The maximum boundaries of subscription .. amendments to organizing the platforms for offering debt and investment tools

The Capital Market Authority has launched a project to develop the organizational framework for the platforms of offering and investigating debt tools, through the “poll” platform, with the aim of updating the organizational framework for these platforms and clarifying the requirements for licensing necessary to keep pace with the rapid developments in the organizational environment in the Kingdom.

The proposed amendments to the rules of subtracting securities and the ongoing obligations included several major aspects aimed at organizing the offering of debt tools through collective financing platforms, which are operated by licensed financial market institutions.

These amendments included the inclusion of the offering of debt tools within the excluded offering cases, and the determination of the requirements for obtaining the arrangement license for these platforms, in addition to imposing restrictions on the use of the offering proceeds to prevent them from being directed towards providing loans, investing or paying debt.

New modifications

The amendments stipulated the organization of subscription operations by limiting the participation to the customers registered in the collective financing platforms, defining the maximum boundaries of the subscription to the retailers, as well as obliging the financial market institutions to set policies and procedures to evaluate the debt tools, and ensure that investors are informed of them before making their investment decisions.

The proposals also included the requirement to verify the sponsor’s credit registry to ensure its financial affinity, while obliging the financial market institutions to sign an information exchange agreement with specialized companies.
The proposed amendments obligated financial institutions to disclose the details of each issue, the payment schedule, cases of delay and measures taken through their websites, in addition to providing the right to cancel the subscribers from retailers within a specified period.

Regarding the regulation of the offering process, the amendments have defined the requirements and information that must be provided in the debt tools ’offering document via collective financing platforms, including the offering summary, the nominal value, the total value of the offering, the use of accessories, in addition to information about the source, the sponsor, the shotto, and the guarantees of the debt tools if any.

The proposals included amendments that regulate the offering of shares through collective financing platforms, as they obligated the financial market institutions to develop policies to assess shares, verify the credit registry of the source, and to sign credit information exchange agreements, as well as clarify the requirements of the authority’s quarterly notice of the proposals.

In a related context, the proposed amendments aim to organize the secondary market activity of securities, including shares and debt tools offered through collective financing platforms, to ensure transparency and efficiency in trading operations.

The proposed regulations dealt with the minimum information to be included in the debt tools ’offering document, where the document must contain detailed data on the facility with special purposes, the nature of its work, the date of its establishment, the organizational structure of the sponsor, the basic financial information, and the general nature of its activity, in addition to the disclosure of potential risks and the existing fundamental lawsuits.

With regard to the governance of the offering, the proposed amendments stressed the need for the sponsor of the facility with special purposes a Saudi company with a limited liability, and that the shepherd is the beneficiary of the offering, while obliging the collective financing platform to play the role of the guardian on the facility, and to ensure that all the amounts received in a bank account designated in the name of the facility with special purposes.

Among the important amendments is the exemption of facilities with special purposes from the condition of appointing an auditor registered with the authority, while obliging them to appoint a licensed account auditor in accordance with the accounting and auditing profession system, in order to facilitate procedures while maintaining a high level of transparency and financial monitoring.