Article 50 of the Saudi Capital Market Law
المادة 50 من نظام السوق المالية
The article prohibits an insider from trading on inside information or disclosing it to someone expected to trade, and prohibits anyone else from trading on information they know was disclosed in violation of the law.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - يحظر على أي شخص يحصل بحكم علاقة عائلية أو علاقة عمل أو علاقة تعاقدية على معلومات داخلية (يشار إليه بالشخص المطلع) أن يتداول بطريق مباشر أو غير مباشر الورقة المالية التي تتعلق بهذه المعلومات، أو أن يفصح عن هذه المعلومات لشخص آخر توقعا منه أن يقوم ذلك الشخص الآخر بتداول تلك الورقة المالية.
ويقصد بالمعلومات الداخلية المعلومات التي يحصل عليها الشخص المطلع، والتي لا تكون متوافرة لعموم الجمهور، ولم يتم الإعلان عنها، والتي يدرك الشخص العادي، بالنظر إلى طبيعة ومحتوى تلك المعلومات أن إعلانها وتوافرها سيؤثر تأثيرًا جوهريًّا على سعر الورقة المالية أو قيمتها التي تتعلق بها هذه المعلومات، ويعلم الشخص المطلع أنها غير متوافرة عمومًا وأنها لو توافرت لأثرت على سعر الورقة المالية أو قيمتها تأثيرًا جوهريًّا.
ب - يحظر على أي شخص شراء أو بيع ورقة مالية بناء على معلومات حصل عليها من شخص مطلع وهو يعلم أن هذا الشخص قد خالف بإفشائه المعلومات الداخلية المتعلقة بالورقة نص الفقرة (أ) من هذه المادة.
ج - للهيئة صلاحية وضع القواعد لتحديد وتعريف المصطلحات الواردة في الفقرتين (أ،ب) من هذه المادة، والأعمال والممارسات التي ترى الهيئة استثناءها من تطبيق أحكامها استنادًا إلى مقتضيات سلامة السوق وحماية المستثمرين.
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 50 explained in plain English
This article prohibits what is known as trading on inside information. An insider is a person who obtains inside information by virtue of a family relationship, a business relationship or a contractual relationship.
What is inside information? It is information that meets all of the following descriptions:
- it is obtained by the insider;
- it is not available to the general public and has not been announced;
- an ordinary person, given its nature and content, would realize that announcing it would materially affect the price or value of the security;
- the insider knows that it is not generally available and that, if it were, it would materially affect the price or value.
What is prohibited?
- The insider trading, directly or indirectly, in the security to which the information relates.
- The insider disclosing it to another person where he expects that person to trade in that security.
- Any person buying or selling a security on the basis of information obtained from an insider, knowing that the insider violated paragraph (a) by disclosing it.
Paragraph (c) gives the Authority the power to set rules that specify and define the terms used in paragraphs (a) and (b), and that specify the acts and practices it considers should be excepted, based on the requirements of the soundness of the market and the protection of investors.
This article complements Article 49, which prohibits acts that create a misleading impression about the market or prices. Someone who has received non-public information about a listed company and is hesitating over trading in its share would do best to consult a lawyer specializing in securities and capital markets.
Practical example
Saad, an employee of a listed company in Riyadh, learned through his work, before any announcement, that the company would announce large losses that any ordinary person would realize would materially affect its share price, and he told his brother to sell his shares before the announcement. Saad is an insider here, and his disclosure to his brother, expecting him to sell, is prohibited under paragraph (a). If the brother sold knowing that Saad had disclosed the information in violation of the law, he violates 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 50 of the Saudi Capital Market Law
Who is an insider under the Capital Market Law?
Any person who obtains inside information by virtue of a family relationship, a business relationship or a contractual relationship.
Is telling a relative inside information a violation even if I don't trade myself?
Yes. The article prohibits an insider from disclosing inside information to another person where he expects that person to trade in the security concerned.
May I trade on information I heard from an employee of the company?
Paragraph (b) prohibits buying or selling on the basis of information obtained from an insider if you know that he violated paragraph (a) by disclosing it.
Who sets the details of the terms and exceptions?
The Authority has the power to set rules that specify and define the terms used in paragraphs (a) and (b), and the acts it considers should be excepted for the soundness of the market and the protection of investors.
More articles on Manipulation and Insider Trading
- Article 49
The article treats as a violator anyone who deliberately does an act that creates a false or misleading impression about the market, prices or the value of a security, and lists forms of this fraud.
أ - يعد مخالفا لأحكام هذا النظام أي شخص يقوم عمدا بعمل أو يشارك في أي إجراء يوجد انطباعا غير صحيح أو مضللا بشأن السوق، أو الأسعار، أو قيمة أي ورقة مالية، بقصد إ
- Article 57
The article makes a person who deliberately manipulates a security's price liable to compensate those whose dealing price was severely and adversely affected, and lets the Committee imprison violators of Articles 49 and 50 for up to 5 years.
أ - أي شخص يخالف المادة التاسعة والأربعين من هذا النظام، أو أيًّا من اللوائح أو القواعد التي تصدرها الهيئة بناء على تلك المادة، وذلك بالتصرف أو إجراء صفقة للتلا
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.