Article 2 of the Saudi Capital Market Law

This article sets the basic definition of securities to which the Capital Market Law applies, an important definition because all of the Law's provisions, from offering to trading, disclosure and oversight, revolve around it. Securities for the purposes of this Law means the following:

• Shares of companies that are transferable and tradable.
• Tradable debt instruments issued by companies, the government, public authorities or public institutions.
• Investment units issued by investment funds.
• Any instruments representing rights to share in profits, or rights to a distribution of assets, or either.
• Any other rights or instruments that the Board of the Capital Market Authority sees fit to include and approve as securities if it sees in that the achievement of market integrity or the protection of investors.

The article also gives the Board a reverse power: it may exclude from the definition rights and instruments that originally fall within paragraphs (a, b, c, d) if it sees no need to treat them as securities, based on the requirements of market integrity or investor protection.

The text of the article begins with the phrase "subject to the provisions of Article 3," meaning this definition is limited by what Article 3 expressly excludes; it provides that commercial papers such as checks, bills of exchange and promissory notes, documentary credits, money orders, instruments traded exclusively among banks, and insurance policies are not securities.

In practice, if you want to know whether an investment product is subject to the Capital Market Authority's oversight, start by comparing it with this list, bearing in mind that the Board may add or exclude instruments. If in doubt about the status of a particular instrument, it is wise to consult a lawyer specializing in securities.