Article 41 of the Saudi Capital Market Law
المادة 41 من نظام السوق المالية
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 نشرة الإصدار المعتمدة إلى المشتري قبل تاريخ البيع وذلك حسب القواعد والتعليمات التي تصدرها 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 41 explained in plain English
This article places a restriction on the sale of securities at the issuance stage, one that protects the buyer from buying securities whose prospectus has not been approved.
Who is covered by the prohibition?
- The issuer: the person who issues securities or intends to issue them.
- The issuer's affiliate: a person who controls the issuer, is controlled by the issuer, or is under the control of the same third person as the issuer.
- The underwriter: a person who buys the securities from the issuer or its affiliate in order to offer, place and market them to the public, or who sells them on its behalf.
(These definitions come from Article 1.)
What is prohibited? Selling securities owned by that issuer before:
- the Authority approves the prospectus, and
- it takes effect.
An additional condition: the approved prospectus must be sent to the buyer before the date of the sale, in accordance with the rules and instructions issued by the Authority.
The difference from Article 40: Article 40 concerns the offering of securities, and requires for that purpose that the prospectus be submitted to the Authority, published and the commissions paid. This article concerns the sale itself, and requires that the Authority approve the prospectus and that it take effect. The content of the prospectus is specified in Article 42, and includes a description of the issuer and its management, the securities to be issued, and its financial position.
For the investor, this provision gives the right to receive the approved prospectus before the sale, and so to see the information before committing.
Practical example
A company in Riyadh is acting as underwriter for the offering of the shares of an industrial company. It may not sell any of these shares to Mohammed before the Authority approves the prospectus and it takes effect, and it must send him the approved prospectus before the date of the sale.
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 41 of the Saudi Capital Market Law
May shares be sold before the prospectus is approved?
No. The issuer, its affiliate and the underwriter are prohibited from selling the issuer's securities before the Authority approves the prospectus and it takes effect.
Must the buyer receive the prospectus?
Yes. The approved prospectus must be sent to the buyer before the date of the sale, in accordance with the rules and instructions issued by the Authority.
What is the difference between Article 40 and Article 41?
Article 40 requires, for offering securities, that the prospectus be submitted to the Authority, published and the commissions paid; Article 41 requires, for selling them, that the Authority approve the prospectus and that it take effect.
More articles on Offering Prospectus and Offering Securities
- Article 40
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.
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
- 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.