Article 40 of the Saudi Capital Market Law
المادة 40 من نظام السوق المالية
The article bars offering securities until the prospectus has been submitted to the Authority and published and commissions paid, lets the Authority exempt some requirements, and sets the permitted ways of making the offer.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - يتم نشر محتويات نشرة الإصدار المنصوص عليها في المادة الثانية والأربعين من هذا النظام أو أي أجزاء منها على النحو وللفترة التي تنص عليها لوائح الهيئة وقواعدها.
ب - لا يجوز للمصدر، أو لتابع المصدر أو لمتعهد التغطية أن يعرض أوراقًا مالية تخص ذلك المصدر أو تابعه ما لم يقم بتقديم نشرة الإصدار إلى الهيئة ونشرها بالطريقة المنصوص عليها في الفقرة (أ) من هذه المادة ودفعه العمولات المطلوبة. ويجوز للهيئة إعفاء المصدر من بعض المتطلبات بناء على طريقة العرض، أو حجم العرض، أو عدد المستثمرين وخصائصهم، أو خصائص مصدر الورقة المالية أو الورقة المالية نفسها.
ج - بعد استيفاء المتطلبات الواردة في الفقرتين (أ،ب) من هذه المادة يمكن أن تتم العروض بإحدى الطرق الآتية :
1 - شفاهة.
2 - بواسطة نشرة إصدار تستوفي الشروط الواردة في المادة الثانية والأربعين من هذا النظام.
3 - بواسطة إعلان يتضمن ملخصاً عن نشرة الإصدار، وأي معلومات أخرى تتطلبها الهيئة أو تسمح بها بموجب القواعد التي حددتها الهيئة.
4 - بواسطة أداة أخرى بما في ذلك الوسائط الإلكترونية شريطة أن تكون تلك الأداة معتمدة من الهيئة.
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 40 explained in plain English
This article sets the basic conditions for offering securities to investors, centered on the prospectus, whose content is specified in Article 42.
Paragraph (a): publishing the prospectus. The contents of the prospectus, or parts of it, are published in the manner and for the period provided for in the Authority's regulations and rules.
Paragraph (b): no offer before the conditions are met. The issuer, its affiliate or the underwriter may not offer securities belonging to the issuer or its affiliate except after:
- submitting the prospectus to the Authority;
- publishing it in the manner provided in paragraph (a);
- paying the required commissions.
The Authority may exempt the issuer from some requirements depending on the method of the offer, its size, the number of investors and their characteristics, or the characteristics of the issuer or the security itself.
Paragraph (c): methods of offering. Once the requirements are met, the offer may be made:
- orally;
- by a prospectus that meets the conditions of Article 42;
- by an advertisement containing a summary of the prospectus and any other information the Authority requires or permits;
- by another means, including electronic media, provided it is approved by the Authority.
Article 42 requires the prospectus to contain an adequate description of the issuer and its management, of the securities to be issued and how the proceeds will be used and the commissions, a statement of its financial position with audited statements, and any other information the Authority requires. The issuer, the affiliate and the underwriter are defined in Article 1. Companies wishing to make an offering may use a lawyer specializing in securities.
Practical example
A family company in Riyadh plans to offer its shares to the public through an underwriter. Neither the company nor the underwriter may offer the shares, even by an advertisement or through a website, before the prospectus has been submitted to the Authority and published and the required commissions paid; after that, the offer is made by one of the methods the article specifies.
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 40 of the Saudi Capital Market Law
May shares be offered before the prospectus is submitted to the Capital Market Authority?
No. The issuer, its affiliate or the underwriter may not offer securities unless the prospectus has been submitted to the Authority, published, and the required commissions paid.
Can the prospectus requirements be waived?
The Authority may exempt the issuer from some requirements depending on the method of the offer, its size, the number of investors and their characteristics, or the characteristics of the issuer or the security.
May securities be offered electronically?
Yes. Once the requirements are met, the offer may be made by another means, including electronic media, provided the means is approved by the Authority.
Articles this article refers to
More articles on Offering Prospectus and Offering Securities
- Article 41
The article bars the issuer, its affiliate and the underwriter from selling the issuer's securities until the Authority has approved the prospectus and it has taken effect, and requires the approved prospectus to be sent to the buyer before the sale.
لا يجوز للمصدر أو تابع المصدر أو متعهد التغطية أن يبيع أوراقًا مالية مملوكة لذلك المصدر قبل أن تعتمد نشرة الإصدار من الهيئة ويبدأ سريان مفعولها، ويشترط أن ترسل
- Article 42
The article sets out the information a prospectus must contain: a description of the issuer and its management, the securities, proceeds and commissions, audited financial position, and whatever else the Authority requires.
يجب أن تتضمن نشرة الإصدار المعلومات والبيانات الآتية: أ - المعلومات التي تتطلبها قواعد الهيئة التي تبين وصفًا كافيًا للمصدر، وطبيعة عمله والأشخاص القائمين على إ
- Article 43
The article requires the Authority to announce acceptance or rejection of a prospectus, with power to set its period of effect, and requires the issuer to notify the Authority in writing of any material change and publish a press release.
أ - يجب على الهيئة بعد قيامها بمراجعة نشرة الإصدار إعلان قبولها أو رفضها للنشرة. وللهيئة في حالة قبول النشرة أن تحدد فترة زمنية تكون نشرة الإصدار نافذة خلالها.
- Article 44
The article lets the Authority's board reject a prospectus if its information is lacking or misleading, its fees have not been paid in full, or the issuer has not submitted its periodic reports.
يجوز للمجلس أن يرفض نشرة الإصدار في أي من الأحوال الآتية : أ - إذا لم تتضمن نشرة الإصدار المعلومات التي تتطلبها المادة الثانية والأربعون من هذا النظام. ب - إذا
- Article 48
The article authorizes the Capital Market Authority to set disclosure forms and instructions, relieves it of responsibility for missing or misleading documents filed with it, and makes the publisher of an advertisement responsible for its publishing errors.
أ - تحدد الهيئة نماذج وتعليمات الإفصاح، بما في ذلك المعلومات التي يجب أن تتضمنها نشرات الإصدار والتقارير الدورية ، التي يتعين على الجهات التي تخضع لرقابة الهيئة
- Article 55Amended by M/16
The article gives a buyer of a security the right to compensation if the approved prospectus contained materially incorrect statements or omitted material facts, and specifies who is liable, how liability can be defeated and how compensation is calculated.
أ - إذا تضمنت نشرة الإصدار عند اعتمادها من قبل الهيئة، بيانات غير صحيحة بشأن أمور جوهرية، أو أغفلت ذكر حقائق جوهرية يتعين بيانها في النشرة، فإنه يحق للشخص الذي
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.