Under Saudi law, foreign investment in securities is subject to specific restrictions. Pursuant to the Rules for Foreign Investment in Securities, issued by the Board of the Capital Market Authority (CMA) by Resolution No. 2-26-2023 dated 05/09/1444H (corresponding to 27/03/2023G), as amended (the Rules for Foreign Investments in Securities), only certain categories of foreign investors have historically been permitted to invest in shares listed on the Main Market of the Saudi Exchange (Tadawul).

These categories include:

• Qualified Foreign Investors (i.e. foreign entities that, at the time of applying to open an investment account, have assets under their own or their group's ownership, management or custody of at least SAR1,875 million but excluding certain categories such as certain pension funds);
• Foreign Strategic Investors (i.e. foreign legal entities seeking to directly own a percentage of a listed company's shares with the intention of enhancing that company's financial or operational performance);
• foreign ultimate beneficiaries who are fronted under swap agreements with a local capital market institution; and
• foreign individuals or entities whose investment portfolio is managed by a CMA-regulated entity on a discretionary basis.

In addition, investments of foreign investors on the Tadawul are subject to the following key restrictions:

• a non-residing foreign investor (other than a Foreign Strategic Investor) may not own 10% or more of shares or convertible debt instruments of any listed issuer;
• the aggregate maximum ownership by all foreign investors (except Foreign Strategic Investors) in listed shares or convertible debt instruments of an issuer may not exceed 49%;
• foreign investors that buy convertible debt instruments cannot convert them into listed shares on the Tadawul unless they are allowed to invest directly in those shares, or become an ultimate beneficiary through a swap agreement; and
• Foreign Strategic Investors have a mandatory two-year lock-up from the date of acquisition.

In May 2025, the CMA eased foreign ownership restrictions and permitted foreign natural persons residing in one of the GCC member states, or having resided in one of the GCC member states and having opened an investment account in Saudi Arabia during that time, to also invest in listed shares on the Tadawul, subject to the additional restrictions set out above.

In line with a recent press interview of the CMA board member Abdulaziz Abdulmohsen Bin Hassan indicating that the CMA will further ease foreign ownership restrictions in both existing listed companies and new companies looking to IPO on the Saudi markets, the CMA has published on 1 October 2025 a new draft regulatory framework allowing non-resident foreign investors to directly invest in the Tadawul.

Pursuant to the proposed amendments, the concepts of swap agreements (which were previously used as an option to allow non-resident foreign investors to obtain only the economic benefits of listed securities in the Tadawul) and the Qualified Foreign Investor will be abolished. Instead, the draft permits all foreign investors, whether residing or not, to directly invest in Saudi-listed shares on the Tadawul, subject to:

• the non-residing foreign investor (other than a Foreign Strategic Investor) not owning 10% or more of the shares or convertible debt instruments of any listed issuer; and
• the aggregate maximum ownership by all foreign investors (except Foreign Strategic Investors) in the listed shares or convertible debt instruments of an issuer not exceeding 49%.

The consultation period will last for 30 calendar days, ending on 09/05/1447H (corresponding to 31/10/2025G).