CME-1 Securities Regulations — Questions and Answers
Question 1: What is the primary regulatory body overseeing the capital market in Saudi Arabia?
- Saudi Central Bank (SAMA)
- Capital Market Authority (CMA) (Correct answer)
- Ministry of Finance
- Saudi Stock Exchange (Tadawul)
Correct answer: Capital Market Authority (CMA)
The Capital Market Authority (CMA) is the regulatory body responsible for overseeing and developing the Saudi capital market under the Capital Market Law issued by Royal Decree M/30 in 2003.
Question 2: Under the Saudi Capital Market Law, which activity requires a license from the CMA?
- Opening a bank savings account
- Dealing in securities as a business (Correct answer)
- Purchasing government bonds for personal investment
- Trading foreign currencies at airports
Correct answer: Dealing in securities as a business
Dealing in securities as a business activity requires authorization from the CMA. The Capital Market Law mandates that any person carrying out securities business must be licensed by the CMA.
Question 3: What is the maximum prison sentence for insider trading violations under Saudi Capital Market Law?
- 1 year
- 3 years
- 5 years (Correct answer)
- 10 years
Correct answer: 5 years
Under the Saudi Capital Market Law, insider trading violations can result in imprisonment for up to 5 years. This severe penalty reflects the seriousness with which Saudi Arabia treats market manipulation and insider trading.
Question 4: Which of the following is classified as a 'security' under the CMA regulations?
- Real estate deeds
- Convertible debt instruments (Correct answer)
- Vehicle insurance policies
- Bank letters of credit
Correct answer: Convertible debt instruments
Convertible debt instruments are classified as securities under CMA regulations. Securities include shares, debt instruments, investment fund units, derivatives, and any rights related to these instruments.
Question 5: What is the role of the Committee for the Resolution of Securities Disputes (CRSD)?
- Setting interest rates for bonds
- Resolving disputes related to securities activities (Correct answer)
- Approving IPO applications
- Managing the Tadawul trading platform
Correct answer: Resolving disputes related to securities activities
The CRSD is a judicial body established under the Capital Market Law to hear and resolve disputes falling within the provisions of the Capital Market Law, its implementing regulations, and CMA rules.
Question 6: An Authorized Person under CMA regulations must maintain a minimum capital adequacy ratio. What happens if they fall below the required threshold?
- Their license is automatically revoked
- They must notify the CMA immediately and submit a remediation plan (Correct answer)
- They are given a 1-year grace period with no restrictions
- They can continue operations without any obligation
Correct answer: They must notify the CMA immediately and submit a remediation plan
Authorized Persons must notify the CMA immediately when their capital falls below the required threshold and submit a plan to restore compliance. The CMA may impose additional conditions or restrictions until compliance is restored.
CME-1 Securities Regulations
What is the primary regulatory body overseeing the capital market in Saudi Arabia?