The Capital Market Authority (CMA) has increasingly demonstrated its willingness to make use of advanced technology to supervise, monitor and take the necessary actions where it is required to uphold the Saudi stock exchange's (Tadawul) reputation. The efforts are in line with the strategic plan to achieve the objectives of Vision 2030, in a bid to position Tadawul as a leading market in the Middle East, attracting foreign investors in keeping with international best practices and diversifying Saudi Arabia's sources of income.

For example, on May 2 2021, the CMA referred a suspected violation to the Public Prosecution concerning two suspects alleged to have been involved in manipulation and fraud during the trading of shares of a number of listed companies on Tadawul, violating the Capital Market Law. The practices included the suspects entering both purchase and sell orders for a security without the intention for execution, also violating the Market Conduct Regulations (MCR). The suspects were also reported to have promoted opinions of a number of listed companies on the online Hawamer Saudi Stock Forum for the purposes of taking advantage of the subsequently increased price of the security, in violation of the MCR.

The impact of a CMA referral to the Public Prosecution includes:

  • Potential criminal penalties (as determined by the CMA Committee for the Resolution of Securities Disputes)
  • Reputational damage following the public announcement of the identities of the violators on the CMA's website
  • Liability to pay compensation to any person affected by the violation

These endeavors to clamp down on unfair and unsound actions are comparable to the Securities and Exchange Commission's efforts in the US to regulate the recent frenzy of so-called “pump and dump” schemes, where social media has been used to drive up share prices. Most notably, the GameStop share price was driven up from US$4 to US$347 over the past year. The CMA's efforts to regulate misleading and fraudulent practices in this regard are increasingly analogous to international standards.

Originally published September 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.