CME-1 Securities Regulation & Compliance 2

Question 1

What is required before a listed company can conduct a rights issue in Saudi Arabia?

Accepted Answer

CMA approval of the offer documents and shareholder approval

Answer

A rights issue requires both CMA approval of the offering documents and a shareholder vote at a General Assembly, as it dilutes existing shareholders.

Question 2

What is a 'profit warning' and when must it be disclosed?

Accepted Answer

An immediate disclosure when the company expects earnings to materially differ from market expectations

Answer

A profit warning must be disclosed immediately when a company reasonably anticipates that financial results will materially deviate from prior guidance or analyst expectations.

Question 3

What are the consequences for a listed company that fails to meet continuing obligations?

Accepted Answer

Trading suspension, fines, and potential delisting by the Saudi Exchange

Answer

Failure to meet continuing obligations may result in trading suspension, regulatory fines, and in severe cases delisting from the Saudi Exchange.

Question 4

Which body must approve the appointment of external auditors for CMA-licensed entities?

Accepted Answer

CMA under its licensing conditions

Answer

CMA-licensed entities must comply with CMA rules regarding the qualification, appointment, and rotation of external auditors as part of their licensing conditions.

Question 5

What is the maximum term for an external auditor of a listed company without mandatory rotation under CMA rules?

Accepted Answer

5 years

Answer

CMA Corporate Governance Regulations require external auditor rotation after a maximum of five consecutive years to preserve independence.

CME-1 Practice Test

CME-1 Practice Test

CME-1 Securities Regulation & Compliance 2