Allowing the Distribution of Public Investment Fund Units through Electronic Channels of Electronic Money Institutions

[Logo of the Saudi Central Bank]

Circular

To: Respected Parties,

Peace, mercy, and blessings of God be upon you,

Subject: Allowing the Distribution of Public Investment Fund Units through Electronic Channels of Electronic Money Institutions.

Based on the powers granted to the Saudi Central Bank (SAMA) under the Saudi Central Bank System issued by Royal Decree No. (M/36) dated 1442/04/11H, the Payments and Payment Services System issued by Royal Decree No. (M/26) dated 1443/03/22H, and its Executive Regulations issued on 1444/10/24H, and in light of SAMA's role in implementing initiatives of the Financial Sector Development Program stemming from Saudi Vision 2030 objectives, which include expanding access to collective investment products; and based on coordination between SAMA and the Capital Market Authority (CMA), with the aim of facilitating access to investment fund products by expanding the channels for obtaining these products.

We wish to inform you that it has been decided to allow electronic money institutions (EMIs) to contract with investment funds and capital market institutions licensed by the CMA, in order to distribute fund units according to the following conditions:

1. The contract must be with a capital market institution licensed by the CMA specifically for distributing publicly offered investment funds.
2. The EMI must notify SAMA in advance before contracting with licensed capital market institutions, and the notification must include the company's confirmation of updating its internal policies to align with these products and their associated potential risks.
3. The EMI must verify that service provision complies with the stipulations and requirements set forth in the Executive Regulations of the Payments System, including licensing conditions, regulatory restrictions, and limits imposed on the company commensurate with its business volume.
4. The EMI must exercise due diligence related to these products, and the contract agreement must stipulate that the liability and risks arising from this contracting lie with the contracted capital market institution under the CMA's supervision.
5. The role of the EMI is limited to distributing funds via its e-wallet application and solely filling out and signing related documents, without allowing the client to open an investment account through EMI channels. It must clearly explain to the client that funds are one of the investment products of the CMA-licensed institution, not payment products, and that the EMI is not a party to the relationship between the client and the licensed capital market institution.
6. The client must be able to subscribe to funds through the EMI's e-wallet application without the ability to dispose of them (e.g., sell or unsubscribe), and fund subscription shall only be completed after the licensed capital market institution contacts the client and notifies them of the fund's suitability.

We also wish to emphasize the responsibility of EMIs to comply with all relevant systems, regulations, and directives, and to verify the soundness of their operations and services from all technical and legal aspects, while ensuring adherence to the principle of segregation between payment activities and investment activities.

Yours sincerely,

Yazeed bin Ahmed Al-Sheikh
Deputy Governor for Supervision

Distribution Scope

• Payment service companies.