RIYADH, 19 December 2002 — In a determined move to protect the interests of shareholders in joint stock companies, the Ministry of Commerce has warned corporate officials in a circular not to take advantage of inside information in a way detrimental to the interests of shareholders.
The ministry’s circular also urged the companies to strengthen their internal surveillance and enlighten the shareholders of their responsibility to be watchful of corporate performance.
The ministry swung into action following reports of some top executives trading in their company shares as soon as certain key information about the company’s status or performance is announced.
According to the circular, company boards, managers and top officials are banned from dealing in their company shares for short terms with the aim of promoting speculation. They are also not allowed to deal in equities in a manner that could mislead investors or influence share prices.
The ministry also warned the company officials against dealing in shares when they get some information about some development or event that would affect the share prices of the company until at least a full day passes after the occurrence of the particular event or decision.
In compliance with an earlier Council of Ministers’ decision, the ministry emphasized the company officials’ responsibility to be transparent while supplying information on the financial standing and final accounts of joint stock companies so that the investors can safely evaluate the company performance and take appropriate decision to protect their interests. Such details should be supplied on a quarterly basis covering all its revenue from all sources and profit and loss statements in keeping with the specifications set by the Saudi Chartered Accountants Board.
The members of the board of directors, director generals and other executives are also banned from buying and selling equities in the last 10 days before the end of the quarter and the date of announcement of its quarterly financial report. The company directors and officials should be accurate and realistic in their statements about the company, the circular said.
The ministry also warned against leaking of information about the company’s plan to increase or reduce the capital or any other matter that could lead to speculation or affect the share prices in the market. In the event of leaking any information directly or indirectly affecting share prices, the ministry will be forced to disapprove the company’s demand in the matter, the circular said.
The ministry also cautioned that any statement on gross operating profit without giving the net profit would be misleading.
The ministry also warned against others dealing in corporate shares who exploit inside information, which could make serious impact on share prices but unknown to shareholders. Such practices are illegal and will invite penalty, the circular said.
