CME-1 Market Integrity & Insider Trading

Question 1

What constitutes 'insider trading' under the Saudi Capital Market Law?

Accepted Answer

Trading in securities based on material, non-public information obtained through a privileged position

Answer

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.

Question 2

Who qualifies as an 'insider' under CMA rules?

Accepted Answer

Directors, senior executives, employees, and anyone with access to material non-public information due to their position

Answer

Insiders include directors, executives, employees, advisors, and anyone who obtains MNPI because of their relationship with the company.

Question 3

What is 'tipping' in the context of insider trading regulations?

Accepted Answer

Passing material non-public information to another person who then trades on it

Answer

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.

Question 4

What penalties can the CMA impose for insider trading violations?

Accepted Answer

Fines up to three times the profit made or loss avoided, disgorgement of profits, and referral for criminal prosecution

Answer

CMA penalties for insider trading include significant financial fines, disgorgement of all gains, trading bans, and referral to the Public Prosecution for criminal charges.

Question 5

What is 'front running' in securities markets?

Accepted Answer

A broker trading for its own account ahead of a large client order, profiting from the anticipated price movement

Answer

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.

CME-1 Practice Test

CME-1 Practice Test

CME-1 Market Integrity & Insider Trading