What is market manipulation and deception?
Market manipulation means any act of or engage in manipulation, deception or misleading when trading securities. Manipulation has many forms, all aim at changing the price of a security for the benefit of a person through deceiving others. Another type of manipulation is when an investor places selling/buying orders for a security with the prior knowledge that other orders of substantially the same size, time and price for the purchase of that security will be entered; this manipulation may increase/decrease the price this security creating artificial false prices in the market. Such conduct may negatively affect other investors who are not aware of these per-arranged transactions. This conduct is prohibited as per Market Conduct Regulations issued by the Authority.
What are the manipulative and deceptive acts or practices?
The following actions shall be among those considered as manipulative or deceptive acts or practices:
a) making a fictitious trade; or
b) effecting a trade in a security that involves no change in its beneficial ownership.
Also, the following acts are among those considered as manipulative or deceptive acts or practices when committed for the purpose of creating a false or misleading impression of trading activity in a security or interest in the purchase or sale of the security, or for the purpose of creating an artificial bid price, ask price or trade price for a security:
c) entering an order or orders for the purchase of a security with the prior knowledge that an order or orders of substantially the same size, time and price for the sale of that security, has been or will be entered;
d) entering an order or orders for the sale of a security with the prior knowledge that an order or orders of substantially the same size, time and price for the purchase of that security, has been or will be entered;
e) purchasing or making offers to purchase, a security at successively higher prices or in a pattern of successively higher prices;
f) selling or making offers to sell a security at successively lower prices or in a pattern of successively lower prices; or
g) entering an order or orders for the purchase or sale of a security in order to:
• establish a predetermined sale price, ask price or bid price;
• effect a high or low closing sale price, ask price or bid price;
• maintain the sale price, ask price or bid price within a predetermined range; or
• entering an order or a series of orders for a security that are not intended to be executed.
What does a security related to inside information mean?
A security related to inside information shall mean any security whose price or value would be materially affected if the information was disclosed or made available to the public.
What is the inside information?
It is the information which:
1) relates to a security;
2) has not been disclosed to the general public, and that is not available to the general public; and
3) a normal person would realise that, in view of the nature and content of the information, disclosing it or making it available to the public would have a material effect on the price or value of the security.
What does an insider mean?
For greater certainty, insider means any of the following:
1) a director, a senior executive or an employee of the issuer of a security related to inside information;
2) a person who obtains inside information through a family relationship, including from any person related to the person who obtains the information;
3) a person who obtains inside information through a business relationship, including obtaining the information:
• from the issuer of a security related to inside information;
• from any person who has a business relationship with the person who obtains the information; or
• from any person who is a business associate of the person who obtains the information;
4) a person who obtains inside information through a contractual relationship, including obtaining the information:
• from the issuer of a security related to inside information; or
• from any person who has a contractual relationship with the person who obtains the information.
Who are the addressees of the Investment Accounts Instructions? What is the aim of these Instructions?
These instructions address authorized persons and aim to regulate the opening and operation of investment accounts held by authorised persons licensed to conduct the activities of dealing, managing, or custody; and to define the related investment accounts controls and supervisory rules.
What is an investment account?
An accounting record created by the authorised person for the purpose of the deposited client`s money in a client account opened by the authorized person to fund the client's transactions in the securities. And reflects all details of the client account.
What does Freezing of the Investment Account mean?
The temporary block of all money transfers from the investment account and usage of the investment account balance, and this does not include preventing the client from the sale of his securities, receive the proceeds and profits generated from his securities into the investment account or transfer from his bank account to the investment account.
What is an Investment Accounts Identification Cards?
Upon the client`s request, the authorised person must issue an investment account identification card for the client and provide it or deliver it to him, which shall contain the client’s name and number of the investment account as well as the authorised person's name and the branch that the investment account was opened with.
When shall a Capital Market Institution freeze investment accounts?
The authorised person must freeze all investment accounts of the clients after expiration of the validity date of the documents were provided for opening the investment account, or not adhering to the authorised person`s request to update the account`s information, in accordance with the Clause (a) of Article (14) of the Investment Accounts Instructions.
Shall an authorised person notify the client of freezing the investment account?
Yes, the authorised person must notify his clients at least 1 month before the date of freezing the investment accounts. The authorised person must also maintain policies and procedures to achieve this requirement and make record of such fulfillment.
What is the Parallel Market, and what is the purpose of establishing it?
It is a market where shares, that have been registered and admitted for listing as per the Parallel Market Listing Rules, are traded. The Parallel Market was established to promote the role of the Exchange in providing funding sources and making the Exchange more stable, supportive to the national economy and more appealing for investment in. Since the conditions for registration and listing in the Parallel Market-Nomu are less than those required from companies aiming to list in the main market, thus, the Parallel Market is considered as an opportunity for companies (including small and medium-sized enterprises) to obtain funding from the capital market.
What are the Eligible classes to participate in the Parallel Market?
The Parallel Market Listing Rules defines "Qualified Investor" as any of the following persons:
1) Authorised Persons, who act for their own account.
2) Clients of a person authorised by the Authority to conduct managing activities provided that this Authorised Person has been appointed as an investment manager on terms which enable him to make decisions concerning the acceptance of an offer and investment in the Parallel Market on the client’s behalf without obtaining prior approval from the client.
3) The Government of the Kingdom, any government body, any supranational authority recognized by the Authority or the Exchange, and any other stock exchange recognized by the Authority or the Securities Depository Center.
4) Government-owned companies, either directly or through a portfolio managed by a person authorised to carry out managing activities.
5) Companies and funds established in a member state of the Cooperation Council for the Arab States of the Gulf.
6) Investment Funds.
7) Qualified Foreign Investors.
8) Any other legal persons allowed to open an investment account in the Kingdom and an account at the Depositary Center.
9) Natural persons allowed to open an investment account in the Kingdom and an account at the Depositary Center, and fulfill any of the following criteria:
a. has conducted transactions in security markets of not less than 40 million Saudi riyals in total, and not less than ten transactions in each quarter during the last twelve months.
b. the average size of his securities portfolio shall exceed 10 million Saudi riyals during the last twelve months.
c. holds the General Securities Qualification Certificate which is recognized by the Authority.
10) Any other persons prescribed by the Authority.
What is the definition of qualified investor?
The offer, as per the Parallel Market Listing Rules, is confined to the categories of Qualified Investors pursuant to the Qualified Investor's definition set out in Article 3 of the Parallel Market Listing Rules. Trading shares listed in the Parallel Market-Nomu is confined to Qualified Investors pursuant to the Qualified Investor's definition set out in Article 3 of the Parallel Market Listing Rules, and as an exception from that, shareholders of the issuer, other than Qualified Investors, who owned their shares prior to listing them in the Parallel Market, may trade in these shares and rights issue issued by that issuer.
Can the public participate in the offering and trading in the Parallel Market-Nomu?
Any of the public can participate in the offering and trading in the Parallel Market-Nomu, only if they are classified as a Qualified Investor pursuant to the Qualified Investor's definition set out in Article 3 of the Parallel Market Listing Rules. The Parallel Market Listing Rules define "Public" as: "persons other than the following:
1) affiliates of the issuer;
2) substantial shareholders of the issuer;
3) directors and senior executives of the issuer;
4) directors and senior executives of affiliates of the issuer;
5) directors and senior executives of substantial shareholders of the issuer;
6) any relative of persons described at (1), (2), (3), (4) or (5) above;
7) any company controlled by any persons described at (1), (2), (3), (4), (5) or (6) above; or
8) persons acting in concert, with a collective shareholding of (5%) or more of the class of shares to be listed."
The Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority defines "Substantial shareholder" as: a person holding (5%) or more of the class of shares of the issuer.