A Scholarly Analysis of Inside Trading as Unethical Behavior within Securities Law: A Comparative Study of the United States and Saudi Arabia

Abstract

This dissertation is purposed to embark on an in-depth comparative scrutiny of the legal approach towards inside trading in both Saudi Arabia and the United States. It aims to offer a comprehensive analysis encompassing the evolution of inside trading legislation historically, the present-day enforcement mechanisms, the punitive measures in place, and potential enhancements to better the existing legal structures. The first chapter provides a historical overview, comparing the evolution of inside trading laws in both jurisdictions. It scrutinizes the evolution of the Saudi Securities Law, with a particular focus on inside trading, from the establishment of the Saudi Company Act in 1965 to its current form. Concurrently, it explores the development of inside trading laws in the United States from the early 1900s to the present day. A comprehensive investigation of both Saudi and American legal systems identifies historical deficiencies in Saudi Arabia's inside trading regulations. This comparative analysis serves as a foundation for discussions in later chapters on how the Saudi Capital Market Law (CML) could potentially benefit from incorporating aspects of American inside trading legislation and policy. The dissertation then proceeds to address the materiality of non-public information, a pivotal concept in inside trading law. Examining the ambiguities and complexities inherent in defining and categorizing insiders, it investigates the implications these challenges have on investing and trading within stock markets. The lack of public access to substantial information is identified as a fundamental challenge, driving the necessity for effective regulations to ensure fair trading practices. Subsequently, the dissertation delves into a comparative analysis of disclosure forms and inside trading loopholes within the CML and the United States. Emphasizing the role of disclosure 10 in deterring inside trading and keeping the market informed, it outlines the importance of disclosure rules in maintaining market efficiency. A critical evaluation of these rules within Saudi and U.S. legal contexts provides insights into potential improvements that could increase transparency and reduce opportunities for inside trading in Saudi Arabia. The next major area of investigation focuses on the enforcement of laws pertaining to inside trading and the associated criminal and civil penalties. It comprehensively reviews CML's enforcement procedures, detection methods, and penalties imposed on inside trading offenses. This analysis further explores the penalties and enforcement mechanisms employed by the U.S. to combat insider trading, including the whistleblower program. It critically evaluates the effectiveness of these measures, both within the U.S. and globally, offering insights into the challenges of enforcing insider trading laws and potential solutions under CML.