CMA Seeks Feedback on Custody Capital Cut to SAR 20M

The Capital Market Authority (CMA) invited all interested persons and participants in the capital market to share feedback on developing securities business activities in the Saudi Exchange (Tadawul). The consultation period lasts 30 calendar days, ending June 17, 2026. The draft proposes lowering minimum capital for custody by 60%, setting a new floor for crowdfunding arrangers, and splitting dealing into risk-based sub-activities.

For traders and investors tracking Saudi capital market evolution, the direction is clear: lower entry barriers, more institutions, and narrower margins for incumbents. The real market read requires parsing which segments face the most exposure.

Custody Capital Halved to SAR 20M: Entry Barrier Collapses

The CMA proposed cutting the minimum capital requirement for custody activity by 60% to SAR 20 million from SAR 50 million. Custody providers hold client assets and settle trades. Lowering the bar by SAR 30 million opens the door for smaller institutions to compete with existing players that have already absorbed the higher cost base.

The regulator said the amendment aligns with leading international best practices. The immediate effect is a direct reduction in entry barriers for one of the core capital market functions. Institutions that entered at the higher threshold now face competition from firms raising only SAR 20 million.

Crowdfunding Gets a Formal SAR 2M Floor

The CMA set a minimum capital requirement of SAR 2 million for arranging activities that involve holding client funds in the context of securities-based crowdfunding. The regulator described the figure as "commensurate with the nature of the associated risks." This is a new specific requirement. Previously, crowdfunding arrangers operated under more general capital rules.

The SAR 2 million threshold is low enough to attract fintech entrants. It is high enough to filter unserious applicants. Platforms that operated in grey areas can now regularize, potentially attracting more issuers and investors to the securities-based crowdfunding segment.

Dealing Sub-Activities: Principal vs Agent Capital Tiers

The CMA introduced defined sub-activities under the Dealing business with separate minimum capital requirements:

Dealing as Principal, Underwriting, and Executing Transactions on a Margin Basis – grouped together with a SAR 20 million minimum.
Dealing as Agent – a separate SAR 10 million minimum.

This tiered approach matches capital to risk. Principal dealing and underwriting carry balance-sheet risk and higher potential losses. Agency execution involves no inventory risk. The split also allows firms to specialize without meeting a one-size-fits-all requirement.

Activity	Current Minimum Capital	Proposed Minimum Capital
Custody	SAR 50 million	SAR 20 million
Arranging (crowdfunding)	Not specified separately	SAR 2 million
Dealing as Principal, Underwriting, Margin Execution	Not specified separately	SAR 20 million
Dealing as Agent	Not specified separately	SAR 10 million

KYC and AML Overhaul Raises Compliance Bar

The CMA is developing Know Your Client (KYC) requirements by linking them to the customer’s money laundering and terrorism financing risk classification. The draft includes designated forms for this purpose.

The final compliance cost of the new KYC regime could offset the capital savings for some entrants. Advising firms – previously restricted to that activity alone – may now engage in other professions or businesses subject to specified controls. That flexibility lets advisory firms diversify revenue streams without surrendering their license.

Exposure: Who Gains, Who Faces Pressure

Timeline and Catalyst Path

The consultation period ends June 17, 2026. After that, the CMA will review comments and issue a final draft. The regulator emphasized that feedback from individuals, government entities, the private sector, and supervised entities will be taken into full consideration.

What to Watch Before the Deadline

Comment letters from existing institutions: Incumbents may push back on the custody reduction or request transitional arrangements. If major brokers argue that the SAR 20 million threshold increases systemic risk, the final number could be higher.

Fintech interest: Crowdfunding platforms and digital brokers have a direct incentive to support the proposals. A surge in formal comments from new applicants would signal latent demand.

KYC implementation cost: The final compliance cost of the new regime could offset the capital savings for some entrants. If the KYC rules are onerous, the competitive impact may be muted.

Post-Consultation Risk

If the final rules mirror the draft, the market structure change is straightforward: lower capital barriers, more institutions, narrower margins for incumbents. If the CMA retreats on the custody capital cut or imposes high operational requirements, the competitive dynamic shifts back.

Risk Scenarios

What Would Reduce the Risk

Final rules retain most capital thresholds at current levels or impose transitional periods that soften the competitive impact on incumbents.

KYC and AML compliance costs prove high enough to deter many new entrants, offsetting the capital reduction.

The consultation reveals weak demand – few formal comments from potential new entrants – indicating that regulatory barriers are not the binding constraint on entry.

What Would Make the Risk Worse

Final rules adopt the draft with minimal changes, especially the custody capital halving, triggering a wave of new license applications within 12 months.

Crowdfunding platforms proliferate but default or fraud events occur shortly after licensing, prompting the CMA to tighten rules retroactively and creating regulatory uncertainty for all participants.

The dealing sub-activity split creates regulatory arbitrage if firms structure themselves as "Agent" entities (SAR 10 million) while effectively operating as principals through affiliated arrangements.

The consultation is a concrete regulatory catalyst for anyone tracking Saudi capital market evolution. The outcome – whether the final rules match the draft – will determine the pace of institutional growth and the competitive dynamics for existing firms. For now, the direction is clear: lower barriers, more flexibility, and a more granular risk-based capital framework. For ongoing coverage of regulatory shifts that affect market structure, see our stock market analysis section.