المملكة: With the exception of endowments and civil society, the “financial market” prohibits investment accounts for individual institutions

Controls for accepting clients before opening an investment account

The instructions confirmed in its third article that the financial market institution, before accepting any client and opening an investment account for him, must ensure that all legal obligations stipulated in the relevant laws and regulations are met.

This includes full compliance with the provisions of the system. The financial market and its executive regulations, in addition to the requirements of the systems related to combating money laundering and the financing of terrorism.

The instructions stated that no financial market institution may provide services related to dealing, management, custody, or investment through securities crowdfunding platforms before obtaining the customer’s approval of the investment account opening agreement, documenting this approval, and opening an official investment account for him with the institution. It also stressed the need for the agreement to include all the basic data stipulated in Article Four of the instructions.

The Authority allowed financial market institutions to rely on a third party to implement some customer identity verification procedures, provided that this is done in accordance with the provisions contained in the Anti-Money Laundering and Combating the Financing of Terrorism regulations and their implementing regulations.

The instructions obligated financial institutions to verify the real relationship between customers and natural persons who manage or operate investment accounts on their behalf, such as guardians, agents, secretaries, or authorized signatories, in order to ensure clarity of legal responsibilities and avoid any illegal use of investment accounts.
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The instructions prohibited opening an investment account for individual institutions, with the exception of institutions licensed in accordance with the system of associations and civil society foundations, or institutions owned by endowments, in accordance with the controls specified in subsequent articles of the instructions.

The instructions excluded some cases from the requirement of prior approval of the investment account opening agreement, when providing services related to dealing business to a client who appoints an independent custodian, provided that the requirements of the conditions for providing services to clients stipulated in the regulation of financial market institutions are adhered to.

The fifth article of the instructions touched on the necessity of providing the client with The information identifying the investment account upon request and by any appropriate means, provided that this data includes the client’s name, his investment account number, and the name of the financial market institution that manages the account.

Controls for opening accounts for natural persons

As for Article Six, it is devoted to specifying the detailed controls for opening investment accounts for natural persons of various categories.

For Saudi citizens, the instructions required obtaining valid national ID card information and verifying its authenticity before opening the investment account.
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As for citizens of the Gulf Cooperation Council countries, the financial market institution must obtain data on a valid passport or national ID card and verify its authenticity.

With regard to foreigners residing in the Kingdom, the instructions stipulate the necessity of obtaining data on a valid residence permit or resident ID and verifying its validity. The controls also included holders of a five-year residence card, as the data of this card must be verified before opening the investment account.

The instructions included special provisions for members of missions. Diplomacy accredited to the Kingdom, where a letter of introduction issued by the embassy of a member of the diplomatic mission must be obtained, in addition to valid diplomatic card data.

Opening accounts for foreigners outside the Kingdom

With regard to foreign natural persons residing in GCC countries or not residing in the Kingdom, the instructions stated that they can open investment accounts for the purpose of investing in securities permitted in accordance with the Financial Market Law and its executive regulations, provided that valid passport data is submitted and verified.

Provisions Especially for some categories

The instructions included special provisions related to some categories, such as blind or illiterate customers, giving them the right to use a personal identifier who explains to them the procedures for opening the account and its terms and conditions.

In the event that a personal identifier is not provided, an employee of the Financial Market Corporation will explain the procedures and conditions to the customer, with one of the officials of the branch or main center certifying that the customer has seen all the data related to opening the account and acknowledges bearing the responsibilities resulting from it.

The instructions allow the adoption of a fingerprint. The thumb or personal seal of the blind or illiterate customer as an official signature in his dealings with the financial institution.

Minor’s Accounts

The instructions also address the mechanism for opening investment accounts for persons under the age of 18 Hijri years, where the account is opened in the name of the minor and is operated by the guardian or guardian.

In this case, the identity documents of both the minor and the guardian or guardian must be obtained and verified. However, if the minor is of Saudi nationality and less than 15 Hijri years of age, it is sufficient to obtain data from the family registry in which the child is added and the national identity data of the guardian or guardian.

If the minor is under guardianship, the financial market institution must obtain the guardianship deed issued by the competent court and abide by all the provisions contained therein.

The instructions stressed the necessity of applying due diligence measures towards the guardian or guardian, with him bearing full legal responsibilities when managing The investment account for the minor.

The instructions paid special attention to children in need of care, as they stipulated the possibility of opening investment accounts for them if they reside in residential branches or with “sponsorful” alternative families, charitable societies and institutions for the care of orphans, or comprehensive rehabilitation centers, provided that these entities are under the supervision of the Saudi Ministry of Human Resources and Social Development.

According to the instructions, the investment account is opened in the name of the child himself, while the account is operated by persons authorized to do so under An official letter issued by the Ministry.

This letter must include the child’s data and identify the persons authorized to open and operate the account, in addition to the data of the alternative family if the child resides there.

The instructions obligated financial market institutions to obtain valid identity document data for both the child and those authorized to manage the account, verifying their authenticity, in addition to applying due diligence procedures to the authorized persons as they are legally responsible for disposing of the investment account on behalf of the child.

Mechanisms Opening accounts for incapacitated persons

The instructions also dealt with regulating the opening of investment accounts for incapacitated persons, as they stipulated that the account be opened in the name of the person concerned, while it is operated by the legally appointed guardian or guardian.

In this case, the financial market institution must obtain the identity document data of the guardian or guardian, in addition to the identity data of the incapacitated client if he is over 18 Hijri years old, or family registry data if he is under 15 years of age. Hijri.

The instructions also require obtaining a final or expedited judicial ruling issued by the competent court proving the case of loss of capacity, with verification of the validity of the ruling and compliance with all provisions contained therein.

The instructions confirmed that the guardian or guardian bears all the legal responsibilities associated with managing the investment account of the incapacitated person, just as if the account were personally owned by him.

Accounts for people incapable of writing and signing

With regard to Regarding people who lose the ability to write or sign, the instructions stated that the investment account is opened for them according to the same procedures applied to natural persons, with the customer’s thumbprint or personal stamp being relied upon instead of the signature in all transactions related to the account.

Regulating the accounts of interdicted persons

The instructions included regulating the mechanism for opening investment accounts for interdicted persons, whereby the account is opened in the name of the interdicted person, while it is operated by his legal representative appointed by a court ruling.

The financial market institution must in this regard In the case of obtaining data on the identity documents of the interdicted person and his legal representative, in addition to the data on the final or expedited interdiction ruling instrument issued by the competent court.

The instructions confirm that the legal representative bears all the legal responsibilities related to the management of the investment account, in accordance with the provisions stipulated in the judicial ruling issued against him.

Regulating the opening of investment accounts for legal persons

In Article Seven of the instructions, the Authority has established a detailed regulatory framework for opening investment accounts for persons Legal entities, including Saudi companies and companies affiliated with the Gulf Cooperation Council countries.

For Saudi companies, the instructions stipulate that the company be established according to the companies’ system in the Kingdom, while Gulf companies must meet the definition of a Gulf legal person in accordance with the applicable regulations.

If the company is not listed on the financial market, the financial market institution must verify the existence of evidence proving the permissibility of its investment in the areas in which it wishes to invest.

Financial market institutions may be guided by the documents specified in Appendix No. “1” of the instructions to verify that the requirements for opening an investment account for companies are met, by obtaining data on these documents and verifying their accuracy.

Additional controls for companies listed on the market

The instructions set additional conditions when opening investment accounts for companies listed on the market or their subsidiaries, with the exception of banks, insurance companies, financing companies, and financial market institutions.

The most prominent of these conditions is the necessity of issuing a decision from the board of directors of the listed company specifying the controls for investment in securities, while obliging the financial market institution to obtain and verify the data of this decision. Its validity before opening the investment account.

The instructions stipulate that if the investment is not long-term for at least one year, such that the security may not be sold before one year has passed from the date of the last purchase of the same source, then the investment must be made through an investment fund or a private investment portfolio managed by a financial market institution under a management contract.

The management contract must include an explicit text confirming the complete separation between the listed company or its subsidiaries and investment decisions, preventing any potential conflict of interest.

It was required The instructions allowed financial market institutions to notify the Authority immediately upon signing any management contract with a listed company or its subsidiary, indicating the investment account number and the investment portfolio associated with it.

Investment accounts for foreign legal persons

The instructions allowed financial market institutions to open investment accounts for foreign legal persons for the purpose of investing in securities permitted in accordance with the financial market system and its executive regulations and instructions issued by the Authority.

Government Fund Accounts

The instructions allowed the opening of investment accounts For funds owned by Saudi or Gulf government entities, provided that the fund is fully owned by that government entity.

In this case, the financial market institution must obtain the bylaws of the fund, in addition to the decision to name the persons authorized to open and operate the account, and their identity documents.

It is also necessary to obtain the fund’s articles of incorporation – if any – and documents that clarify the capital composition and management structure, in addition to documents showing the names of the members of the fund’s board of directors.

Opening accounts for non-governmental organizations Profitability

With regard to non-profit organizations within the Kingdom, the instructions stipulate that the financial market institution must obtain a license issued by the competent government authority, in addition to proof that the organization may invest in the areas in which it wishes to invest.

A decision must also be obtained from the Board of Directors approving the opening of the investment account and specifying the persons authorized to manage it.

Cases of opening accounts for categories not stipulated

And in the event that any natural or legal person applies to open an investment account and the instructions do not include clear procedures. To open the account for him, the Authority obligated the Capital Market Institution to obtain prior approval from the Authority before completing the account opening process.

Controls for transferring between accounts

The instructions prohibited making any transfers between two investment accounts for different clients, except in specific cases, including the issuance of instructions from a competent judicial authority through the Authority, or any other cases approved by the Authority.

The instructions also required that the client’s investment account be linked to one or more bank accounts in his name, so that funds are only transferred to those accounts, with the exception of some Special cases such as settling amounts owed by the customer, settling the account in favor of the heirs of the deceased customer, or transfers between a minor and his guardian.