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stipulated in an unpublished decision issued by a ministerial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.