The Capital Market Authority (“CMA”) has published for public consultation the draft amendments to the Rules for Special Purposes Entities, the Rules on the Offer of Securities and
Continuing Obligations, and the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority (the “Draft Amendments”). The consultation period is 45 calendar days from the date of publication. Interested persons and market participants are invited to submit their feedback during this period.
Objectives
The Draft Amendments aim to deepen the sukuk and debt instruments market in the Kingdom by improving the regulatory framework for securitization operations and enhancing the diversity of investment products available in the capital market.
Key Proposed Changes
The principal elements of the Draft Amendments include the following:
Public Offering of Asset-Backed Debt Instruments
For the first time, the amendments would permit the public offering of asset-backed debt instruments through securitization operations. The scope of Part 2 of the Rules for Special Purposes Entities would be broadened so that all debt instruments offered through a public offer by a special purposes entity will be subject to the Rules on the Offer of Securities and Continuing Obligations (ROSCO) and the Listing Rules.
Originator Retention Requirement
A new Article 73 under ROSCO would require the originator to maintain ownership at all times of at least 5% of the nominal value of asset-backed debt instruments offered through a public offer, excluding debt instruments backed by assets guaranteed by the Kingdom’s government.
Credit Rating
Issuers of publicly offered asset-backed debt instruments would be required to obtain a credit rating from an authorised credit rating agency at the time of offering, and at least an annual review of that credit rating, with the results disclosed publicly on the Exchange’s website.
New Prospectus Requirements
A new Annex 14(b) under ROSCO would set out minimum prospectus contents specifically for asset-backed debt instruments, covering detailed information on the securitization structure, the originator, the securitized assets, risk factors, financing structure, and legal information.
Enhanced Periodic Reporting
New reporting obligations would require the directors of a Special Purpose Entity issuing publicly offered asset-backed debt instruments to publish a report within 30 days of each distribution date and an annual report within three months of the financial year-end, covering asset pool performance, material litigation, defaults, and credit enhancement information. The CMA has also issued a Guideline for Periodic Reports providing detailed templates for cash distribution reports and annual reports
New Defined Terms
The Glossary would be updated to include new definitions for “Credit Enhancements,” and “Primary Obligor,” and to amend the definition of “Beneficiary” to reflect its broader application.
Next Steps
We encourage clients involved in capital markets, securitization, and debt issuance in the Kingdom to review the Draft Amendments and consider submitting feedback to the CMA during the consultation period. We are available to assist with the preparation and submission of any such feedback.
The link to CMA’s consultation page is available at News Details The CMA Calls for Public Consultation on Improving the Regulatory Framework for Securitization
How can Al Tamimi help?
If you have any questions or require further information, please contact the key contacts.
Key Contacts
Rafiq Jaffer, Partner, r.jaffer@tamimi.com
Ambreen Bidiwala, Legal Director, A.bidiwala@tamimi.com