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Saudi Arabia

The Capital Markets Law (CML) came into effect on February 24 2004. The regulatory structure created under the CML includes a new Capital Markets Authority (CMA) empowered to regulate the issuance of and trading in securities and the establishment of a physical stock exchange, called the Saudi Capital Market. Saudi Arabia does not have a physical stock exchange. Rather, shares in Saudi Arabian public joint-stock companies are traded by local banks using the Tadawul electronic exchange under the regulatory authority of the Saudi Arabian Monetary Agency (SAMA).

Although the implementing regulations to the Capital Markets Law have not yet been issued (they are expected soon), the chairman and other members of the new Capital Markets Authority's board of directors have been appointed by royal decree. Under Article 7 of the CML, the board will exercise all the powers entrusted to the CMA pursuant to the CML and will determine the manner in which the CMA's activities are divided among its departments and divisions. The board will prepare and adopt the CMA's bylaws and the procedures for appointing the CMA's staff, consultants and auditors. The board will also have the authority to delegate, by published order, any of its responsibilities (except those expressly assigned to the board under the CML), with the authority to retain, at its discretion, the power to review the actions undertaken by those that are delegated authority.

The chairman is the CMA's chief executive officer and is responsible for managing the CMA and implementing the CMA's policies, including: (1) implementing all decisions taken by the board; (2) signing, alone or jointly with others, reports, accounting statements, financial accounts and correspondence of the CMA; and (3) managing the CMA's administrative and financial affairs.

Following the appointment of the chairman and the board, the CMA has started to regulate securities offerings that are in the process of going to market (replacing SAMA as the regulator). The CMA is now reviewing and issuing comments on offering documentation and is granting approvals in connection with securities offerings. At this stage, however, not all of the provisions of the CML have been implemented. For example, the new stock exchange has not yet been established, and securities that are issued are still being listed solely on the Tadawul electronic exchange. Moreover, the jurisdictional boundaries of the CMA and certain other Saudi government authorities, including the Saudi Arabian Ministry of Commerce and Industry, with respect to public joint-stock companies and securities offerings remain uncertain. The implementing regulations for the CML, when issued, are expected to clarify many of these issues.

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