The Capital Market Authority of Saudi Arabia (CMA) has announced a new reform, opening the Saudi equity market to all categories of foreign investors. The reform takes effect Feb. 1, 2026, and abolishes the Qualified Foreign Investor (QFI) regime that has governed foreign access in Saudi Arabia since 2015. As a result, foreign investors — both institutional and individual — will be able to invest directly in shares listed on the Main Market of Tadawul without meeting qualification thresholds or obtaining special regulatory status.
The CMA has also abolished the framework for equity swap arrangements, which had historically been used to provide synthetic exposure to foreign investors. These changes reflect the maturity and internationalization of the Saudi market, its growing integration into global index and capital flow dynamics, and Saudi Arabia’s broader Vision 2030 objectives.
Importantly, while the CMA has liberalized market access, foreign ownership limits remain in place, including a 49% aggregate foreign ownership cap and a 10% limit per single foreign investor, subject to limited strategic investor exceptions.
The QFI Regime: Background and Rationale
Saudi Arabia first opened its equity market to direct foreign institutional investment in 2015 through the QFI framework. Prior to that, non-Gulf Cooperation Council (GCC) foreign investors could only access Saudi equities indirectly, primarily through swap agreements or local funds.
The CMA structured the QFI regime as a phased liberalization tool, allowing access only to foreign financial institutions meeting prescribed eligibility criteria, including minimum assets under management (AUM), regulatory supervision in recognized jurisdictions, and operational track record requirements. At launch, minimum AUM thresholds were high (approximately $5 billion), reflecting a policy focus on attracting long-term institutional capital while limiting speculative inflows.
Over time, the CMA has relaxed QFI requirements, reducing thresholds, expanding eligible investor categories, and simplifying registration. These changes materially increased foreign participation and supported Saudi Arabia’s inclusion in major global indices such as the MSCI Emerging Markets and the FTSE Russell. By Q3 2025, foreign investors reportedly held over SAR 590 billion in Saudi equities.
Despite these developments, the QFI regime continued to impose structural and administrative barriers, particularly for smaller institutions and individual investors, and contributed to continued reliance on synthetic exposure structures.
Opening the Market to All Foreign Investors
Beginning Feb. 1, 2026, foreign investors of all types may invest directly in Saudi-listed equities through licensed Saudi intermediaries without QFI status or prior CMA approval. The CMA has also abolished the regulatory framework governing equity swap agreements.
As foreign investors will now be able to hold shares directly and exercise full shareholder rights, synthetic exposure structures will no longer be permitted or required. The reforms have been implemented through amendments to the Rules for Foreign Investment in Securities and related CMA instruments approved by the CMA Board and announced on Jan. 6, 2026.
Operational details, including account-opening procedures, custodian arrangements, and trading rules will still apply to foreign investors as they do for Saudi investors. Foreign investors will need to work through Saudi brokerage firms and must comply with Saudi market regulations, but the CMA will not require an additional QFI layer of approval or ongoing compliance going forward.
Capital Markets Liberalization in 2024 and 2025
The abolition of the QFI regime follows a series of incremental reforms. In early 2025, the CMA permitted non-Saudi residents of GCC countries to invest directly in Saudi-listed securities. Later in 2025, the CMA expanded access to additional categories of foreign investors, including former GCC residents, further narrowing the practical scope of the QFI framework.
During the same period, the CMA codified key ownership limits, including a 49% aggregate foreign ownership cap per listed company and a 10% cap per single foreign investor. It also codified certain exemptions for approved foreign strategic investors, subject to minimum holding periods and regulatory conditions. Following public consultation in late 2025, the CMA formally approved the full abolition of the QFI regime.
Implications for the Saudi Capital Markets
The reforms may deliver several benefits:
- Broader investor participation and liquidity: Removing qualification barriers opens the market to a wider pool of international investors, supporting increased liquidity, depth, and resilience.
- Simplified market access: Foreign investors and intermediaries will no longer need to navigate QFI registration processes or complex swap structures, which may reduce operational friction and transaction costs.
- Improved transparency and governance: Direct ownership may enhance shareholder rights, voting participation, and transparency of foreign ownership, supporting stronger corporate governance over time.
- Positive index and capital flow dynamics: Greater accessibility may improve Saudi Arabia’s attractiveness to global index funds and international asset allocators, reinforcing its position within emerging market portfolios.
For banks and financial advisers, the reforms may create expanded opportunities to support inbound investment, brokerage, custody, and advisory activity. For issuers, a broader investor base may support valuations, IPO participation, and secondary market activity.
Ongoing Limitations and Considerations for Investors
Despite the full opening of market access, certain ownership safeguards remain central:
- Aggregate foreign ownership in a listed company remains capped at 49%.
- Single foreign investors are generally limited to 10% ownership.
- Foreign strategic investors may exceed these limits only with approval and subject to minimum holding periods.
- Sector-specific foreign investment restrictions under other Saudi laws continue to apply.
Foreign investors must also abide by standard market conduct rules, disclosure obligations (including 5% shareholding notifications), and Saudi settlement, custody, and compliance requirements.
Conclusion
The abolition of the QFI regime marks a structural milestone in the development of Saudi Arabia’s capital markets. The reforms may enhance accessibility and international integration while preserving ownership safeguards and regulatory oversight. For international investors, banks, and advisers, this reform may represent a more open, transparent, and globally aligned Saudi Arabian equity market.