Market Integrity & Insider Trading Flashcards
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Read the first 6 Market Integrity & Insider Trading flashcards as text
What constitutes 'insider trading' under the Saudi Capital Market Law?
Answer: Trading in securities based on material, non-public information obtained through a privileged position
Insider trading is the buying or selling of securities based on material, non-public information (MNPI) by persons who owe a duty of confidentiality to the company.
Who qualifies as an 'insider' under CMA rules?
Answer: Directors, senior executives, employees, and anyone with access to material non-public information due to their position
Insiders include directors, executives, employees, advisors, and anyone who obtains MNPI because of their relationship with the company.
What is 'tipping' in the context of insider trading regulations?
Answer: Passing material non-public information to another person who then trades on it
Tipping is the act of passing MNPI to a third party (tippee) who subsequently trades on the basis of that information; both the tipper and tippee may be liable.
What penalties can the CMA impose for insider trading violations?
Answer: Fines up to three times the profit made or loss avoided, disgorgement of profits, and referral for criminal prosecution
CMA penalties for insider trading include significant financial fines, disgorgement of all gains, trading bans, and referral to the Public Prosecution for criminal charges.
What is 'front running' in securities markets?
Answer: A broker trading for its own account ahead of a large client order, profiting from the anticipated price movement
Front running occurs when a broker or trader executes trades in their own account ahead of a client's order they know will move the price, violating their duty to the client.
What is the 'Chinese Wall' concept in a securities firm?
Answer: Information barriers between departments to prevent the flow of MNPI from advisory to trading divisions
Chinese Walls are internal information barriers that prevent MNPI from flowing between different departments (e.g., M&A advisory and trading) within the same firm.
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