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Capital Market Law

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Capital Market Law


Capital Market Law



The Capital Market Law (“CML”) issued by the Council of
Ministers Resolution No. 91 of 16/04/1424H according to the Royal Decree No.
M/30 of 02/06/1424H. The law contains ten chapters totaling sixty-seven
articles, ushers in a new era of capital market regulation in Saudi Arabia. CML
aims to establish an independent market regulator, found a national Saudi stock
exchange, and regulate various aspects of market behavior in conformance with
the international standards for the professional practice of the capital market
. It is designed to level the playing field in the Saudi financial sector by
introducing a consistent and transparent legal structure.



 



Chapter One: Definitions



Article One



 



Unless the context otherwise indicates, the following words
and phrases, wherever they appear in this Law, shall have the meaning herein
specified:



 



Kingdom: the Kingdom of Saudi Arabia.



The Authority: the Capital Market Authority.



The Board: the Board of the Capital Market Authority.



The Chairman: the Chairman of the Board of the Capital
Market Authority.



Person: any natural or legal person that is recognized as
such under the laws of the Kingdom.



The Exchange: the Saudi Stock Exchange.



Trading: buying and selling of securities.



Issuer: a person who is issuing or intending to issue
securities.



Affiliate: a person who controls another person or is
controlled by that other person, or who is jointly being controlled with that
person by a third person.



Control: the direct or indirect ability or power to exercise
effective influence over the actions and decisions of another person.



Underwriter: a person who buys securities from the issuer or
an affiliate of the issuer for the purpose of offering, placing and marketing
such securities to the public, or a person who sells securities on behalf of
the issuer or an affiliate of the issuer for the purpose of making a public
offering and placement of such securities.



Relatives: husband, wife and minor children. 8 Capital
Market Authority



Placement or Offering of Securities: issuing securities,
inviting the public to subscribe therefor or the direct or indirect marketing
thereof; or any statement, announcement or communication that has the effect of
selling, issuing or offering securities, but does not include preliminary
negotiations or contracts entered into with or among underwriters.



Investment Adviser: an adviser who provides, offers or
agrees to provide, advice to others in their capacity as investors or potential
investors, in relation to purchasing, selling, subscribing or underwriting a
security, or exercising any right conferred by a security to acquire, dispose
of, underwrite or convert a security.



The Center: the Securities Depositary Center.



The Committee: the Committee for the Resolution of
Securities Disputes.



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



Internal Regulations: the regulations issued by the
Authority in relation to the Authority’s administrative and financial affairs
and its personnel and staff affairs.



Chapter Two: The Capital Market Authority



 Article Four



(a) An Authority to be named ”The Capital Market Authority”
is hereby established in the Kingdom and shall directly report to the President
of the Council of Ministers. It shall have a legal personality and financial
and administrative autonomy. It shall be vested with all authorities as may be
necessary to discharge its responsibilities and functions under this Law. The
Authority shall enjoy exemptions and facilities enjoyed by public
organisations. Its personnel shall be subject to the Labour Law.



 



(b) The Authority shall not have the right to engage in any
commercial activities, to have a special interest in any project intended for
profit, to borrow or lend any funds, or to acquire, own or issue any
Securities.



 



Article Five



(a) The Authority shall be the agency responsible for
issuing regulations, rules and instructions, and for applying the provisions of
this Law. To achieve these objectives, the Authority shall:



 



Regulate and develop the Exchange, seek to develop and
improve methods of systems and entities trading in Securities, and develop the
procedures that would reduce the risks related to Securities transactions.



Regulate the issuance of Securities and monitor Securities
and dealing in Securities.



Regulate and monitor the works and activities of parties
subject to the control and supervision of the Authority.



Protect citizens and investors in Securities from unfair and
unsound practices or practices involving fraud, deceit, cheating or
manipulation.



Seek to achieve fairness, efficiency and transparency in
Securities transactions. 14 Capital Market Authority



Regulate and monitor the full disclosure of information
regarding Securities and their issuers, the dealings of informed persons and
major shareholders and investors, and define and make available information
which the participants in the market should provide and disclose to
shareholders and the public.



Regulate proxy and purchase requests and public offers of
shares.



License the establishment of special purposes entity, and
regulate and control its business, uses, issuance of securities, the
registration in its registry established by the Authority and the provisions of
its articles of incorporation, and regulate the provisions of the registration
of funds transferred to it, including documentation of the rights thereof and
its legal standing against others, and the issuance of rules governing thereof.



(b) The Authority may publish a draft of regulations and
rules before issuing or amending them. The regulations, rules and instructions
issued by the Authority shall be effective in the manner prescribed under their
provisions.



 



(c) For the purpose of conducting all investigations which,
in the opinion of the Board, are necessary for the enforcement of the
provisions of this Law and other regulations and rules issued pursuant to this
Law, the members of the Authority and its employees designated by the Board are
empowered to subpoena witnesses, take evidence, and require the production of
any books, papers, or other documents which the Authority deems relevant or
material to its investigation. The Authority shall have the power to carry out
inspections of the records or any other materials, whoever the holder may be,
to determine whether the person concerned has violated, or is about to violate
any provision of this Law, the Implementing Regulations or the rules issued by
the Authority.



 



(d) The special purposes entity shall have legal personality
and financial autonomy, and it shall cease to exist with the end of the purpose
for which it was established for in accordance with the rules and regulations
issued by the Authority.








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