Article 32 of the Saudi Capital Market Law
المادة 32 من نظام السوق المالية
The article defines the broker and the broker's agent by the commercial activities they carry on in securities, defines the portfolio manager, and allows the Authority to set exceptions to both definitions.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - يقصد بالوسيط شركة المساهمة التي تعمل بالوساطة، ووكيل الوسيط الذي يعمل لدى شركة الوساطة، ويقوم بكل أو بعض الأعمال الآتية :
1 - يعمل بصفة تجارية وسيطا في تداول الأوراق المالية خلافًا للأشخاص الذين يعملون على أساس ترتيب تعاقدي، والمشار إليهم في الفقرة (ب) من هذه المادة، بما في ذلك أي شخص يمارس بصفة تجارية عمل حفظ الأوراق المالية.
2 - يقدم بصفة تجارية عرضًا للآخرين الحصول على أصول مالية في صورة أوراق مالية عن طريق فتح حساب يمكن عن طريقه تنفيذ صفقات الأوراق المالية.
3 - يقوم بصفة تجارية بتنفيذ صفقات الأوراق المالية لحسابه الخاص عن غير طريق إصدار الأوراق المالية، وذلك من أجل إيجاد سوق في الأوراق المالية، أو لتحقيق الربح الناتج من الفرق بين أسعار عروض الأوراق المالية وطلباتها.
4 - يقوم بصفة تجارية بحيازة أو طرح الأوراق المالية للمصدر، أو لشخص مسيطر على ذلك المصدر.
5 - يقوم بالوساطة – خلافًا للأشخاص الذين يعملون على أساس ترتيب تعاقدي والمشار إليهم في الفقرة (ب) من هذه المادة – بصفة تجارية بما في ذلك ترتيبات عقود لمبادلة العملة والأوراق المالية.
ب - يقصد بمدير المحافظ :
1 - أي شخص يعمل بصفة تجارية على أساس ترتيب تعاقدي أو غيره بإدارة الأوراق المالية التي يملكها شخص، أو إدارة صناديق استثمار يملكها شخص طبيعي أو اعتباري بقصد استثمارها في الأوراق المالية، والذي يمكن أن تشمل أنشطته صفقات في الأوراق المالية، أو طلب تنفيذ صفقات أوراق مالية لحساب الشخص الذي تم إجراء الترتيبات التعاقدية معه.
2 - أي شخص يعمل بصفة تجارية على أساس ترتيب تعاقدي يقوم بالأعمال المذكورة في الفقرة (أ/5) من هذه المادة.
ج - يجوز للهيئة أن تحدد، في القواعد التي تصدرها، استثناءات من أحكام الفقرتين (أ،ب) من هذه المادة، وذلك حسبما تراه محققًا لسلامة السوق وحماية المستثمر.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 32 explained in plain English
This article specifies who is considered a broker and who is considered a portfolio manager. This matters because Article 31 limits brokerage work to a person holding a valid license who acts as an agent of a licensed joint stock company, unless exempted under paragraph (c) of this article.
First: the broker (paragraph a) is a joint stock company that works in brokerage, and a broker's agent working for a brokerage firm, who carries out all or some of the following activities on a commercial basis:
- Acting as a broker in the trading of securities, including a person who engages in the custody of securities, as distinct from those who act under a contractual arrangement referred to in paragraph (b).
- Offering to acquire financial assets in the form of securities by opening an account through which transactions are carried out.
- Carrying out transactions for his own account other than by issuing securities, in order to create a market in them or to profit from the difference between bid and offer prices.
- Acquiring or placing securities for the issuer or for a person controlled by the issuer.
- Brokerage, including arrangements for currency and securities swap contracts, as distinct from those who act under a contractual arrangement.
Second: the portfolio manager (paragraph b)
- A person who acts on a commercial basis, under a contractual arrangement or otherwise, in managing securities owned by a person, or managing investment funds owned by a natural or legal person for the purpose of investing them in securities. Their activities may include carrying out transactions, or asking for them to be carried out, for the account of the person who contracted with them.
- A person who acts on a commercial basis, under a contractual arrangement, in the activities mentioned in paragraph (a/5).
Third: exceptions (paragraph c) The Authority may set out in its rules exceptions to paragraphs (a) and (b) as it considers they serve the soundness of the market and the protection of investors.
The practical point is that the test for brokerage is carrying on these activities on a commercial basis. Anyone who wants to know whether their activity requires a license should consult a lawyer specializing in securities.
Practical example
A joint stock company in Riyadh opens accounts for its clients to carry out share transactions and keeps their securities in custody for a commission; it is acting as a broker. A company that contracts with Fahad to manage his share portfolio and invest it on his behalf is a portfolio manager under paragraph (b).
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 32 of the Saudi Capital Market Law
Who is a broker under the Capital Market Law?
A joint stock company that works in brokerage, and a broker's agent working for it, if they carry out on a commercial basis any of the activities in paragraph (a), such as brokerage in trading, custody of securities and carrying out transactions.
Who is a portfolio manager?
A person who acts on a commercial basis, under a contractual arrangement or otherwise, in managing securities or investment funds owned by another for the purpose of investing them in securities, or who acts under a contractual arrangement in the activities of paragraph (a/5).
Can some persons be exempted from the definition of broker?
Yes. The Authority may set out in its rules exceptions to paragraphs (a) and (b) as it considers they serve the soundness of the market and the protection of investors.
More articles on Securities Brokerage
- Article 36
The article allows any broker or broker's agent to give up its license by notifying the Authority in writing, on the terms the Authority considers necessary for the soundness of the market or investor protection.
يجوز لأي وسيط أو وكيل وسيط أن يتخلى عن ترخيصه بإخطار الهيئة خطيًّا بذلك، طبقًا للأحكام والشروط التي تراها الهيئة ضرورية وملائمة لسلامة السوق أو حماية المستثمر.
- Article 37
The article requires licensed brokers and their agents to file with the Authority and the Market the reports provided for in the regulations and rules of the Authority and the Market.
يجب على الوسطاء أو وكلاء الوسطاء المرخص لهم أن يودعوا لدى الهيئة والسوق التقارير التي تنص عليها لوائح الهيئة والسوق وقواعدهما.
- Article 38
The article makes the Capital Market Authority the body that supervises the compulsory and voluntary liquidation of a broker's business.
تتولى الهيئة الإشراف على التصفية الإجبارية والطوعية لأعمال الوسيط.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.