FAQs for Implementing Regulations

The authorized employees of the Claims Reception Office, at the Secretariat of CRSD and ACRSC, receive the complaint or pleading and their attachments and then refer them to the chairman of CRSD.

Yes, CRSD’s decisions may be appealed before ACRSC in accordance with Article Twenty Five, paragraph (f), of the Capital Market Law.

According to Article Twenty Five, paragraph (f), of the Capital Market Law, CRSD’s decision may be appealed within 30 days from receiving CRSD decision.

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. The claimant or defendant should appear in person. d. Should the appeal be filed by a representative, it is required that the original power of attorney and a copy of such are presented. Furthermore, the power of attorney should indicate the representative’s right to file the appeal.

According to Article Twenty Five, paragraph (g), of the Capital Market Law, ACRSC shall have the discretion to: a. Refuse to review CRSD decisions. b. Affirm CRSD decisions. c. Undertake a de novo review of the complaint or suit based on the record at the hearing before CRSD and to issue the appropriate decision.

It is the ability of the authorized person to meet his financial obligations and still retain a prescribed cushion (net capital) to absorb losses.

It is important to follow up to make sure that the authorized persons have enough capital and financial resources to fulfill their obligations so that the APs won’t be a risk to their clients as well as the Capital Market and its participants.

The Prudential Department at CMA continuously monitors the authorized person’s financial position to ensure that the APs have enough capital to conduct the securities business, and in the worse case scenario, to liquidate in an orderly fashion and with no effect to their clients as well as the capital market and its participants. . The authorized persons with net capitals below their minimum requirements are closely monitored to rectify their situation before causing a threat to the stability of the Capital Market and its participants .

According to the Authorised Persons Regulations and what is practiced in the Saudi capital market, clients’ money is separated from the authorized person’s own money. The authorized persons are not allowed to use clients’ money without the proper instruction from their clients. In case there was a shortage in the authorized person’s capital adequacy, the effect would be on his money only which protects his clients in case his license was suspended or revoked. CMA monitors the APs net capital positions on monthly basis which enable interference in the right time to halt the authorized person’s operations before his 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 Authorised Persons such as business profile and change in ownership, etc; including personnel registration requirements and reviewing of notifications from the Authorised Persons as stated in Annex 3.2 of the Authorized Person Regulations. The Department is also tasked with the development and administration of the CME Examinations for Registered Persons.

It is mandatory to obtain a license from CMA for all those who want to practice any of the securities business activities in KSA mentioned in Article Two of the Securities Business Regulations. These include: 1) Dealing: where a person deals in a security as principal or as agent, and dealing includes to sell, buy, manage the subscription or underwrite securities; 2) Arranging: where a person introduces parties in relation to securities business, advises on corporate finance business or otherwise acts to bring about a deal in a security; 3) Managing: where a person manages a security belonging to another person in circumstances involving the exercise of discretion; 4) Advising: where a person advises a person on the merits of that person dealing in a security or exercising any right to deal conferred by a security; or 5) Custody: where a person safeguards assets belonging to another person which include a security, or arranges for another person to do so, and custody includes taking the necessary administrative measures. The authorized person is deemed to be carrying out security business in KSA in these above circumstances. That said, a financial institutions which are licensed by a foreign regulators to perform securities business activities in any other capital market in countries which apply supervisory and regulatory standards similar to the standards applied by CMA or acceptable to it, may conduct business securities activities with a client in kingdom, if the client classified as one of the following; 1. An investment company as defined in the Glossary of defined terms used in the regulations and rules of the CMA . OR 2. A natural person with investment in excess of SAR 50 million, or she/he owns a net assets of no less than SAR 50 million. Provided that the request for practicing securities business activities have to be initiated from the client (reverse inquiry) with no marketing of securities business being made from the foreign financial institution and theses practices shall not be made on securities issued or listed in the Kingdom except bonds issued by Saudi government.

Implementing Regulations are the rules, instructions and procedures issued by the Authority for the implementation of the provisions of this Law.

All terms are defined in the Glossary of defined terms used in the regulations and rules of the Capital market Authority. Please check the website: www.cma.org.sa

Yes, there are currently three qualification exams which are a requirement for registrable functions in accordance with Article 21 of the Authorized Persons Regulations, these are as follows: • The General Securities Qualification Certificate (CME-1), which consists of two parts: • Part One: Securities Rules and Regulations. • Part Two: Securities Operations. The CME-1 certification is a prerequisite for any person applying to the CMA to be a registered person to perform a registrable function. All candidates for the CME-1 qualification certificate must hold a minimum of a high school qualification or any equivalent certificate. • The Compliance & AML/CTF (CME-2): The CME-2 certification is a requirement for performing the compliance and AML/CTF functions at an authorised person, for registered persons or those intending to register with CMA. • The Broker-Dealer Qualification Certificate (CME-3): The CME-3 certification is a requirement for performing the local and international brokerage/ dealership functions at an authorised person, for registered persons or those intending to register with CMA. The Compliance and AML/CTF Officers are also required to undergo professional training programs on Compliance and Anti-Money Laundering & Counter Terrorist Financing (AML/CTF). These training programs are delivered by International Compliance Association (ICA) –UK and the certificate on completion is awarded in association with the University of Manchester –UK. ICA is a global professional body and education provider in the field of Compliance, AML/CTF and fraud/financial crime prevention.

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.