Saudi Arabia’s Capital Market Authority (CMA) yesterday announced three executive bylaws aimed at regulating the market, encouraging the public to invest in stocks with confidence, and preventing fraudulent practices. The new laws regulate the flotation of bonds, set out principles for the enrolment of bonds, and elucidate market etiquette, Arab News reported today.
Head of CMA Jemaz Al-Suheimy highlighted the significance of the three laws, saying that they would protect investors and preserve market credibility without unacceptable burden for investors, intermediaries and financial consultants. He said that the CMA was keen to expedite transfer to the new capital market system.
Al-Suheimy said that the new laws would encourage formation of more joint stock companies and enhance fair and transparent stock market dealings. “This will encourage more Saudis to participate in the financial market and help the market achieve high degrees of transparency and confidence. The new law on enrolment of bonds demands from listed joint stock companies frank and continuous statements; the flotation law explains the types of issues acceptable to the market and the terms and conditions to be fulfilled by companies,” he said. The law allows public and private flotation of bonds.
The principles for enrolment demand from companies frank statements on everything that affects price of bonds they issue to ensure open access to correct information by all investors. “CMA will cooperate with all listed companies for effective implementation of this rule,” he noted.
Al-Suheimy said that the new laws were formulated in the light of prevalent regulations for international capital markets and after consulting legal and financial experts within and outside the Kingdom. “The law incriminates deals based on internal information and bans the issuance of incorrect information. It also sets out acceptable principles for the relation between investors and intermediaries,” he explained.
The law prohibits false stock exchange deals, manipulation of opening and closing prices and ordering bonds without intent to implement them. “It also prohibits officials, including board members and administrators, from leaking sensitive information that would affect prices of bonds if made public,” he said. The law allows clients who suffer losses as a result of misinformation to take legal action against those who published it, claiming damages.
“The new regulations ensure that investors obtain a fair price and that sales and purchase orders are carried out in accordance with professional norms,” Al-Suheimy said. The law prohibits intermediaries from carrying out deals if they know that the client has violated the system and market etiquette. The Capital Market Law specifies stringent punishment for those who violate the law.
Details of the three laws are available on CMA’s website: www.cma.org.sa.
Source: SPA
