Comparative Analysis of U.S. and Saudi Arabia Investment Funds Regulations

Tang, Gabriella | January 1, 2020

The investment funds sector has always been a major player in the financial industry globally. As such, many countries with mature financial markets have enacted regulations to govern the activity and management of investment funds. The U.S. Securities and Exchange Commission (SEC) enacted the Investment Company Act of 1940(the Act) as an effort to restore investor confidence in investment funds and safeguard investors from future abuses after the market crash in 1929. On the other hand, emerging financial markets started to take part in regulations in the hope to attract more investors and outside resources. The Capital Market Authority of Saudi Arabia (hereinafter CMA) enacted the Investment Funds Regulation (hereinafter the Regulation) in 2006, as the Sovereign aims to turn the State into an investment powerhouse. Due to the newness of the Regulation, an analysis of the Act will be helpful for the CMA to improvise the Regulation and avoid mistakes. This paper will first focus on four areas of the Investment Company Act of 1940, analyzing the strengths and weaknesses of the Act with suggestions provided. It will then offer an analysis of the Investment Funds Regulation of Saudi Arabia and discuss areas for improvement based on the analysis of the Investment Company Act of 1940.