Since its establishment in 2003, the Saudi Arabian Capital Market Authority (CMA) has been focused on protecting investors and creating a favorable investment atmosphere to boost confidence in the securities market.
This commitment is reflected in its ongoing efforts to track down and penalize those who have unlawfully profited from investment activities.
From 2023 to the end of May this year, the authority fined 39 investors a total of over 403 million Saudi riyals ($107.5 million). Last year, there were 17 violators, but in the first five months of this year, the number increased to 22.
Dr. Ahmed Al-Tamimi, a licensed lawyer specializing in securities and founder of “Al-Madina Law and Legal Consultancy Firm,” explained to Asharq Al-Awsat how investors break the rules and what punishments they face.
Al-Tamimi explained that manipulating stock prices by spreading false information or rumors is against Article 49 of the Capital Market Law and Articles 2, 3, and 8 of the Market Conduct Regulations.
The regulations prohibit anyone from intentionally creating a false impression about the market, prices, or value of a security to influence others to buy, sell, or refrain from trading that security.
Al-Tamimi highlighted actions like placing orders or trades on a security to create a false impression of trading activity or interest. This includes using technology to automate orders based on preset instructions.
He also mentioned tactics like setting predetermined prices for buying or selling, influencing opening or closing prices, and affecting the prices of other securities.
Al-Tamimi clarified that investors break rules by spreading rumors. This means sharing false information or opinions to manipulate the price or value of a security, whether it’s their own statement or someone else’s.
He explained that trading with insider knowledge is covered by Article 50 of the Capital Market Law and Articles 4, 5, and 6 of the Market Conduct Regulations.
This involves information related to a security that could significantly impact its price or value if made public.
It’s against the rules for those with access to such information to trade or share it with others who might trade in the affected security.
According to Article 50, anyone with insider info due to family, work, or contracts (called the informed person) can’t trade or share that info expecting others to trade.
Al-Tamimi noted that the CMA not only directly protects citizens and investors but also sets up defenses.
According to Article 11 of the Market Conduct Regulations, financial institutions and registered individuals can’t accept or execute orders if they suspect manipulation or insider trading.
They must notify the authority within three days if they reject an order. If suspicions arise after accepting an order, they must notify within three days of discovering the reasons. The authority also encourages reporting violations by offering financial rewards to whistleblowers for their protection.
Al-Tamimi explained that investors face penalties for actions like market manipulation, spreading rumors, or trading with insider information.
Penalties range from warnings to fines three times the gains made or losses avoided due to the violation, along with potential imprisonment for up to five years.
Moreover, Al-Tamimi warned investors against ignorance of market regulations, as it doesn’t excuse them from responsibility, especially if they manage their portfolios without proper authorization.
He also noted that affected investors can file complaints with the CMA and seek compensation through the Securities Dispute Resolution Committee.
Al-Tamimi stressed the CMA’s commitment to protecting citizens and investors from unfair or fraudulent practices in securities trading.
