Regulatory Alerts2021-06-10
Aggregate Accounts to manage the finance amount for engaging in debt-based crowdfunding
The Central Bank of Saudi Arabia mandates debt-based crowdfunding entities to establish dedicated aggregate accounts exclusively for managing financing amounts, requiring strict segregation from the entities' own funds. The directive obligates these entities to implement written management policies, board-approved authorization matrices, semi-monthly senior reporting, and documented reconciliation processes while notifying the Central Bank of all account openings or closures. Additionally, it requires bank agreements to explicitly reflect regulatory requirements and clearly delineate the respective operational responsibilities of both the banks and the crowdfunding entities.
Circular
To Whom It May Concern,
Peace, mercy, and blessings of God be upon you,
Subject: Regarding Aggregate Accounts to Manage the Financing Amount in Debt-Based Crowdfunding Entities.
Based on the powers granted to the Central Bank under its system issued by Royal Decree No. (M/36) dated 11/4/1442H, and the system for monitoring financing companies issued by Royal Decree No. (M/5) dated 13/8/1433H,
The Central Bank wishes to affirm to all debt-based crowdfunding entities the importance of complying with what is stipulated in the system for monitoring financing companies, its executive regulations, and the rules governing debt-based crowdfunding activities regarding aggregate accounts to manage the financing amount in debt-based crowdfunding entities, specifically as follows:
First: It is confirmed that the purpose of opening aggregate accounts in debt-based crowdfunding entities shall be limited solely to managing the financing amount, and they must be segregated from the debt-based crowdfunding entity's funds in separate accounts.
Second: The account dedicated to participants' funds in debt-based crowdfunding entities shall be named "Financing Amount Management Account – [Name of the Debt-Based Crowdfunding Entity]".
Third: The debt-based crowdfunding entity shall notify the Central Bank upon opening or closing aggregate accounts at banks and financial institutions operating in the Kingdom.
Fourth: The debt-based crowdfunding entity shall establish written policies and controls related to the management and operation of aggregate accounts, including designating authorities and authorized persons, subject to the following considerations:
(1) Strengthening the principle of multiple oversight based on risk assessment, including activating the role of internal supervisory functions within the entity.
(2) The authority of persons managing the aggregate account shall be limited according to the board-approved authorization matrix, and the authorized person for the account must submit a report to senior management on a semi-monthly basis.
(3) The aggregate account shall not be linked to any financial obligations or rights of the debt-based crowdfunding entity.
Fifth: The debt-based crowdfunding entity shall perform and document the reconciliation process to verify that the total executed debt-based crowdfunding financing operations match the aggregate account balance at the bank.
Sixth: The agreement for opening the aggregate account with the bank shall reflect all regulatory requirements stipulated in the rules governing debt-based crowdfunding activities, clarifying the responsibilities of both the bank and the debt-based crowdfunding entity regarding operations executed on the aggregate account.
For information and implementation effective from its date, the Central Bank shall be provided with the procedures taken to review all documents and amend them in accordance with the above circular.
Yours sincerely,
Fahd bin Ibrahim Al-Shathri
Deputy Governor for Supervision
Distribution Scope:
- Debt-based crowdfunding entities operating in the Kingdom
P.O. Box 2992 Riyadh 11169, Kingdom of Saudi Arabia Tel: +966 11 463 3000
P.O. Box 2992, Riyadh, 11169 Kingdom of Saudi Arabia Tel: +966 11 463 3000