Saudi Arabia reiterates warnings over insider trading

Saudi Public Prosecution said the regulations are designed to encourage transparency in the trading of securities, and a breach of the rules is a criminal matter

  
General view of Riyadh city, after the Saudi government eased a curfew, following the outbreak of the coronavirus disease (COVID-19), in Riyadh, Saudi Arabia, May 7, 2020. Image used for illustrative purpose.

General view of Riyadh city, after the Saudi government eased a curfew, following the outbreak of the coronavirus disease (COVID-19), in Riyadh, Saudi Arabia, May 7, 2020. Image used for illustrative purpose.

REUTERS/Ahmed Yosri
 
JEDDAH: Saudi authorities have issued a renewed warning against insider trading, with a legal expert saying the clampdown will strengthen confidence in the Kingdom’s capital markets.


In a post on its official Twitter account, Saudi Public Prosecution said the regulations are designed to encourage transparency in the trading of securities, and a breach of the rules is a criminal matter.

The authority said that if a person acquires confidential, internal knowledge through a family, business or contractual relationship, that person is prohibited from acting on that information and trading securities related to the specific company.

The rule also applies to third parties and the person is not permitted to pass the confidential information to others or to allow them to trade on their behalf.

Saudi-based legal consultant Rabih Joudi told Arab News that the rules are in place to protect private information related to traded companies.

“This will raise penal responsibility for those who intentionally or negligently disclose confidential information on a company, even if they do not work in the company and are not bound by contract with the company, but they got such information from a relative or friend who works in the company or is bound by obligation of confidentiality toward the company,” Joudi said.

“The main criteria is that an average adult knows, or should have known, the importance of such information and that the disclosure of such information will affect the company, its activities, its shares, and securities,” he added.

Joudi said that the direction taken by the Saudi Public Prosecution will give a boost to the capital markets in the Kingdom and “will suppress to a large extent the issue of trading based on internal information.”

“This development will raise the bar for companies’ boards in relation to governance,” he added.

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