Saudi CMA moves to improve debt issuance governance for SPEs

28/03/2025 06:54 AST

Saudi Arabia's Capital Market Authority is seeking to improve the governance of Special Purpose Entities to increase their attractiveness for issuing debt instruments and acting as investment units.

SPEs, established and licensed by the CMA, are independent financial and legal entities created for specific financing purposes, dissolving once their objectives are met.

The CMA's newly proposed amendments seek to expand the range of eligible issuers while ensuring alignment with existing regulations.

The changes would also enable SPEs to offer debt instruments through exempt offerings, complementing the existing public and private issuance frameworks.

This move aligns with the regulator's goals of developing the sukuk and debt instruments market while supporting the growth of the asset management industry.

"The draft will also support the deepening of the sukuk and debt instruments market and the diversification of issuances by expanding the range of debt issuers through Special Purpose Entities, which in turn will contribute to enhancing liquidity and creating new investment opportunities," the CMA said in a statement.

SPE adoption has surged in recent years, with the number of entities more than doubling from 464 in 2018 to 945 by the end of 2024.

The newly released CMA draft reveals that among the amendments aimed at broadening the scope of issuers is the authorization for SPEs to conduct securitization transactions.

It also aims to streamline governance by clarifying the responsibilities of directors and fund managers within an entity's by-laws, particularly for funds structured as SPEs.

Additionally, the reforms aim to strengthen SPE governance by requiring that the trustee be a legal entity, enhancing provisions for trustee removal, ensuring board members' independence from the sponsor and originator, and simplifying the entity's dissolution procedures.

Earlier this week, the CMA proposed easing investor criteria for Nomu, the Kingdom's parallel market, to expand participation and enhance liquidity.

The amendments included reducing the minimum transaction requirement for individual investors from SR40 million ($8 million) to SR30 million over a 12-month period while eliminating the quarterly trading activity requirement.

Additionally, under the new regulations, board and committee members of Nomu-listed companies would qualify as eligible investors.