MENA Asset Management Survey 2012 - National Bank of Abu Dhabi

Regulatory Trends
Moreover, the regulations spell out a number of obligations for managers in terms of due
diligence, both to provide adequate and accurate information to investors and in
managing the fund itself, and financial reporting must meet IASB standards (or AAOIFI
ones for a Shariah-compliant fund). In addition, fund managers are required to ensure
the distribution of fund shares through multiple intermediaries without bias to any single
one.
KSA Capital Markets Authority regulation
The key pieces of regulation discussed in this section are the KSA Market conduct,
Corporate Governance, Investment Fund regulations and the AML and Counter-Terrorist
Law.
In terms of trading, investment managers have an obligation to provide best execution
for their investors, as well as prompt allocation of the assets to the relevant accounts.
Investor reporting and transparency are also promoted, through provisions regarding
shareholders’ access to information, disclosure and transparency in the CMA Corporate
Governance Law. In addition, the CMA’s Investment Fund Regulation requires managers
to report at least quarterly to unit-holders, and to value the assets of a fund and calculate
unit prices on each dealing day.
Moreover, the rules bolster financial reporting standards with the obligation for firms to
submit annual and interim financial statements, prepared and audited in accordance with
standards of the Saudi Organization of Certified Public Accountants (SOCPA). A further
onus is put on transparency through the requirement for managers to establish a
separate bank account for each investment fund and to maintain records for all securities
and other assets of each fund.
In terms of risk management, the rules state that a fund must not unduly concentrate
investments in a single security or asset type, to avoid over-exposure, and must not
undertake undue investment risk, but also that a single unit-holder may not own more
than 10% of a fund’s total NAV, to avoid conflicts of interest.
Anti-Money Laundering and Anti-Terrorism provisions are equally onerous. Customer
due diligence and ongoing scrutiny must be applied to all clients, with specific policies to
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