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You can refer to the Capital Market Law and its implementing regulations especially the “Market Conduct Regulations” which describes the violating conducts. Capital Market Law and its implementing regulations can be found on the CMA website www.cma.org.sa or you can request a printed copy from CMA’s headquarters. |
CMA seeks to protect investors and to achieve justice, efficiency as well as transparency in trading by detecting manipulative or detective practices in the CML and implementing regulations. As for the rise and decline of the market, it is governed by supply and demand only. |
CMA is responsible of issuing the instructions, rules and regulations as well as applying the provisions of the Capital Market Law. In order to do that, CMA does the following: - Regulate and develop the capital market and promote appropriate standards and techniques for all sections and entities involved in Securities Trade Operations in addition to develop procedures to reduce the risks associated with securities exchange.
- Regulate and monitor issuing the securities.
- Regulate and monitor the activities of entities working under CMA.
- Protect investors and the public from unfair and unsound practices involving fraud, deceit, cheating, manipulation, and inside information trading.
- Maintain fairness, efficiency, and transparency in transactions of securities.
- Regulate and monitor full disclosure of information related to securities and issuers in addition to insider trading, big shareholders and investors, identify and provide information that should be disclosed by the participants in the market to shareholders and the public.
- Organize the requests for representation, buying and public offering of shares.
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CMA monitors the publishing of the financial statements and reports issued by the listed companies to make sure they are consistent with CMA’s requirements and regulations in terms of timing and the information published. |
Board members are representatives of the shareholders and owners to oversee the company’s management to carry out whatever may be in the general interest of the company and shareholders’. Hence, the responsibility of mentoring the performance is on the shareholders in the first place. It is done by electing the members appropriately and monitor their performance in addition to pursue the disclosed reports and hold them accountable in General Assemblies. The board of directors would not be exempt of neglect or abuse. Each shareholder have the right to question the companies’ board of directors and auditors . In addition, he has the right to vote on the resolutions of the General Assembly and to participate in its deliberations. Moreover, Board members are responsible for evaluating the executive management’s performance in the company. |
According to Article fifty of the Capital Market Law, any person who obtains, through family, business or contractual relationship, inside information is prohibited from directly or indirectly trading in the Security related to such information, or to disclose such information to another person with the expectation that such person will trade in such Security. No person may purchase or sell a Security based on information obtained from an insider while knowing that such person, by disclosing such insider information related to the Security, has violated the law. |
It is shown, during the trading period, which trading is suspicious and which is not. Not everyone who trades in the last half hour is considered a violator of the law. The violation is in the conduct that aims to create a false and misleading impression. |
Yes, you can after getting a license to exercise Securities Activities from CMA. |
The Capital Market Law violations are mentioned in detail in Chapter Ten “Sanctions and Penalties for violations” in articles 55 until 64 of the Capital Market Law. |
The affected person (the investor in the Capital Market) has the right to file a private right suit before the Committee for Resolution of Securities Disputes (CRSD), and claim compensation for the losses that he has incurred as a result of the violation against who is proved guilty of the violation. |
Yes, it did. Article 58 of the Capital Market Law states that “A private action claim under Articles 55, 56 and 57 of this Law shall not be heard if the complaint is filed with the Authority after the elapse of one year from the date upon which the claimant should have been aware of the facts causing him to believe he had been the victim of a violation, and in no case may such claim be heard by the Committee after five years from the occurrence of the violation subject of the claim, unless the defendant acknowledges the liability, or the plaintiff provides a justification accepted by the Committee” |
Pursuant to Article (30) of the Capital Market Law, the concerned bodies that have jurisdiction over securities disputes are: a. The Committee for the Resolution of Securities Disputes (CRSD). b. The Appeal Committee for the Resolution of Securities Conflicts (ACRSC). |
Pursuant to Article (30) of the Capital Market Law, CRSD shall have jurisdiction over the following cases: a. Public actions, which are brought against violators of the Capital Market Law and its implementing regulations, and the regulations, rules and instructions of the Authority, the Exchange, the Depository Center, the Clearing Center. b. Private actions, which are brought by investors in securities against Capital Market Institutions or between capital market institutions, c. Grievance claims against decisions and procedures issued by the Authority, the Exchange, the Depository Center, or the Clearing Center. d. Actions of emergent nature that are brought before CRSD for issuing temporary decisions within the scope of the Law and its Implementing Regulations. e) All civil and criminal lawsuits and disputes arising from the application of the provisions of the Companies Law and its regulations, and the imposition of penalties on violators, with regard to listed joint stock companies.
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A person shall not file a suit with the Committee for Resolutions of Securities Disputes without filing a complaint first with Authority’s (Investor Protection Department, General Administration of Communication and Investor Protection) . When the complaint is filed, the following is considered: - Submitting the complaint to the Committee after a (90) day period has passed from its filing date. - The Authority notifies the grievant otherwise of the permissibility of submitting the complaint to the Committee directly before the expiration of the 90 days period. -The grievant is notified by Authority of any of the above two matters. |
The authorized employees of the Claims Reception Office, at the Secretariat of CRSD and ACRSC, receive and refer the complaint or pleading to the General Secretary, who refers it to the heads of circuits in CRSD. You can also view the requirements of filing a lawsuit before CRSC through the link below: |
Yes, CRSD’s decisions may be appealed before ACRSC in accordance with Article (30) , paragraph (h), of the Capital Market Law. |
According to Article (30) , paragraph (h), of the Capital Market Law, CRSD’s decision may be appealed within 30 days from their notification date. |
To file an appeal, it is required that: a. The appeal should be deposited within 30 days from the date of receiving a copy of CRSD decision. b. A letter should be addressed to the chairman of ACRSC specifying the names of the appellant and appellee; CRSD decision number and date; reasons for the appeal; and requests. . c. In case the appeal was filed by a representative, the power of attorney should indicate the representative’s right to file the appeal.
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According to Article (30) , paragraph (i), of the Capital Market Law, ACRSC shall have jurisdiction of considering objections on the decisions of the Committee for the Resolution of Securities Disputes based on the information provided for in the claim’s file. The decisions of the Appeal Committee shall be final. . |
It is the ability of the Capital Market Institution to meet its financial obligations and maintaining adequate capital to carry out securities business. |
It is important to follow up to make sure that the Capital Market Institution has enough capital and financial resources to fulfill its obligations so that the Capital Market Institutions won’t be a risk to its clients as well as the Capital Market and its participants. |
The Market Institutions Compliance Department in the Capital Market Authority continuously monitors the financial statements of the Capital Market Institution to ensure the capital adequacy of the Capital Market Institution to carry on securities business and cover its expenses, and having the liquidity, and in turn its business continuity. A Capital Market Institution with capital base lower than the total minimum capital requirements for such is monitored to rectify its situation before it reaches a point where it poses a potential risk to the capital market and its participants. |
According to the Capital Market Institutions Regulations and what is practiced in the Saudi capital market, the Capital Market Institution must segregate its own money and assets from client money and client assets, and client money and client assets must only be used for the benefit of a Capital Market Institution’s clients. In case there was a shortage in the Capital Market Institution’s capital adequacy, the effect would be on its money only which protects its clients in case its license was suspended or revoked. CMA monitors the Capital Market Institutions net capital positions on monthly basis which enable interference in the right time to halt the Capital Market Institution’s operations before its financial status deteriorates. |
The Authorisation Department is primarily responsible for receiving and reviewing securities business applications from applicants who seek to conduct securities business in the Kingdom of Saudi Arabia. The Authorisation Department is also responsible of reviewing applications for changes and amendment in the Capital Market Institutions such as business profile and change in ownership, etc; including personnel registration requirements and reviewing of notifications from the Capital Market Institutions as stated in Annex 3.2 of the Capital Market Institutions Regulations. The Department is also tasked with the development and administration of the CME Examinations for Registered Persons, in addition to implementing initiatives and projects that related to the development of the Capital Market Institutions. |
Reading the Board's report is important to the investor because it includes the company's business, structure of the Board and its performance, in addition to the operational results of the company's activities and the most important strategic and operational decisions taken during the year. |
Implementing Regulations are any Regulations, Rules, Instructions, procedures or orders issued by the Authority for the implementation of the provisions of the Capital Market Law, Companies Law and Bankruptcy Law. |
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Yes, there are Qualification Examinations that the Authority requires depending on the registrable functions according to Article (21) of the Capital Market Institutions Regulations. The Authority has approved the new series of the Qualification Examinations in cooperation with the Financial Academy and the Chartered Institute for Securities and Investment (CISI). The Authority’s circular issued on this regard can be viewed at this link: Authority’s
circular. The new qualification examinations are as follows: 1- International Introduction to Securities and Investment (CME-1A). 2- General Saudi Capital Market Rules and Regulations (CME-1B). 3- Global Financial Compliance (CME-2A). 4- Saudi Capital Market Rules and Regulations – Compliance, Anti-Money Laundering and Combating the Financing of Terrorism (CME-2B). 5- Securities (CME-3A). 6- Saudi Capital Market Rules and Regulations– Brokers (CME-3B). 7- International Certificate in Wealth and Investment Management (CME-4A) 8- Saudi Capital Market Rules and Regulations –Asset Managers (CME-4B). 9- Corporate Finance Technical Foundations (CME-5A) 10- Saudi Capital Market Rules and Regulations – Corporate Finance (CME-5B). starting from 01/02/2023G. the qualification requirement for each registrable function will be as follows: 1- General Registrable Functions: · International Introduction to Securities and Investment (CME-1A). · General Saudi Capital Market Rules and Regulations (CME-1B). 2- Compliance, Anti-Money Laundering and Combating the Financing of Terrorism: · General Saudi Capital Market Rules and Regulations (CME-1B). · Global Financial Compliance (CME-2A). · Saudi Capital Market Rules and Regulations Compliance, Anti-Money Laundering and Combating the Financing of Terrorism (CME-2B). 3- Securities Brokers: · Securities (CME-3A) · Saudi Capital Market Rules and Regulations– Brokers (CME-3B). 4- Persons to be registered under the management activity: · International Certificate in Wealth and Investment Management (CME-4A). · Saudi Capital Market Rules and Regulations –Asset Managers (CME-4B). 5- Corporate Finance Professionals : · Corporate Finance Technical Foundations (CME-5A) · Saudi Capital Market Rules and Regulations – Corporate Finance (CME-5B). It’s worth noting that applicants for registration to perform the function of a member of the board of directors of a Capital Market Institution are exempted from the requirements to pass the International Introduction to Securities and Investment (CME-1A) and the General Saudi Capital Market Rules and Regulations (CME-1B) examinations. In addition, all persons who have passed the Authority’s Qualification Examinations in its previous series will be eligible to register according to the requirements of each registrable function without the need to take the Authority's Qualification Examinations in its new series until their obligatory date. For registration and more information, you can visit the Financial Academy website. |
Practicing brokerage in the stock market requires a license from CMA. Whoever practices brokerage without a license is subject to punishment as per Article 60 of the Capital Market Law. To view the full article, you can go back to the Capital Market Law. |
Yes, the QFI can invest directly in listed securities in the local market as well as invest in the following investment funds, according to the regulations set by the Authority:
• Foreign Investment Fund Qualified as QFI according to the Rules.
• Investment fund that invests in the Saudi Stock Exchange through the swap agreement.
• Approved local investment funds by the Authority.
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Listed companies are responsible for deducting the withholding tax from dividends that they distribute to QFIs. |
Yes, the QFI can deal with a GCC portfolio manager for the management of its investments in the Saudi Stock Exchange.
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Yes, the QFI can deal with portfolio manager who is a capital market institution licensed by the CMA. |
The fund manager –upon your request- must provide you with the quarter statement and annual reports (including the audited financial statements), prepared in accordance with the requirements of Annex (3) and (4) of the Investment Funds Regulations.
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Yes, the QFI can deal with another QFI to manage his investments in listed securities and that does not prejudice the responsibility to abide by the law and its implementing regulations and market rules and its regulations, and other rules that are related. |
The Authority has a specialized department for that which is the Investor Protection Department. The department can be contacted through the following channels: • Through the Authority's website: www.cma.org.sa. • P.O. Box (87171) Riyadh (11642). CMA Head Office - King Fahad Road, Ground Floor Investor Protection Department |
CRSD and ACRSC are fully independent to discharge their duties, and the head of each circuit and its members are appointed by a Royal Order. Thus, pursuant to the provisions of the Capital Market Law, CRSD and ACRSC became the competent litigating authority for resolving disputes that fall within the scope of the provisions of this Law and its Implementing Regulations, the regulations of the Authority, the Exchange, the Depository Center, or the Clearing Center and its rules and instructions in the public right and the private right. It shall have all necessary powers to investigate and settle the claims, including the power to issue subpoenas to witnesses, order the production of evidence and documents, issue decisions, and impose sanctions. Furthermore, with regard to joint-stock companies listed in the capital market, the Committee for Resolution of Securities Disputes shall review and decide appeals against the Authority decisions and all civil and criminal lawsuits and disputes arising from the application of the provisions of Companies Law and its Regulations, and shall also impose the penalties prescribed for violating such provisions... |
Yes, every QFI shall open an independent account. After that, the QFI can open several investment portfolios that are linked to the account. |
If the international broker's role is limited to sending orders issued by the QFI to the capital market institution , then the international broker is not required to qualify as a QFI, provided that the international broker must have the authority to send such orders. |
The cost of transferring is 20 SAR for the securities of each listed company (not per security).
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Transferring securities from a Swap Agreement account to a QFI account does not affect the market value of the securities.
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The shares shall be transferred within 2 business days from the date on which all the requirements were completed. |
Yes, a QFI can be the Foreign Counterparty in Swap Agreements.
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The QFI is responsible of complying with investment limits and disclosure requirements and abide by the Capital Market Law and its Implementing Regulations and the rules of the Exchange and other relevant laws.
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Yes, the notification shall be in accordance with a form prepared by the Exchange, which may be viewed through the following link: Disclosure Forms.
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Yes, a QFI can be a client of any other capital market institution when investing in listed securities. |
Yes, pursuant to the applicable procedures set forth by the CMA and the Saudi Central Bank, QFIs can receive financing from local banks to fund their investments. |
No, the fund manager shall continuously comply with the provisions of the relevant Law and implementing regulations even after the CMA's issuance of its approval on the fund's terms and conditions. Complying with the provisions of the relevant Law and implementing regulations is the fund manager's responsibility. |
The Capital Market Institutions Regulations addresses all of the Capital Market Institutions licensed by the Authority to carry out securities businesses, and the registered persons of registrable functions who intend to apply for a license to carry out securities businesses and for registrable functions. The Regulations aims to regulate the Capital Market Institutions and the registered persons and to specify the procedures and conditions for obtaining the license as well as the conditions for the maintenance of the license or the registration, to provide for the rules of conduct that Capital Market Institutions must comply with when conducting their business, as well as the rules and provisions governing the conduct of business, and to set the systems and controls as well as the provisions relating to clients' money and assets. |
A security business shall mean engaging in any of the activities of dealing, arranging, managing, advising, and custody by any person acting by way of business, unless any of the exclusions specified in chapter two of part (2) of Securities Business Regulations. The above mentioned activities are defined as follows: Dealing: to deal in a security as principal or as agent, including buying, selling, managing securities subscription and underwriting. Arranging: a person introduces parties in relation to offering of securities or arrangement of its underwriting, or advises on corporate finance business. Managing: a person manages a security belonging to another person in circumstances involving the exercise of discretion, or operates investment funds; it is divided into two activities: - Managing investments and operating funds. - Managing investments.
Advising: a person provides advises to another person in relation to a security, including advising on the merits of dealing in it or exercising any right to deal conferred by it or financial planning and wealth management in it. Custody: a person takes custody of assets belong to another person including securities, or makes arrangements for other person to do so. This includes taking the necessary administrative procedures. |
The offering of securities issued by a foreign fund in the Kingdom must be through a distributor, and the distributor must be a Capital Market Institution licensed to carry out dealing activity or the activity of managing investments and operating funds. |
Founders and controlling shareholders become subject to the provisions that apply to an applicant from the date of submission of the application. |
Yes, a Capital Market Institution must comply to the provisions set forth in Capital Market Institutions Regulations, unless the Authority waives a provision of these Regulations in whole or in part either on the Capital Market Institution’s request or on its own initiative. |
A Capital Market Institution must comply with the following principles: 1) Integrity, by conducting its business with integrity. 2) Skill, care and diligence, by conducting its business with due skill, care and diligence. 3) Efficiency of management and control, by taking reasonable care to organise its affairs responsibly and effectively, with adequate risk management policies and systems. 4) Financial prudence, by maintaining adequate financial resources in accordance with the Rules issued by the Authority. 5) Proper market conduct, by observing proper standards of market conduct. 6) Protection of Clients’ assets, by arranging for adequate protection of its clients’ assets. 7) Co-operation with regulators, including disclosing to the Authority any material event or change in the Capital Market Institution’s business operations or organization. 8) Communications with clients, by communicating information to them in a way which is clear, fair and not misleading. 9) Paying due regard to clients’ interests, by treating them fairly and paying due regard to their interests. 10) Resolve the conflicts of interest, by dealing with the conflicts of interest cases fairly, both between itself and its clients and between a client and another client. 11) Clients’ suitability, by taking reasonable care to ensure the suitability of its advice and discretionary managing decisions for any client to whom it provides those services. |
Yes, the paid up capital of the applicant must not be less than the following: - Dealing and Custody: SR 50 million;
- Managing: SR 20 million for managing investments and operating funds; and a capital that covers the expected expenses for a year for managing investments;
- Arranging and Advising: a capital that covers the expected expenses for a year.
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A Capital Market Institution must have its management and head office in the Kingdom. |
The Authority shall prescribe the registrable functions. The following functions are considered functions that must be performed by registered persons: 1) CEO or Managing member of board of Directors; 2) CFO; 3) a member of the board of directors or partner; 4) senior executives and departments managers; directly related to securities business; 5) compliance officer; 6) MLRO; 7) The employees providing clients with securities business including activities sales representatives, investment advisors, clients’ or funds’ portfolios managers, corporate finance professionals and brokerage professionals as defined by the Authority. |
A security activity shall mean any of the following activities:
◾Dealing
◾Arranging
◾Managing
◾Advising
◾Custody. |
Dealing activity means a person deals in a security as principal or as agent, and dealing includes to sell, or buy, or manage the subscription or underwrite securities. |
Arranging activity means a person introduces parties in relation to offering of securities or arrangement of its underwriting or, advises on corporate finance business. |
