Securities Business Regulations

KINGDOM OF SAUDI ARABIA
Capital Market Authority
SECURITIES BUSINESS REGULATIONS
English Translation of the Official Arabic Text Issued by the Board of the Capital Market Authority Pursuant to its Resolution Number 2-83-2005 Dated 21/5/1426 H Corresponding to 28/6/2005 G Based on the Capital Market Law Issued by Royal Decree No M/30 dated 2/6/1424H Amended by Resolution of the Board of the Capital Market Authority Number 2–75-2020 Dated 22/12/1441H corresponding to 12/8/2020G Arabic is the official language of the Capital Market Authority Important Notice: The current version of these Regulations, as may be amended, can be found at the Authority website: www.cma.org.sa

TABLE OF CONTENTS
PART 1: GENERAL PROVISIONS
Article 1: Definitions
PART 2: THE SECURITIES BUSINESS
Chapter One: Carrying on Security Business
Article 2: Securities Activity
Article 3: Securities Business Defined
Article 4: Carrying on Securities Business in the Kingdom
Article 5: Authorisation
Article 6: Contravention
Chapter Two: Exclusions from Authorisation
Article 7: Scope
Article 8: Activities within Groups and Joint Enterprises
Article 9: Activities Carried out in the Course of a Non-Securities Business
Article 10: Sales of Goods and Supply of Services
Article 11: Execution of Wills
Article 12: Activities in Connection with the Sale of a Company
Article 13: Exclusions from Dealing as Principal
Article 14: Exclusions from Arranging
Article 15: Exclusion from Advising
PART 3: SECURITIES ADVERTISEMENTS
Article 16: Preliminary
Article 17: Securities Advertisements
Article 18: Contravention
Article 19: Advertising in the Kingdom
Article 20: Exclusions
PART 4: PUBLICATION AND ENTRY INTO FORCE
Article 21: Publication and Entry into Force
ANNEX 1: EXEMPT PERSONS

PART 1: GENERAL PROVISIONS
Article 1: Definitions
(a) Any reference to the “Capital Market Law” in these Regulations shall mean the Capital Market Law issued by Royal Decree No. M/30 dated 2/6/1424H. (b) Expressions and terms in these Regulations have the meaning, which they bear, in the Capital Market Law and in the Glossary of defined terms used in the Regulations and Rules of the Capital Market Authority, unless the context indicates otherwise.

PART 2: THE SECURITIES BUSINESS
Chapter One: Carrying on Securities Business
Article 2: Securities Activities 1
A securities activity shall mean any of the following activities:

1. Dealing: a person deals in a security as principal or as agent, and dealing includes to sell, buy, manage
   the subscription or underwrite securities;
2. Arranging: a person introduces parties in relation to offering of securities or arrangement of its
   underwriting, or advises on corporate finance business;
3. Managing: a person manages a security belonging to another person in circumstances involving the
   exercise of discretion, or operates investment funds;
4. Advising: a person advises another person in relation to a security, which includes advising on the
   merits of that person dealing in it, exercising any right to deal conferred by it or financial planning and wealth management in it; or
5. Custody: a person safeguards assets belonging to another person which include a security, or arranges
   for another person to do so, and custody includes taking the necessary administrative measures.
   Article 3: Securities Business Defined
   Securities business shall mean engaging in any of the securities activities specified in Article 2 of these Regulations by any person acting by way of business unless any of the exclusions specified in Chapter 2 of this Part apply.

In accordance with the Board of Authority Resolution No. (2-75-2020) dated 22/12/1441H corresponding to 12/8/2020G, Article 2 of these Regulations shall become effective as of 28/5/1443H corresponding to 1/1/2022G, provided that Article 2 of the Securities Business Regulations issued by the Board of the Authority Resolution No. (2-83-2005) dated 21/05/1426H corresponding to 28/06/2005G shall continue to be effective until the effectiveness date of Article 2 of these Regulations.

Article 4: Carrying on Securities Business in the Kingdom
A person carries out securities business in the Kingdom if:
(a) he engages in securities activity from a permanent place of business in the Kingdom; (b) he is presumed to carry on a securities activity from a permanent place of business in the Kingdom in any of the following situations:

1. he engages in the relevant activity, or in securities business generally, in the Kingdom; or
2. he engages in the relevant activity with or for a person in the Kingdom.
   Article 5: Authorisation
   A person must not carry on securities business in the Kingdom unless he is:
3. a capital market institution authorised by the Authority; or
4. an exempt person as specified in Annex 1 to these Regulations.
   Article 6: Contravention
   Contravention of Article 5 of these Regulations is an offence in accordance with Article 60 of the Capital Market Law.
   Chapter Two: Exclusions from Authorisation
   Article 7: Scope
   Securities activities that are excluded by this Chapter do not require authorisation by the Authority.
   Article 8: Activities within Groups and Joint Enterprises
   (a) A transaction between two persons who act as principal is excluded from dealing if the two persons:
5. are members of the same group;or
6. are, or propose to be, participants in a joint enterprise (provided that the transaction is for the
   purpose of the joint enterprise).

(b) Each of arranging, managing, advising and custody by a person are excluded where:

1. the person is a member of a group and the services in question are provided for a member of the
   same group; or
2. the person is, or proposes to become, a participator in a joint enterprise and the services in
   question are provided for a participant in the joint enterprise (provided that the services are provided for the purpose of the joint enterprise).
   Article 9: Activities Carried out in the Course of a non-Securities Business
   (a) A securities activity is excluded if it:
3. is carried out in the course of carrying on any profession or business which does not otherwise
   consist of carrying on securities business in the Kingdom;
4. may reasonably be regarded as a necessary part of other services provided in the course of that
   profession or business; and
5. is not remunerated separately from the other services.
   (b) Arranging or advising carried out by a law firm or accountancy firm registered in the Kingdom is presumed to fall within paragraph (a) of this Article if:
6. the arranging or advising is provided in the ordinary course of the business of the firm; and
7. the firm does not hold itself out as carrying on, and does not carry on, securities business.
   Article 10: Sale of Goods and Supply of Services
   (a) A securities activity between a supplier and a customer is excluded if it is carried out for the purposes of, and is reasonably necessary for or ancillary to, the sale or supply of goods or services. (b) For the purpose of the application of paragraph (a) of this Article:
8. supplier: means a person whose main business is to sell goods or supply services and not to
   carry on securities business; and
9. customer: means a person, other than an individual, to whom a supplier sells goods or supplies
   services, or agrees to do so.

Article 11: Execution of Wills
A securities activity carried out by an executor of a will is excluded if:

1. it is undertaken in his capacity as an executor;
2. the executor does not hold himself out as carrying on, and does not carry on, securities business; and
3. the executor is not remunerated for the activity separately from the other services.
   Article 12: Activities in Connection with the Sale of a Company
   Entering into a transaction is excluded from dealing if the purpose of the transaction is to acquire or dispose of 50 percent or more of the voting shares in a company whose shares are not listed on the Exchange.
   Article 13: Exclusions from Dealing as Principal
   (a) Dealing by a person as principal in a security that is not a contractually based security is excluded unless:
4. the person holds himself out as engaging in the business of dealing in securities; or
5. the person regularly solicits members of the public to deal in securities.
   (b) In paragraph (a) of this Article, “members of the public” excludes capital market institutions and exempt persons. (c) Dealing by a person in a contractually based security as principal is excluded if a capital market institution or an exempt person deals or advises in relation to the transaction. (d) Dealing by a person as principal is excluded if the dealing is the acceptance of an instrument creating or acknowledging indebtedness in respect of any loan, credit, guarantee or other similar financial accommodation or assurance which he has made, granted or provided. (e) The issuance by a person of its own shares, debt instruments or warrants is excluded from dealing. (f) A capital market institution investing its money in securities is excluded from dealing as principal.

Article 14: Exclusions from Arranging
The following activities are excluded from arranging:

1. Arranging by a person of a transaction to which it is a party.
2. Arrangements under which a person accepts or is to accept (as principal or agent) an instrument
   creating or acknowledging indebtedness in respect of any loan, credit, guarantee or other similar financial accommodation or assurance which he has made, granted or provided.
3. Arranging by a person of the issuance of its own shares, debt instruments or warrants.
4. Arranging introductions of persons to a capital market institution or an exempt person for the
   provision of custody services.
   Article 15: Exclusion from Advising
   Advising is excluded if the following two conditions are fulfilled:
5. the advice is either:
    in writing and contained in a newspaper, journal, magazine, or other periodical publication, or given by way of a service comprising regularly updated news or information; or  contained in a broadcast or transmission of a television or radio programme; and
6. its principal purpose is neither to advise nor to induce persons to deal.

PART 3: SECURITIES ADVERTISEMENTS
Article 16: Preliminary
(a) A securities advertisement means any form of verbal, electronic, written or otherwise communication in relation to securities or securities activity made in the course of business for the purpose of inviting or inducing a person to engage in securities activity. (b) References to making or communicating a securities advertisement in this Part include causing a securities advertisement to be made or communicated but do not include acting as a mere conduit for information with no editorial control over its content.
Article 17: Securities Advertisements
A person must not make or communicate any securities advertisement to a person in the Kingdom unless:

1. the person making the advertisement is a capital market institution; or
2. the contents of the securities advertisement have been approved for the purpose of this Part by a
   capital market institution.
   Article 18: Contravention
   Contravention of Article 17 of these Regulations is an offence under Article 60 of the Capital Market Law.
   Article 19: Advertising in the Kingdom
   (a) Subject to paragraph (b) of this Article, a securities advertisement is made or communicated to a person in the Kingdom if it is available to persons in the Kingdom, including advertisements made via the internet. (b) A securities advertisement is not made or communicated to a person in the Kingdom if it is directed only at persons outside the Kingdom. (c) It is a question of fact based on the circumstances, including those relating to the communication of the securities advertisement and its contents, whether a securities advertisement is directed only at persons outside the Kingdom.

Article 20: Exclusions
A securities advertisement is excluded from the prohibition in Article 17 of these Regulations if it:

1. relates to securities activity that is excluded from securities business under these Regulations;
2. is made to a capital market institution or an exempt person by a person seeking to obtain
   information about, or to receive, securities business services;
3. is made by an exempt person and relates to that person's exempt activities;
4. is directed only at capital market institutions or exempt persons;
5. is made by a member of a group to another member of the same group;
6. is made by a participant in a joint enterprise to another participant (or potential participant) for a
   purpose relating to the joint enterprise;
7. is made by a journalist acting in that capacity;
8. is required to be made under the law of the Kingdom, including the Implementing Regulations; or
9. is directed at persons who own, or are entitled to obtain, securities issued by the person making the
   advertisement, or creditors of that person.

PART 4: PUBLICATION AND ENTRY INTO FORCE
Article 21: Publication and Entry into Force
These Regulations shall become effective upon their publication.

ANNEX 1: EXEMPT PERSONS
(a) The following persons are exempt in relation to securities business activities undertaken by them:

1. the Government of the Kingdom;
2. SAMA;
3. the Exchange and any other stock exchange approved by the Authority;
4. the Depositary Centre;
5. CCP; and
6. a supranational authority recognised by the Authority.
   (b) An insolvency practitioner is exempted in relation to his activities undertaken in his capacity as such. (c) An insurance company is exempted in relation to its insurance activities regulated by SAMA. (d) The Authority may exempt other persons.