CMA refers suspects to Public Prosecution for violating Capital Market Law

Logo of the Capital Market Authority (CMA)

The Capital Market Authority (CMA) detected through follow-up procedures, a group on a social media program, including more than 250 members, through which internal information on the Saudi Exchange (Tadawul)-listed companies was disclosed before being announced by such companies on the Saudi Tadawul Group’s website.

Among the inside information shared were advertisements related to a company contracting with another one to provide cooperative health insurance services, positive financial results for a company, capital increase and distribution of cash dividends to shareholders.

In addition, the supervisor of the aforementioned group committed some violations by promoting opinions related to listed companies through the group, in order to influence their prices and achieve a personal benefit from it, as well as managing some portfolios without obtaining a license from the CMA. He also exploited such portfolios to commit violations involving manipulation and misleading in the market.

The seizure and deduction procedures showed that some persons committed violations related to disclosing inside information for companies listed on Tadawul, and some of the suspects worked in listed companies. After identifying those responsible for such violations, the CMA Board decided to refer several suspects to the Public Prosecution, as follows:

1) Referral of the group supervisor regarding violation of Articles (31) and (49) of the Capital Market Law and Article (5) of the Securities Business Regulations, as well as Articles (2) and (8) of the Market Conduct Regulations to the Public Persecution for managing some portfolios on the Saudi Exchange without obtaining a license from the CMA and carrying out practices that involve manipulation and fraud in market trades. This resulted in suspicion of his trading through his portfolios and portfolios managed by him on the shares of some listed companies. The suspicions included his responsibility with another suspect of the entry of purchase orders to influence the share price, the entry of purchase orders in the closing auction with the aim of achieving a high closing price and the entry of an order for the sale of a security with prior knowledge that an order of the same size, time and price for the sale of that security, has been or will be entered. In addition, he was responsible for trading (by purchasing) shares of some listed companies, then promoting opinions via the aforementioned group for the purpose of influencing the price of the security, then trading (by selling) the shares of listed companies affected by the promoting opinions and his personal benefit from it.

2) Referral of a suspicion regarding the violation of Article (50) of the Capital Market Law and Article (5) of the Market Conduct Regulations by some insiders, among them are employees in some listed companies, where they disclosed inside information related to such companies before it is announced on the market's website.

3) Referral of a suspicion regarding the violation of Article (50) of the Capital Market Law and Article (6) of the Market Conduct Regulations by two suspects. They traded two listed companies based on inside information related to a potential merger between them.

The CMA assured its devotion to apply the Capital Market Law and its Implementing Regulations, as well as protect the market from illegal practices.

The authority urged all participants and investors in the Saudi Exchange to limit their transactions in securities to the capital market institutions authorized by the CMA to carry out securities business. It further requested investors not to deal with unauthorized persons, whether they were legal or natural person, where their business is promoted via social media or any other means. They must also ensure that the persons with whom they deal have obtained the authority's authorization or visit the CMA's website on WWW.CMA.ORG.SA to view the list of the authorized capital market institutions.

The CMA also called upon all participants in the capital market to maintain the confidentiality of information about listed companies.

The General Secretariat of Committees for Resolution of Securities Disputes will announce to the public the identities of convicted violators on its website upon the issuance of final decisions by the Committees for Resolution of Securities Disputes.

Moreover, any person affected by these violations is entitled to file a compensation claim, after conviction, against the violators before to the Committee for the Resolution of Securities Disputes as per Article (57) of the Capital Market Law.

Furthermore, any person who has entered into any agreement or contract with an unauthorized person is entitled to file a claim, individually or collectively, to the Committee for the Resolution of Securities Disputes to rescind the agreement or contract and recover any money or other property paid or transferred pursuant to such agreement or contract, in accordance with paragraph (b) of Article (60) of the Capital Market Law, provided that these claims are preceded by a complaint filed to the CMA.