Saudi Arabia Opens Its Capital Markets to Foreign Investors: Key Reforms and Implications

Saudi Arabia’s capital markets are now open to foreign investors on a direct basis. Amendments to the Capital Market Authority’s Rules for Foreign Investment in Securities, published on 5 January 2026 and in force since 1 February 2026, abolish the Qualified Foreign Investor regime and remove the framework for swap-based access, allowing foreign investors to hold securities listed on the Saudi Exchange (Tadawul) in their own name. In an article published by Lexis Middle East, Hourani & Partners examines the reforms and what they mean for investors looking at the Kingdom.

Under the previous framework, direct participation in Saudi listed equities was largely limited to institutional investors that qualified under the QFI regime, which required assets under management of at least SAR 1.875 billion (approximately USD 500 million) alongside a range of regulatory and operational conditions. Investors outside that regime typically gained exposure through swap agreements with authorized Saudi financial institutions, under which the local institution held the shares and passed on the economic return. The result was exposure without ownership: no legal title, no shareholder rights, and counterparty risk built into the structure.

The amended rules replace that structure with direct access. Foreign investors no longer need QFI approval or a swap arrangement to invest in securities listed on Tadawul, and as holders of legal title they can vote at shareholder meetings and participate in corporate actions. The reforms do not remove every constraint, however. The ownership limits in Article 6 of the FIS Rules and sector-specific restrictions continue to apply, and the Foreign Strategic Investor regime, with its mandatory two-year lock-up, remains in place for investors seeking a long-term stake in a listed company.

Highlights of the article include:

• The background to the reforms, including the QFI regime’s eligibility threshold, the swap arrangements used by investors who fell outside it, and the definition of “foreign” under the FIS Rules, which covers non-Saudi and non-GCC nationals regardless of residency.
• The two principal changes introduced by the amendments: the abolition of the QFI regime and the removal of the regulatory framework governing swap agreements.
• What direct ownership means in practice, from the exercise of shareholder rights to reduced structuring complexity and the removal of counterparty risk associated with synthetic exposure.
• The ownership limits that remain under Article 6 of the FIS Rules: no single non-resident foreign investor (other than a Foreign Strategic Investor) may hold 10% or more of a listed issuer’s shares or convertible debt instruments, aggregate foreign ownership excluding FSIs is capped at 49%, and regulatory, constitutional, and sector-specific restrictions continue to apply.
• The continued operation of the Foreign Strategic Investor regime, which applies to foreign legal entities taking a direct stake for a minimum of two years with the objective of contributing to the company’s financial or operational performance, and carries a mandatory two-year lock-up.
• The practical steps required to trade, including brokerage and custody arrangements with authorized Saudi financial institutions, account opening, and KYC and AML checks, with onboarding timelines that vary by institution and investor profile.
• How the reforms sit within Saudi Arabia’s broader Vision 2030 strategy to deepen its capital markets, enhance liquidity, and align them more closely with international standards.

Click here to read the full article on Lexis Middle East.

The article is authored by Rudolf Goldschmidt, Partner; Lea Hage Chahine, Associate; and Abdullah Qureshi, Associate.