JEDDAH, 24 January 2006 — The Saudi Capital Market Authority (CMA) announced yesterday the issue of new rules regarding joint-stock companies that are to buy stocks in other joint-stock companies. The rules include the prohibition of listed joint-stock companies on the Saudi stock market index to buy and sell securities unless these financial activities are stated in the participating companies’ codes and regulations.
In addition, CMA is prohibiting listed joint-stock companies from engaging directly in financial securities trading. The authority is requiring all interested joint-stock companies in securities trading to engage in the market through two ways. First, through investment funds; second, through private portfolios that are managed by a licensed trader, and that the trader is handling the joint-stock company’s securities trading according to an agreement that is subject to CMA approval.
CMA is requiring all joint-stock companies that are interested in financial securities investments to engage according to a decision issued by the company’s board of directors. The decision should include the proper regulations to regulate the investments and to identify the level of operational risks that are compatible with risk management objectives. CMA also pointed out that securities trading must not conflict or negatively affect the original business operations of the engaging joint-stock company in the securities trading.
CMA is requiring all companies whose securities trading is in conflict with the new rules to reorganize its operations according to the new rules in a period of no more than three months starting from the date of the new rules. Companies with similar operations should report to CMA in a one-month period with a plant showing the reorganization of its existing securities trading.
CMA is participating this month in the first forum on the corporate governance of Saudi family businesses in the light of globalization challenges. The forum is taking place in Jeddah between Jan. 31 and Feb. 1 with the attendance of 250 experts on corporate governance and family businesses restructuring. CMA is introducing a working paper that discusses a list of business ethics and manners that are to be followed in the market.