CME-1 Securities Regulations 2 — Questions and Answers
Question 1: Which regulation governs the offering of securities to the public in Saudi Arabia?
- Anti-Money Laundering Law
- Rules on the Offer of Securities and Continuing Obligations (Correct answer)
- Banking Control Law
- Companies Law only
Correct answer: Rules on the Offer of Securities and Continuing Obligations
The Rules on the Offer of Securities and Continuing Obligations (OSCOs) govern public offerings in Saudi Arabia. These rules set requirements for prospectus content, disclosure, and ongoing obligations of issuers.
Question 2: What is the minimum public float requirement for companies listing on the Main Market of Tadawul?
- 10% of shares
- 20% of shares
- 30% of shares (Correct answer)
- 50% of shares
Correct answer: 30% of shares
Companies listing on the Main Market of Tadawul must have a minimum free float of 30% of their share capital offered to the public, ensuring sufficient liquidity and market participation.
Question 3: Under CMA regulations, what is the cooling-off period during which investors can withdraw their subscription from an IPO?
- No cooling-off period exists
- Within 2 business days of the prospectus amendment (Correct answer)
- Within 3 business days of subscription
- Within 30 calendar days of subscription
Correct answer: Within 2 business days of the prospectus amendment
Investors have the right to withdraw their subscription within 2 business days following the publication of a supplementary prospectus or material amendment to the original prospectus.
Question 4: A CMA-licensed investment fund manager must ensure client assets are held by which entity?
- The fund manager's own account
- An independent custodian (Correct answer)
- The client's personal bank account
- Any commercial bank branch
Correct answer: An independent custodian
CMA regulations require that client assets be held by an independent custodian to ensure asset segregation and protect investors from potential misuse or commingling of funds by the fund manager.
Question 5: What constitutes market manipulation under Saudi securities law?
- Buying stocks at market price
- Creating a false or misleading impression of trading activity (Correct answer)
- Selling stocks after a profit
- Holding stocks for long-term investment
Correct answer: Creating a false or misleading impression of trading activity
Market manipulation includes any action designed to create a false or misleading impression of trading activity, supply, demand, or price of securities. This includes wash trading, painting the tape, and spoofing.
Question 6: Which type of CMA license allows a firm to manage client portfolios on a discretionary basis?
- Advising license only
- Dealing license only
- Managing license (Correct answer)
- Arranging license only
Correct answer: Managing license
A Managing license from the CMA permits firms to manage investments, including client portfolios on a discretionary basis. This is one of the five categories of securities business activities regulated by the CMA.
CME-1 Securities Regulations 2
Which regulation governs the offering of securities to the public in Saudi Arabia?