock companies
are to be removed. An April 5 article in the Arab News
stated that a Cabinet meeting of the Council of Ministers approved
the change. The new Capital Markets Authority (CMA) will receive
instructions to implement the change, in coordination with other
government authorities.
Saudi Arabia does not have a physical stock exchange. Rather,
local banks trade shares in Saudi Arabian public joint-stock
companies by using the Tadawul electronic exchange. Pursuant to the
Capital Markets Law, which came into effect on February 24 2004,
the regulatory authority responsible for the Tadawul electronic
exchange is now the CMA.
There are two ownership restrictions on citizens of GCC
countries other than Saudi Arabia with respect to the shares of
Saudi Arabian public joint-stock companies. First, they may not own
shares of Saudi Arabian public joint-stock companies that are banks
or insurance companies. This prohibition is stipulated in an
unpublished decision issued by a ministerial committee and has been
circulated to the banks in Saudi Arabia. Because the banks in Saudi
Arabia process the purchase and sale orders for publicly traded
shares on behalf of their clients, they are able to enforce this
requirement by not processing orders that would result in a citizen
of a GCC country other than Saudi Arabia acquiring shares of a
Saudi Arabian public joint-stock company that is a bank or an
insurance company.
The second restriction is that a citizen of a GCC country other
than Saudi Arabia may not acquire more than 25% of the shares of
any Saudi Arabian public joint-stock company. This restriction is
stated in the Automated Trading Rules of the Tadawul Trading Rules.
This restriction is enforced through the Tadawul electronic
exchange, which rejects buy orders that would result in a citizen
of a GCC country other than Saudi Arabia acquiring more than 25% of
the shares of a Saudi Arabian public joint-stock company.
Representatives from the CMA say that the CMA has not yet
started removing these restrictions.