Scope, Applicability, and Compliance

Main Market, Parallel Market (Nomu), Institutional Framework, and Compliance Levels

First: Introduction

The scope of application of the Corporate Governance Regulations is not uniform across all companies. The Regulations apply differently depending on company type, size, market of listing, and operational sector. Understanding the scope is the first step toward proper compliance; a company applying requirements that don’t pertain to it wastes resources, while a company ignoring requirements that do apply risks penalties. This article examines in detail the scope, differences between markets, and requirements for each category of companies.

Since the 2024 amendments, the scope has witnessed significant expansion to include Parallel Market (Nomu) companies with more rigorous requirements than before. This expansion reflects the regulatory maturity of the market and raises the overall governance level. The overlap between the Governance Regulations and other sectoral requirements (banks, insurance) creates application challenges that require precise understanding of priorities and integration.

💡  Key Insight Scope of application is not a rigid list but a dynamic map evolving with company maturity. A startup in the Parallel Market applies a basic level, grows to the Main Market and its requirements rise, and if it enters a regulated sector like banking it adds higher requirements. Understanding the scope correctly is understanding “where you are today and where you will be tomorrow.”

Second: Institutional Framework of the Saudi Capital Market

1. Capital Market Authority

The supreme regulatory body:

• Established by the Capital Market Law (M/30).
• Responsible for issuing regulations.
• Oversight of the market and dealers.
• Investigation and penalties.

2. Saudi Tadawul Group

The operating entity:

• Saudi joint-stock company.
• Operates both Main and Parallel markets.
• Implements listing requirements.
• Licensed by the Authority.

3. Securities Depository Center (Edaa)

The custodian entity:

• Subsidiary of Tadawul Group.
• Custody of securities.
• Settlement and clearing.
• Management of shareholder registers.

4. Securities Clearing Center (Muqassa)

• Central clearing for securities.
• Risk management.
• Settlement guarantee.

Third: The Main Market

1. Definition and Characteristics

The Main Market (Tadawul Main Market):

• The official equities market in the Kingdom.
• Available to all investors (individuals and institutions, Saudi and non-Saudi).
• Strict listing requirements.
• Full application of the Governance Regulations.

2. Listing Requirements

2.1 Financial Requirements

• Minimum capital: SAR 300 million.
• Net profit in previous years.
• Specific operating history.
• Audited financial statements.

2.2 Regulatory Requirements

• Saudi joint-stock company.
• Sufficient public offering ratio.
• Compatible ownership structure.
• Clean legal record.

2.3 Governance Requirements

• Board of directors with minimum independent members.
• Governance committees formed.
• Governance policies and procedures.
• Disclosure reports.

3. Full Application of Governance Regulations

• All binding articles (largest total).
• Full disclosure.
• Internal and external audit.
• Comprehensive annual reports.

Fourth: The Parallel Market (Nomu)

1. Definition and Characteristics

The Parallel Market (Nomu – Parallel Market):

• Launched in 2017.
• For emerging and small-to-medium companies.
• Less strict listing requirements.
• Available primarily to qualified investors.

2. Qualified Investors

2.1 Who They Are

• Licensed financial institutions.
• Investment funds.
• Individuals with sufficient financial standing.
• High-solvency companies.

2.2 Criteria

• Sufficient financial solvency.
• Investment experience.
• Knowledge of risks.
• Formal documentation.

3. Relaxed Listing Requirements

• Lower minimum capital.
• More flexible financial conditions.
• Shorter operating history.
• Lower offering ratio.

4. Gradual Application of Governance Regulations

4.1 First Phase (2017-2023)

• Limited application.
• Basic requirements.
• Flexibility in compliance.

4.2 Current Phase (from 1 January 2024)

• A number of indicative articles became mandatory.
• Broader general assembly requirements.
• Audit committee requirements.
• Enhanced disclosure requirements.

4.3 New Requirements

• General assembly upon request of external auditor/audit committee/10% of shareholders.
• Board composition requirements.
• Minimum disclosures.
• Competency requirements.

📌  Note The gradual application of governance to the Parallel Market reflects the “growth with responsibility” philosophy. Emerging companies start with basic requirements, and as their size and complexity grow, they move to higher requirements. This approach serves small companies (doesn’t strangle them with disproportionate burdens) and protects investors (governance is strengthened as the company grows).

Fifth: Comprehensive Comparison Between the Two Markets

Aspect	Main Market	Parallel Market
Minimum capital	SAR 300 million	SAR 10 million
Minimum offered shares	30%	20%
Number of shareholders	200 shareholders	50 shareholders
Operating history	At least 3 years	One year
Profitability requirements	Net profit	Less strict
Governance Regulations	Full	Graduated, intensive since 2024
Mandatory disclosures	Comprehensive	Limited (broader since 2024)
Quarterly reports	Mandatory	Mandatory
Investor type	All investors	Mainly qualified

Sixth: Disclosure and Transparency in Each Market

1. Main Market

1.1 Periodic Disclosure

• Quarterly reports.
• Comprehensive annual report.
• Annual Board of Directors report.
• Governance report.

1.2 Immediate Disclosure

• Material developments.
• Management changes.
• Major transactions.
• Investigations and disputes.

1.3 Specialized Disclosure

• Related party transactions.
• Major shareholder disclosures.
• Board member disclosures.

2. Parallel Market

2.1 Relaxed Disclosure

• Shorter annual reports.
• Less detailed requirements (previously).

2.2 Updates Since 2024

• Expanding disclosure requirements.
• Approaching Main Market standards.
• Strengthening transparency.

Seventh: Transition from Nomu to the Main Market

1. Reasons

• Company size growth.
• Need for larger financing.
• Access to broader investor base.
• Strengthening market position.

2. Requirements

• Meeting Main Market requirements.
• Restructuring governance.
• Expanding disclosures.
• Necessary approvals.

3. Transition Process

3.1 Preparation

• Studying full requirements.
• Identifying gaps.
• Remediation plan.
• Specialized consultations.

3.2 Application

• Board and committee structuring.
• Building governance policies.
• Developing disclosure systems.
• Qualifying cadres.

3.3 Submission and Acceptance

• Transition request to the Authority.
• Document review.
• Approval.
• Listing on the Main Market.

Eighth: Overlap with Regulated Sectors

1. Banking Sector

1.1 Dual Regulatory Framework

Listed banks are subject to two frameworks:

• Corporate Governance Regulations (CMA).
• Banks Governance Framework (Saudi Central Bank SAMA).

1.2 Additional Requirements for Banks

• Mandatory risk committee.
• Capital requirements (Basel 3).
• Board member requirements (qualifications, experience).
• Risk management requirements.
• Anti-money laundering compliance.

1.3 Application

• Compliance with the stricter requirements.
• Coordination between the two authorities.
• Separate reports.
• Dual oversight.

2. Insurance Sector

2.1 Regulatory Framework

Listed insurance companies are subject to:

• Corporate Governance Regulations (CMA).
• Insurance Authority regulations.
• Additional sectoral requirements.

2.2 Additional Requirements

• Financial solvency requirements.
• Actuarial governance.
• Specialized committees (insurance, investment).
• Sectoral disclosure requirements.

3. Investment Sector

3.1 Licensed Financial Companies

Brokerage, asset management companies, etc.:

• Authorised Persons Regulations.
• Specific governance requirements.
• Independence requirements.

3.2 Investment Funds

• Investment Funds Regulations.
• Fund governance.
• Manager requirements.

4. Telecommunications and Energy Sectors

• Compliance with the general regulation.
• Additional sectoral requirements.
• Sovereign obligations in some cases.

Ninth: Compliance Levels

1. Mandatory Compliance

1.1 Binding Articles

• Most articles of the Regulations.
• No option in application.
• Violations require penalties.

1.2 Penalties for Violation

• Financial fines.
• Warnings.
• Listing suspension (in serious cases).
• Referral to the Public Prosecution.

2. “Comply or Explain” Compliance

2.1 Indicative Articles

• Limited number of articles.
• The company applies or discloses the reason.
• Disclosure must be justified and detailed.

2.2 Required Quality of Disclosure

• Not just “not compliant.”
• Detailed reasons.
• Remediation plans.
• Time frame.

3. Voluntary Compliance (Best Practice)

3.1 What It Is

• Commitment to standards higher than the minimum.
• Adopting best global practices.
• Optional standards.

3.2 Benefits

• Competitive advantage.
• Attracting investments.
• Investor confidence.
• Preparation for future developments.

Tenth: Preparing for Compliance

1. Assessing Current Status

1.1 Self-Review

The first step:

• Reviewing each article of the Regulations.
• Determining compliance for each.
• Identifying gaps.
• Estimating effort required.

1.2 External Review

For objectivity:

• Specialized consultants.
• Law firms.
• Audit firms (Big 4).
• Specialized institutes.

2. Compliance Plan

2.1 Priorities

• Binding articles first.
• High-impact articles.
• What needs more time.
• What needs significant resources.

2.2 Timeline

• Time milestones.
• Defined responsibilities.
• Sufficient budget.
• Measurement indicators.

3. Required Resources

3.1 Human

• Qualified board secretary.
• Governance officer (in large companies).
• Disclosure officer.
• Internal auditor.
• Legal counsel.

3.2 Technology

• Meeting management systems.
• Disclosure systems.
• Internal audit systems.
• Risk management systems.

3.3 Financial

• Governance budget.
• Member compensation.
• Committee costs.
• Audit costs.

Eleventh: “Compliance and Disclosure” System (CGAS)

1. Definition of the System

Electronic system of the Authority:

• For regulatory disclosures.
• Available to listed companies.
• Comprehensive of all disclosure requirements.
• Integrated with Tadawul.

2. Uses

• Immediate disclosures.
• Periodic reports.
• Major shareholder disclosures.
• Board member disclosures.

3. Usage Requirements

• Activated account.
• Defined authorities.
• Electronic signature.
• Training of employees.

Twelfth: Common Challenges

1. “Incomplete Understanding” Challenge

Some companies don’t accurately understand the scope:

• Applying articles that don’t pertain to them.
• Ignoring articles that pertain to them.
• Solution: specialized consultation.

2. “Limited Resources” Challenge

Especially for small companies:

• Shortage of qualified cadres.
• Limited budget.
• Solution: gradualism, external assistance.

3. “Continuous Updates” Challenge

The Regulations evolve:

• Following amendments.
• Continuous policy updates.
• Solution: dedicated governance officer.

4. “Multiple Regulatory Frameworks” Challenge

For regulated sectors:

• Overlap between regulatory authorities.
• Multiple requirements sometimes conflicting.
• Solution: specialized compliance team.

Thirteenth: Best Practices

1. At the Strategy Level

• Comprehensive understanding: of scope of application.
• Long-term planning: for growth and evolution.
• Self-commitment: to standards higher than the minimum.
• Investment: in cadres and systems.

2. At the Application Level

• Comprehensive plan: documented and updated.
• Gradual application: according to priorities.
• Continuous monitoring: of compliance.
• Periodic review: of policies.

3. At the Disclosure Level

• High quality: in content.
• Appropriate timing: for requirements.
• Full transparency: even for challenges.
• Continuous updating: of systems.

4. At the Development Level

• Training: for members and management.
• Consultations: specialized.
• Benchmarking: with best practices.
• Continuous improvement: of governance.

Conclusion

The scope of application of the Corporate Governance Regulations is the map every company must understand before beginning compliance. Correct understanding of the scope determines actual requirements, directs resources, and builds a realistic action plan. A company in the Main Market applies full requirements, a company in the Parallel Market applies graduated requirements, a company in a regulated sector applies additional requirements. Each company has its unique path, but all serve the larger goal: strong governance for a more developed capital market.

The continuous developments in the Governance Regulations, especially the 2024 amendments that expanded application to the Parallel Market, reflect the regulatory maturity of the Saudi capital market. Smart companies do not wait until requirements become mandatory, but anticipate developments and adopt best practices. This trend pushes governance from mere compliance to competitive advantage, from regulatory burden to strategic investment. With the ongoing Regulations development initiative through 2026, the future portends higher requirements and greater opportunities for companies committed to refined governance.

🎯  Essential Points to Remember (1) Scope of application is dynamic according to market, size, and sector. (2) Institutional framework: Authority, Tadawul, Edaa, Muqassa — each with its role. (3) Main Market: strict requirements, all investors, full application of Regulations. (4) Parallel Market (Nomu): graduated requirements, mainly for qualified investors, expanded application since 2024. (5) Transition from Nomu to Main needs comprehensive restructuring. (6) Regulated sectors (banks, insurance) subject to two frameworks with the stricter standard. (7) Compliance levels: mandatory, comply or explain, voluntary (Best Practice). (8) Preparation: assessment, plan, human/technical/financial resources. (9) Electronic CGAS system for official disclosures. (10) Best practice: anticipating developments, not awaiting them.

Contact Us

FAQS

What is the difference between the Main Market and the Parallel Market (Nomu) in terms of governance requirements?

The Main Market requires full application of all binding Governance Regulations articles with comprehensive disclosure for all investor types, while the Parallel Market applies a graduated approach mainly for qualified investors, though application has intensified significantly since 1 January 2024 with mandatory audit committee requirements and broader general assembly rights.

What are the minimum capital requirements to list on each market?

The Main Market requires a minimum capital of SAR 300 million along with at least 3 years of operating history and 30% minimum offered shares, while the Parallel Market requires only SAR 10 million minimum capital, one year of operating history, and 20% minimum offered shares.

Who can invest in companies listed on the Parallel Market?

The Parallel Market is available primarily to qualified investors, including licensed financial institutions, investment funds, and individuals with sufficient financial solvency, investment experience, and knowledge of risks, rather than being open to all retail investors like the Main Market.

References and Sources

• Corporate Governance Regulations issued by the CMA and its 2023-2024 amendments.
• Listing Rules issued by the CMA.
• Parallel Market (Nomu) Listing Rules.
• Saudi Companies Law (Royal Decree M/132).
• Capital Market Law (Royal Decree M/30).
• Banks Governance Framework — Saudi Central Bank.
• Insurance Authority regulations.
• OECD Corporate Governance Factbook 2025.
• Tadawul Listing Rules and Guidelines.
• Certified Governance Institute — Application Guides.