The Saudi Council of Ministers has passed the Capital Markets Law. The law sets out the framework for the capital market including the establishment of the Saudi Arabian Securities and Exchange Commission (SEC).
The commission will hold up the objectives of protecting investor interests, ensuring orderly and equitable dealings in securities business, and promotion and development of the capital market. The Commission with have the power to license non-bank financial intermediaries; and authorize the offering of securities to the public. It will also establish the Saudi Arabian Stock Exchange (SASE) incorporating the national securities depository center.
The enactment of the Capital Markets Law will facilitate the licensing of non-bank financial intermediaries and the issuance of an increased number and variety of securities. Based on international best practice, the Capital Markets Law will result in the restructuring of the capital markets in Saudi Arabia, promoting greater efficiency and transparency. The Law is integral to the government's stated aim of privatization, leading to increased participation by citizens in the capital market and thus the national economy.
The Commission will be governed by five Commissioners to be appointed by Royal Decree, one of which will be nominated as the Chairman and the second as the Vice Chairman. The Commission will develop and regulate a capital market that is dynamic, fair, transparent and efficient, and will contribute to the nation's economic development.
SEC will be the primary regulatory body for the Saudi Arabian capital market. The new Law is expected to promote a more efficient and virile capital market, which would be pivotal in meeting the nation's economic and developmental aspirations. The Commission will endeavour to deepen and broaden the market for enhanced socio-economic development.
In order to enable the SEC to achieve the objectives of investor protection and capital market development The Commission will regulate investments and securities business in Saudi Arabia, register and regulate the Saudi Arabian Securities Exchange, including the national securities depository, register securities to be offered for subscription or sale to the public, organize training programs and promote high ethical standards.
The commission will also register and regulate non-bank financial intermediaries including members of the Exchange, and employees of these, and others involved in the organization and operation of the capital market including custodians of securities and credit rating agencies. It will protect the integrity of the securities market against abuses arising from the practice of insider trading and will review, approve and regulate mergers, acquisition and all forms of business combinations.
The Stock Exchange, incorporating the national securities depository, will be a private sector company, the board of which will initially consist of nine members, three from the Government and six from the shareholders of the Exchange. It will be the only stock exchange in the Kingdom.
The Saudi Arabian stock market has a long history; shares were first offered to the public in 1954. The market remained informal until the mid 1980's when a Ministerial Committee made up of the Ministers of Finance and Commerce and the Governor of the Saudi Arabian Monetary Agency was formed with overall responsibility for the regulation and development of the market.
Saudi Arabia introduced a fully electronic market in the early 1990's, comprising trading, clearing, settlement and depository. A new infrastructure for the market, Tadawul, was implemented in 2001. Trading in shares is limited to Saudi nationals and citizens of other Gulf Cooperation Council (GCC) member states. Non-GCC nationals participate in the market by investment in open-end mutual funds offered by Saudi Arabian banks. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
