Saudi regulator cracks the whip on illegal share trade

RIYADH — Saudi Arabia’s financial markets regulator said it will punish 44 executives and board members of listed companies for violating a ban on trading in their own shares ahead of company profit announcements.

By (Reuters)

Published: Mon 20 Jun 2005, 10:20 AM

Last updated: Thu 2 Apr 2015, 4:44 PM

Eight cases may specifically have violated rules against insider trading, the Capital Markets Authority (CMA) said in a statement released late on Saturday.

The move was welcomed by economists who said it showed the CMA, established last year, was serious about tightening up regulation of Saudi Arabia’s booming market, which has risen nearly six-fold in less than three years.

The CMA said it was acting against senior figures in 35 companies -- nearly half the listed firms on the Arab world’s biggest bourse.

Its decision was based on violation of a ban on board members or senior executives dealing in their own shares in the run-up to announcements of quarterly or annual results.

The authority did not specify what fines the culprits faced. Saudi Arabia’s Eqtisadiah newspaper said they could range from 10,000 riyals up ($2,667) to millions of riyals.

The eight cases of suspected insider trading could lead to boardroom expulsions; travel bans or even prison terms.

“This was a first test for the Capital Markets Authority, and it shows they are serious,” said financial consultant Salim Ghalayini. “It’s an important measure.”

The move might also attract funds to Saudi Arabia from neighbouring Gulf Arab countries, where investors have concerns about regulation of their own markets, Ghalayini said.

The official Saudi stock index rose over 0.8 per cent in early trade on Sunday to a new record of 13,800 points. The index has risen by more than 67 per cent so far this year, buoyed by high oil prices, which are fuelling the economy of the world’s biggest crude exporter.

But analysts say some trading has appeared suspicious.

“A lot of the trade has been moving from sector to sector, from firm to firm. All the traders believe it is driven by inside information,” said an economist, who declined to be named.

“Especially in this quarter, the second quarter which is usually quieter, it looks like speculators and insiders have been doing the trades,” he said. “It’s clear there has been some information leaking from inside.”

He welcomed the CMA move, but said it would have more impact if authorities named the offenders and detailed their fines.

“They should definitely disclose the amount of the fines,” Ghalayini said. “There is no reason to hide the amount, to show people they are serious about It.”

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