The Securities Market in Saudi Arabia and the Capital Market Regulations: A Critical Analysis of the investor protection rules

Abstract

This dissertation seeks to deal with whether the securities regulation in Saudi Arabia is fit for the specific purpose of protecting the interests of investors. This is important because if one were to fail to protect the investors duly, this would result in the securities market being destabilised and ultimately impacting upon the economic growth of the country. This paper shows that the CMA is the main and only authority on this issue in Saudi Arabia, and performs a role that is comparable to that of the FCA in the UK. However, when one considers the actuality of the laws, enforcement and authority of the CMA in Saudi Arabia, it becomes clear that it is far from being fit for purpose in protecting the interests of the investors. This is because the laws and enforcement are not stout enough to rein in the acts of insider trading and market manipulation, which are the major offenders as far as investor protection are considered in any jurisdiction of the world. More importantly, a positive obligation which can help to improve the level of investor protection, is that of disclosure obligations of the listed companies, whereby when offering IPOs, they have to educate the investors voluntarily such that the investment decision made by the investor is a sound one. However, when considering the case of Saudi Arabia, it once again becomes clear that the disclosure obligations are clear in purpose but weak in terms of capitulation and enforcement, which thereby makes them once again feeble. Overall then, this paper will find that the regulatory framework in Saudi Arabia is far from acceptable, and several reforms such as judicial training, stronger powers for the CMA, clearer laws and modifications in line with developed jurisdictions are necessary.