A learning curriculum issued by the Financial Academy. First Edition – August 2019This learning curriculum includes 5 chapters

and constitutes the main reference to pass iFsah Professional Exam.

DISCLOSURE(IFSAH)

Disclosing Information to Securities’ Issuers and Investment

Funds in Saudi Stock Exchange (Tadawul)

In the name of Allah,the Most Gracious, the Most Merciful

The Financial Academy®, 1441 AHKing Fahd National Library Cataloging-in-Publications Data

The Financial AcademIFsah/Financial Academy. Riyadh, 1441 AH..P; .. cm

ISBN: 978-603-91342-6-8

1. Commercial Banks 2. Kits of Learning Materials A. Title332.17 dc 1441/1252

L.D. No. 1441/1252ISBN: 978-603-91342-6-8

Welcome to the learning curriculum issued by the Financial Academy. This book is designed to qualify candidates for iFsah Professional Exam set in Financial Academy.

This book is a learning guide and FA made an enormous effort to ensure the accuracy of the content.

All rights are reserved to the Academy. Thus, it is prohibited to republish any part of this book, store through the information retrieval system, transmit it to any form, or any way either electronically, or photocopy, record, or anything without obtaining prior permission from the Financial Academy.

Curriculum mapping that is shown at the end of the book includes a detailed study plan, which can also be found on the Academy’s website: www.fa.org.sa or by contacting the Academy through the phone number: +966114662688 / Fax: +966114662368.

Note that the exam is based on this plan and we advise candidates of iFsah Professional Exam to make sure to have the latest updates on this curriculum.

The questions in this book have been designed as a tool to assist the candidate in reviewing different information of the curriculum and to promote deep learning of all chapters.Candidates should not consider these questions as “Mock Exam” questions, or view them as an indicator to questions’ level that will come in the exam.

Publisher:Financial Academy 2019.P.O. Box: 10820, Riyadh 11434, Kingdom of Saudi Arabia.Phone: +966114662688Fax: +966114662368All copyrights are reserved by the Financial Academy.

Notice

Saudi Stock Exchange (Tadawul) does hereby notify that this material is just a learning guide. Tadawul does not bear any responsibility for any loss that leads to making or refusing to make a deal due to what is mentioned in this material. In addition, Tadawul stresses that this material is not a legal reference, so we shall always refer to updated rules and regulations posted on CMA’s and Tadawul’s websites.

Index

Chapter One - Saudi Stock Exchange 01

Chapter Two - Electronic Disclosure System (iFsah) 11

Chapter Three - Listed Companies Disclosure Laws and Regulations 25

Chapter Four - Laws and Regulations relating to Investment Funds’ Disclosures 42

Chapter Five - Financial Statements and Reports (XBRL) 55

Annexes 62

Multiple Choice Questions 67

Resources & References 77

Studying this book may take up to 30 hours

Saudi Stock Exchange

Historical Overview of Saudi Stock Exchange

Capital Market Authority

Saudi Stock Exchange

Committee for the Resolution of Securities Disputes

Manipulation and Insider Trading

This part of curriculum provides about 12 out of 100 questions in the exam

Chapter One

Introduction

This chapter provides an overview of the objective about the existence of financial markets and financial instruments traded in these markets, as well as some characteristics of effective markets. It also provides a description of different types of investment, such as stocks and bonds traded in capital market, in addition to instruments traded in money markets (Money Market Instruments). Therefore, investors and market participants should understand characteristics, returns pattern and risks of these investments.

Some Important Definitions in Capital Market Law:Learning Objective:

Be familiar with certain definitions in Capital Market Law

Unless the context otherwise indicates, the following words and phrases, wherever they appear in this Law, shall have the meaning herein specified:Kingdom: the Kingdom of Saudi Arabia.The Authority: the Capital Market Authority.The Board: the Board of the Capital Market Authority.The Chairman: the Chairman of the Board of the Capital Market Authority.Person: any natural or legal person that is recognized as such under the laws of the Kingdom.The Exchange: the Saudi Stock Exchange.Trading: buying and selling of securities.Issuer: a person who is issuing or intending to issue securities.Affiliate: a person who controls another person or is controlled by that other person, or who is jointly being controlled with that person by a third person.Control: the direct or indirect ability or power to exercise effective influence over the actions and decisions of another person.Underwriter: a person who buys securities from the issuer or an affiliate of the issuer for the purpose of offering, placing and marketing such securities to the public, or a person who sells securities on behalf of the issuer or an affiliate of the issuer for the purpose of making a public offering and placement of such securities.Relatives: husband, wife and minor children.Placement or offering of securities: issuing securities, inviting the public to subscribe therefor or the direct or indirect marketing thereof; or any statement, announcement or communication that has the effect of selling, issuing or offering securities, but does not include preliminary negotiations or contracts entered into with or among underwriters.Investment Adviser: an adviser who provides, offers or agrees to provide, advice to others in their capacity as investors or potential investors, in relation to purchasing, selling, subscribing or underwriting a security, or exercising any right conferred by a security to acquire, dispose of, underwrite or convert a security.The Center: the Securities Depositary Center.The Committee: the Committee for the Resolution of Securities Disputes.The Implementing Regulations: the rules, instructions and procedures issued by the Authority for the implementation of the provisions of this Law.

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Internal Regulations: the regulations issued by the Authority in relation to the Authority’s administrative and financial affairs and its personnel and staff affairs.

For the purposes of this Law the term “Securities” shall mean: A. B.

C. D.

E.

1.1 Historical Overview of Saudi Stock Exchange

The Saudi Stock Exchange unofficially started in Saudi Arabia in the early fifties and continued to operate informally until the government set its basic regulations in the eighties. In accordance with the Capital Market Law that promulgated by the Royal Decree No. (M/30) dated 1424/6/2H, the Capital Market Authority is established, which is a governmental organization with a full financial, legal and administrative independence and has direct links with the Prime Minister.

1.2 Capital Market Authority

An Authority named “The Capital Market Authority” was established in the Kingdom that directly report to the President of the Council of Ministers. It has a legal personality and financial and administrative autonomy. It is vested with all authorities as may be necessary to discharge its responsibilities and functions under this Law. The Authority enjoys exemptions and facilities enjoyed by public organizations. Its personnel shall be subject to the Saudi Labor Law.

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Convertible and tradable shares of companies;Tradable debt instruments issued by companies, the government, public institutions or public organizations;Investment units issued by investment funds;Any instruments representing profit participation rights, any rights in the distribution of assets; or either or the foregoing;Any other rights or instruments which the Board determines should be included or treated as Securities if the Board believes that this would further the safety of the market or the protection of investors. The Board can exercise its power to exempt rights and instruments from the definition of securities that otherwise would be treated as Securities under paragraphs (a, b, c, d) of this Article if it believes that it is not necessary to treat them as Securities, based on the requirements of the safety of the market and the protection of investors.Commercial bills such as cheques, bills of exchange, order notes, documentary credits, money transfers, instruments exclusively traded among banks and insurance policies shall not be considered Securities.Securities listed on the Exchange shall be traded through transactions among brokers, each on behalf of its client and shall be evidenced by entries in the Exchange records, in accordance with the provisions of Chapter Four of this Law, unless such transactions are excluded from trading pursuant to the rules and instructions issued by the Authority.

1.2.1 CMA FunctionsLearning Objective:

Be familiar with CMA functions

CMA is responsible for regulating and developing the Saudi Arabian Capital Market by issuing required rules and regulations for implementing the provisions of Capital Market Law. The basic objectives are to create an appropriate investment environment, boost confidence and reinforce transparency and disclosure standards in all listed companies and to protect the investors and dealers from illegal acts in the market.Moreover, Saudi Stock Exchange is authorized to issue rules and instructions. The Exchange shall submit Exchange regulations, rules, instructions and amendments thereof to CMA to be approved by the Board.

1.2.2 CMA Authorities:Learning Objective:

Be familiar with CMA authorities

The CMA is entrusted with the following duties:

•

•

• • • • •

Regulate and develop the capital market and promote appropriate standards and techniques for all sections and entities involved in Securities Trade Operations.Protect investors from unfair and unsound practices involving fraud, deceit, cheating, manipulation and inside information trading.Maintain fairness, efficiency and transparency in transactions of securities.Develop appropriate measures to reduce risks pertaining to transactions of securities.Develop, regulate and monitor the issuance of securities and under-trading transactions.Regulate and monitor the activities of entities working under the supervision of CMA.Regulate and monitor full disclosure of information related to securities and issuers.

1.3 Saudi Stock Exchange

The Saudi Capital Market Law provides for the establishment of the “Saudi Stock Exchange” as a joint stock company that operates as the only authorized entity to carry out trading of securities in the Kingdom of Saudi Arabia.Saudi Stock Exchange (Tadawul) was established as a company that provides comprehensive and diverse financial services to compete internationally. Consistent with its mission to produce top quality and highly efficient securities exchange market products and services, the exchange constitutes to be an added advantage for all beneficiaries and participants in the market.The Exchange also aims at boosting transparency and disclosure level, help investors to make their investment decisions based on accurate and sufficient information.

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1.3.1 The Exchange Objectives:Learning Objective:

Be familiar with the Exchange objectives

The objectives of the Exchange include the following: 1.

2.

3. 4.

1.3.2 Exchange RoleLearning Objective:

Be familiar with stock exchanges’ role in economy

Any “productive” economy requires companies that produce goods and services for domestic consumption or external export. These companies, in turn, need financial resources to help them finance the production process. Stock exchanges link these companies’ needs for financial resources with investors who want to provide necessary resources as investments.The financial system was therefore created to facilitate designing, selling and exchanging funds and financial investments. The financial exchange system is divided to two types: direct and indirect.In Direct Exchange System (finance), borrowers (financial instruments issuers) sell securities directly to creditors (buyers). On one hand, borrowers include central and local governments and corporations. On the other hand, creditors include individuals, financial and non-financial institutions and governments of other countries.In Indirect Exchange System (finance), financial institutions, such as banks, facilitate transfer of funds between borrowers and lenders (creditors) by way of borrowing from creditors and then making funds available to borrowers. These financial institutions are called brokerage institutions and include banks, insurance companies and investment funds. It should be noted that the financial system is strongly associated with the economic system. The financial system’s role is to facilitate production, employment and consumption processes. These processes can be expressed graphically as follows

Ensuring fair, efficient and transparent listing requirements, trading rules and technical mechanisms and information for Securities listed on the Exchange;Providing sound and rapid settlement and clearance rules and procedures through its Securities Depositary Center;Establishing and enforcing professional standards for brokers and their agents; andEnsuring the financial strength and soundness of brokers through the periodic review of their compliance with capital adequacy requirements, and setting such arrangements to protect the funds and Securities in the custody of brokerage companies.

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Indirect Flow of Funds

Direct Flow of Funds

Direct Flow of FundsInvestment can simply be defined as the existing obligation to provide funds or any other resources for investment together with the expectation of future financial gains in return for the invested funds. Investment can be in the form of financial assets or real (in-kind) assets. Financial assets (such as stocks and bonds) play a vital role in connecting investors who want to invest their funds with companies that need financial resources to enable such companies to do their work and serve the economy. On the other hand, real assets are assets (such as real estate, factories and equipment) that companies buy to produce goods and services for consumers. Further to linking companies with investors, stock exchanges play also an equally important role in helping evaluate and exchange financial assets and real assets.

1.3.3 Exchange Regulatory FrameworkLearning Objective:

Be familiar with Exchange’s Regulatory Framework and Mechanism

The financial market can be divided into spot market and future market. Spot market is divided into money market and capital market, which in turn is divided into the primary market (New Issues) and secondary market. As for the primary market (New Issues), there are a number of “brokerage houses” that are licensed to help organizations issue new securities. Secondary market is the market where securities that were already issued are bought and sold among investors. These transactions do not change total amount of securities issued by companies, rather it only transfers ownership of securities from one investor to another. Secondary market provides the mechanism whereby investors can transfer their investment in securities from a long-term investment to a short-term investment. Trading in secondary markets in KSA is carried out through an electronic network linking banks and brokerage companies with Central Trading Unit.The electronic network and supporting infrastructure are referred to as the Trading System. The system can automatically perform all trading that include issuing orders, matching, settlement and transfer of ownership, in addition to providing latest information about stock prices, trading volumes and specific information about listed companies.

Creditors

Creditors

Stock Exchange

Financial Instrument

Borrowers

Borrowers

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1.4 Committee for the Resolution of Securities Disputes

Learning Objective:

Be familiar with duties and jurisdiction of the Committee

A.

B.

C.

1.5 Manipulation and Insider Trading

A.

B.

C.

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The Authority established a committee known as “Committee for the Resolution of Securities Disputes” which has jurisdiction over the disputes falling under the provisions of this law, its implementing regulations, and the regulations, rules and instructions issued by the Authority and the Exchange, with respect to the public and private actions. The Committee shall have all necessary powers to investigate and settle complaints and suits, including the power to call witnesses, issue decisions, impose sanctions and order production of evidence and documents.The Committee’s jurisdiction shall include claims against decisions and actions taken by the Authority or the Exchange and the Committee shall have the right to issue a decision awarding damages and request to revert to the original status or issue another decision as appropriate and that would guarantee the rights of the aggrieved.Evidence in Securities cases shall be admissible in all forms including electronic or computer data, telephone recordings, facsimile messages and electronic mail.

Any person shall be considered in violation of this Law if he intentionally does any act or engages in any action which creates a false or misleading impression as to the market, the prices or the value of any Security for the purpose of creating that impression or thereby inducing third parties to buy, sell or subscribe for such Security or to refrain from doing so or to induce them to exercise, or refrain from exercising, any rights conferred by such Security.The Authority shall set out rules determining the acts and practices, which shall constitute violations of paragraph (A) of this Article. These rules shall specify the acts and practices excluded from the application of the provisions of paragraph (A) of this Article. The powers of the Authority provided for in this paragraph shall include the power to set forth the rules, define the circumstances and procedures aiming at stabilizing the prices of Securities offered to the public, and identify the manner and the period during which these actions must be taken.The following acts and practices shall be among those, which shall be considered types of manipulation that are prohibited by paragraph (A) of this Article:1.

Undertaking transactions in Securities, which do not involve a true transfer of ownership thereof.Entering an order or orders for the purchase of a particular Security with prior knowledge that an order or orders of substantially the same size, price and timing for the sale of the same Security has been or will be entered by a different party or parties.

To perform any act or practice aiming at creating a false or misleading impression of an existing active trading in a Security as may be contrary to the reality. These acts and practices shall include, but not be limited to the following: a.

b.

In addition; A.

B.

C.

8

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Entering an order or orders for the sale of a particular Security with prior knowledge that an order or orders of substantially the same size, price and timing for the purchase of the same Security has been or will be entered by the same party or different parties.

Any person who obtains, through family, business or contractual relationship, inside information (hereinafter an “insider”) is prohibited from directly or indirectly trading in the Security related to such information, or to disclose such information to another person with the expectation that such person will trade in such Security.Insider information means information obtained by the insider and which is not available to the general public, has not been disclosed, and such information is of the type that a normal person would realize that in view of the nature and content of this information, its release and availability would have a material effect on the price or value of a Security related to such information, and the insider knows that such information is not generally available and that, if it were available, it would have a material effect on the price or value of such Security.No person may purchase or sell a Security based on information obtained from an insider while knowing that such person, by disclosing such insider information related to the Security, has violated paragraph (A) of this Article.The Authority has the power to establish the rules for specifying and defining the terms provided for under paragraphs (A) and (B) of this Article, and such acts or practices which the Authority deems appropriate to exempt them from their application, as may be required for the safety of the market and the protection of investors.

c.

2. To affect, alone or with others, the price of a particular Security or Securities traded on the Exchange through executing a series of transactions in such Security or Securities creatingactual or apparent active trading or causing an increase or decrease in the prices of such Securities, for the purpose of inducing third parties to buy or sell such Securities as the case may be.

Revision Questions:

1. Write about CMA and mention CMA functions and authorities. Page 4

2. What are the Exchange’s objectives? Page 5

3. What are Insider Trading’s implications? Page 7

Chapter OneEnd-of-Chapter Questions:

9

Electronic Disclosure System (iFsah)

Disclosure and Transparency

Clear and Accurate Information

Obligation to Disclose Material Developments

Importance of Disclosure to Investor and Impact of Disclosure on Share Price

Definition of Electronic Disclosure System (iFsah)

Objectives of iFsah

Characteristics of iFsah

Method of Displaying Information Entered through iFsah on Tadawul Website

Liability for any advertisement and/or content posted on Tadawul website

Types of iFsah Users

Duties and Responsibilities of Data Discloser (Liaison Officer)

Mandatory Requirements for Companies

Common Issues

Times for Trading and Times Allowed for Announcement

Method of Data Acceptance and Rejection in the System

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

This part of curriculum provides about 28 out of 100 questions in the exam

Chapter Two

Introduction

Over recent years, disclosure and transparency gained more interest in raising investors’ awareness, as their decisions depend mainly on information provided by companies. The importance of disclosure and transparency for listed companies lies in the dissemination of financial and non-financial information, so that investor is sufficiently aware of information relevant to companies listed on the Exchange that matter to them in a proper way and an appropriate time. Thus, companies are confident while running their business with the required level of responsibility, credibility, efficiency. This also contributes to assessing risks surrounding listed companies and being able to take appropriate decisions, while adhering to provide such information periodically, for greater transparency and clarity. This is also a private-sector development, which has become a critical factor to jumpstart economy and support companies› efforts to prosper and grow, while stressing control over such information, announcements and financial statements.

2.1 Disclosure and Transparency:

Learning Objective:

Be familiar with the meaning and the difference of disclosure and transparency.

Disclosure:Disclosure is defined as revealing of (financial and non-financial) information relevant to all interested and concerned parties in a company. Such disclosure may take place periodically or immediately at the time of information, so that information is made available to everyone at the same time and no one has benefited before others.Transparency: Transparency is defined as full disclosure of true administrative and financial status of any entity. Transparency requires that published material data, reports or events reflect entity›s factual status clearly and explicitly.Information Transparency Criteria:There are several conditions to be met in any transparent information or procedure, including: 1.

2. 3. “Transparency” principle is closely related to registration, documentation and reporting, so as to be available to all staff and to inform them of any technical information or financial data relating to company›s activities and decision-making processes.

Transparency shall take place at the appropriate time, as delayed transparency is usually worthless.Transparency shall be made available to all parties at the same time.Transparency shall be clear and unambiguous.

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2.1.1 Importance of Disclosure and TransparencyLearning Objective:

Be familiar with importance of disclosure and transparency of corporate information

Disclosure and transparency have a major importance due to the following reasons:•

•

•

•

2.1.2 Development of Disclosure and Transparency in the ExchangeLearning Objective:

Historical Overview of disclosure in the Exchange

Arab Automotive Company was the first joint-stock company to be operating in KSA in mid-1930s and many of such companies continued then to emerge. By 1975, there were 14 joint-stock companies in KSA. The rapid economic growth and development of KSA, as well as saudization of some foreign banks’ capital in late 1990s led to the incorporation of a huge number of joint-stock companies and banks. Accordingly, there should be a mechanism to direct stock market. Therefore, the Ministerial Committee formed in 1984, comprising of Minister of Finance, Minister of Commerce, and Saudi Arabian Monetary Authority (SAMA) Governor, sought to regulate and develop stock market, while SAMA was entrusted with regulating the market on a daily basis. Several committees then emerged of that ministerial committee such as Stock Exchange Supervision Committee comprising of Deputy Minister of Finance, Deputy Minister of Commerce and SAMA Deputy Governor, which convened monthly meetings that led to the incorporation of Saudi Share Registration Company to entrust with settling and clearing all stock operations. The Committee further developed and operated Electronic Securities Information System (ESIS), which provided automated trading of all stocks through local platforms, and contributed to positioning stock market in a single market where offers and demands are available, as well as providing equity in placing and execution of orders from any geographical source. Market developments had continued through introducing new systems and incorporating joint-stock companies totaling 57 in 1990 and 75 in 2020. Further, more systems had been developed such as Real Time Gross Settlement (RTGS) system in 2001, which provided automated and immediate settlements, enabling investors to buy and sell several times on a trading day. There should have been a regulatory body to control the market and increase investor’s awareness and confidence through independent supervising authority

Increase reliable information delivered in time to decision makers inside and outside a company for timely decision-making that directly affect growth and profitability.Disclosed information affects users of financial statements and decision makers – shareholders, investors and lenders – in relation to making a decision about how to use and invest their money and risks involved.Disclosure helps to understand company›s activities, policies and performance in terms of environmental and ethical standards as well as relationship with communities where it operates.Disclosure and transparency together with proper audit help to reduce possibility of fraud and corruption. Therefore, such factors allow companies to compete with best offers and differentiate from other companies not exercising good governance.

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managing the market and increasing disclosure and transparency. Therefore, Capital Market Law, by virtue of royal directives, was issued to define role and mission of new supervisory, regulatory and operational institutions in Capital Market, and to separate supervisory and regulatory role from executive role by establishing new institutions in the market, such as:

Capital Market Authority (CMA): the regulatory and supervisory body of the Capital MarketSaudi Stock Exchange (Tadawul): It mainly carries out operations of the Exchange. Committee for Resolution of Securities Disputes (CRSD): a committee specialized in settling disputes that fall within scope of Capital Market Law’s provisions, implementing regulations thereof, and rules of CMA and Capital Market. In mid2004-, CMA started its activities directly, as a governmental body with financial and administrative independence, and directly reported to the Prime Minister.

Saudi Stock Exchange (Tadawul):On March 2007 ,19, the Council of Ministers approved the formation of The Saudi Stock Exchange (Tadawul). This was in accordance with Article 20 of the Capital Market Law establishing Tadawul as a joint stock company. Tadawul is the sole entity authorized in the Kingdom of Saudi Arabia to act as the Securities Exchange (the Exchange). It mainly carries out listing and trading in securities, as well as deposit, transfer, clearing, settlement, and registry of ownership of securities traded on the Exchange. The legal status, duties, and responsibilities of the Exchange and Depository Center are explicitly defined in the Capital Market Law (CML) issued by Royal Decree Number (M/30), dated on June 2003 ,16. The Exchange is also the official source of all market information.The capital of Tadawul is SAR 1,200,000,000 divided into (120,000,000) shares of equal value of SAR 10; all of which are cash shares subscribed by the Public Investment Fund. Tadawul is an affiliate member of the International Organization of Securities Commissions (IOSCO), the World Federation of Exchanges (WFE), and the Arab Federation of Exchanges (AFE).Board of Directors (the Board)The Company is managed by a nine-member Board appointed by a decision of Council of Ministers through nomination of CMA’s Board Chairman, where a Chairperson and a Vice Chairperson are selected among them. Membership shall be as follows: 1. 2. 3. 4. 5.

2.2 Clear and Accurate Information

Learning Objective:

Be familiar with clarity and correctness of information from its source

Where, in the opinion of the issuer, disclosure of any matter required by these Rules would be unduly detrimental to the issuer, and omission is not likely to mislead investors with regard to

Ministry of Finance RepresentativeMinistry of Commerce and Investment RepresentativeSAMA RepresentativeFour Members Representing Licensed Brokerage Firms.Two Members Representing Joint-Stock Companies Listed on the Exchange.

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facts and circumstances, knowledge of which is essential for the assessment of the securities in question, the issuer may apply for a waiver from the relevant requirement or otherwise request to delay the disclosure. The issuer must in that case provide to the Authority on a strictly confidential basis a statement of the requested waiver or delay together with the reasons why the issuer believes that the information should not be disclosed at that time. The Authority may approve or reject the application for a waiver or delay. If the Authority approves the application for a waiver or delay, the Authority may at any time require the issuer to disclose any information in relation to the waiver or delay. (Article (61) Paragraph (b) of Rules on the Offer of Securities and Continuing Obligations).Exception from paragraph (a) of this Article, if the issuer is a special purposes entity, the special purposes entity shall disclose to the Authority and the public without delay any material developments that fall within the scope of its activity and the knowledge of which is not available to the general public, and which may affect the assets or liabilities of the special purposes entity and can reasonably lead to a change in the price of the listed securities or have a significant impact on the ability of the special purpose entity to meet its debt instrument related obligations. (Article (62) Paragraph (b) of Rules on the Offer of Securities and Continuing Obligations).

2.3 Obligation to Disclose Material Developments

(a)

1. 2.

In determining whether a development falls within the scope of this Article, an issuer must assess whether a prudent investor would be likely to consider information about the development in making his investment decisions. (b)

1.

2.

3.

4.

5.

6.

An issuer must disclose to the Authority and the public without delay any material developments in its sphere of activity which are not public knowledge, and which may affect the assets and liabilities or financial position or the general course of business of the issuer or its subsidiaries and which may:Reasonably lead to movements in the price of the issuer›s listed securitiesSignificantly affect an issuer’s ability to meet its commitments in respect of listed debt instruments.

The issuer must immediately and without delay disclose to the Authority and the public any of the following developments (as referred to in (a) above):any transaction to purchase, sell, lease or mortgage an asset at a price equal to or greater than %10 of the net assets of the issuer according to the latest reviewed interim financial statements or audited annual financial statements, whichever is later;any debt outside the issuer’s ordinary course of business, of a value equal to or greater than %10 of the issuer’s net assets; according to the latest reviewed interim financial statements or audited annual financial statements, whichever is later;any losses equal to or greater than %10 of the issuer’s net assets; according to the latest reviewed interim financial statements or audited annual financial statements, whichever is later;any significant change in the issuer’s production environment or activity including (but not limited to) the availability of resources and the possibility of obtaining them;any changes in the composition of the directors, the audit committee or to CEO’s position of the issuer, and in case the issuer is a special purposes entity, any changes in the composition of the directors, the audit committee or to CEO’s position of the sponsor and the special purposes entity;any dispute including any litigation, arbitration, or mediation where the value involved is equal to or greater than %5 of the net assets of the issuer according to the latest

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7.

8.

9.

10.

11.

12.

2.4 Importance of Disclosure to Investor and Impact of Disclosure on Share Price

Learning Objective:

Be familiar with the impact of disclosure on share prices and trading volume

Importance of disclosure impact on stock prices comes from the impact of disclosure on emergence of joint-stock companies and legal legislation that oblige joint-stock companies to publish financial statements at a specific time, as well as to provide scientific evidence to link issuance of annual financial reports and its impact on earnings per share and trading volume.By determining the impact of disclosure on trading volume, the studies concluded three hypotheses:First: There is a positive correlation between disclosure and share price in capital market.Second: Timing of accounting information disclosure help to take rational investment decisions.Third: There is a significant relationship between trading volume and extent of accounting information disclosure.To prove such hypotheses, financial reports of companies whose shares are listed on the Exchange were analyzed. Based on such analysis, the studies came up with several findings, most important of which are as follows: 1.

2.

reviewed interim financial statements or audited annual financial statements, whichever is later; any judicial decision issued against the board or any of the directors where the subject of the decision involved relates to the business of the board or any of the directors in the issuer;the increase or decrease in the net assets of the issuer equal to or greater than %10 according to the latest reviewed interim financial statements or audited annual financial statements, whichever is later;the increase or decrease in the net assets of the issuer equal to or greater than %10 according to the latest audited annual financial statements;the entering into, or the unexpected termination of, any contract with revenues equal to or greater than %5 of the gross revenues of the issuer according to the latest audited annual financial statements;any transaction between the issuer and a related party or any arrangement through which the issuer and a related party invest in any project or asset or provide financing therefore if this transaction or arrangement is equal to or greater than %1 of the gross revenues of the issuer according to the latest audited annual financial statements;any interruption in the principal activities of the issuer or its subsidiaries equal to or greater than %5 of the gross revenues according to the latest audited annual financial statements; (Article (63) of Rules on the Offer of Securities and Continuing Obligations).

In order for an investor to make rational investment decisions, it shall identify major changes affecting share price indicated on published financial reports of companies whose shares are listed on the Exchange.Inappropriate timing of accounting information contained in published financial reports is one of significant criticisms of such reports, as it limits their reliability as a major

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3.

2.5 Definition of Electronic Disclosure System (iFsah)

Learning Objective:

Explore and know how to use iFsah

Tadawul launched an updated electronic disclosure system in June 2013; a versatile electronic system that allows companies to prepare, enter, store and disclose financial and non-financial information required under regulations and instructions posted on Tadawul website, where standardized electronic forms are provided to facilitate disclosure process in Arabic and English. •

• •

•

2.6 Objectives and properties of iFsah

iFsah is an interactive multi-use system for preparing and displaying information related to companies listed on Tadawul website.iFsah provides standard electronic forms to facilitate disclosure by listed companies.The Exchange provides a number of tools to help companies prepare, disclose, and save different data and information so as to save time, effort and cost.iFsah helps all parties concerned with providing accurate information through flexibility of forms and approved tables.

source of information, while investor relies mainly on such reports in making investment decisions. Researchers agree that share prices on the Exchange reflect available information about such shares, but disagree on type of information and prices responsiveness.

1 2 3 4Meet companies’

requirements by providing

necessary tools to prepare, display and

store financial statements in accordance

with Laws and Regulations.

Raise level of disclosure and transparency of

financial and non-financial data

Possible download of data in a flexible way

Support both Arabic and

English

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2.7 Characteristics of iFsah

• • • • • • • • • • •

2.8 Method of Viewing Information Entered through iFsah system on Tadawul Website

By visiting Tadawul website (www.tadawul.com.sa), you can select and determine type of market, then select type of required securities to view all relevant information, with the ability to search securities by code.

Following are some pages on Tadawul website relating to iFsah.The website includes “About Us”, together with “Dividends” and “Statements” sections (Detailed Financial Statements, Consolidated Financial Statements, Financial Reports, XBRL Financial Statements, and Board Reports), as well as Company “Profile” that includes “Overview”, “History” and other company-related information.

Example: Company Profile

Publish financial statements.Financial statements: support several formats while saving (HTML – Excel - PDF).Publish announcements in table form with the capacity of attaching documents.Publish and update detailed information of BOD, Audit Committee and Senior Executives.Publish and update company data (Basic information and bylaws).Publish changes to capital.Publish dividends.Provide companies’ shares purchase data.Publish and update information pertaining to investment funds.Publish and update information pertaining to real estate and traded funds.Publish and update information pertaining to bonds and instruments.

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Next page shows all company-related announcements

Tadawul “Home” page provides information related to announcements and market news shown based on filters, by clicking “Markets” then “Press Release”.

Meeting and Sessions” section under “Markets” -> “Main Market” contains “General Assembly Meeting” and “Board of Directors Sessions” sections.

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2.9 Liability for any advertisement and/or content posted on Tadawul website

Saudi Stock Exchange (Tadawul) neither represent nor endorse the accuracy of any advertisement, or the quality of any products, information, or other materials displayed on Tadawul website. Tadawul shall not be, in any manner, responsible and/or liable for any advertisement and/or its content posted on Tadawul website.

2.10 Types of iFsah Users

Learning Objective:

Be familiar with iFsah purpose and users

Each company shall authorize a liaison officer to access iFsah for publishing announcements, disclosing company-related information and updating company profile on Tadawul website. In case of requesting registration/replacement of users, the authority shall be determined as follows:Data Entry Clerk:Responsible for entering and sending data to Supervisor for verification, validation and approval. Such data shall be then sent through iFsah to the Tadawul Reviewer.Supervisor:Responsible for approving and sending data to Tadawul via iFsah.It is recommended to designate one supervisor for each data entry clerk to verify and validate all information before being sent to Tadawul.

2.11 Duties and Responsibilities of Data Discloser (Liaison Officer)

Learning Objective:

Be familiar with duties and responsibilities of data discloser

Liaison Officer is the connection point between company’s management and Tadawul, who advertises and updates all company data published on Tadawul website, as well as preparing, organizing and taking all procedures related to ordinary and extraordinary general assemblies.

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2.12 Mandatory Requirements for Companies

Announcement Requirements Others

2.13 Common Issues

• Non-compliance with company announcements’ instructions. • Insufficient knowledge/information of announcement creator. • Frequent spelling errors and poor drafting of text. • Failure to update announcement-related data and information. • Disregarding observations in case of input rejection. • Lack of following-up if the announcement was rejected.

2.14 Times Allowed for Announcement

Issuer may create an announcement at any time outside of trading time, save as exceptional

cases referred to in Listing Rules.

•

•••

•

•

•

•

•

•

•

•

Comply with all company announcement instructions to the fullest.Select the appropriate form for each announcement.Follow-up status of announcement.Read, format and organize announcement content, and produce a final reviewed revision free of false information or spelling errors before being sent.Ensure that announcement context is readable and clear and included information is true and correct.Inform liaison officer of related requirements and forms to handle announcement properly.Follow instructions received via email in case announcement/inputs is rejected, and auditor feedback will be available on the system.Update relevant data and information.

In case of liaison officer’s appointment, replacement or resignation, Tadawul shall be informed accordingly.The system shall be used by the same authorized person.In case contact information have been changed, new contact information shall be provided to Tadawul.System usage experience shall be shared with new liaison officers.

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2.15 Data Acceptance and Rejection Process on iFsah

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Revision Questions:

1.

2.

3.

What are requirements for transparent information? Page 12

What is liaison officer’s role and responsibility? Page 20

What is data acceptance and rejection process on iFsah? Page 22

Chapter TwoEnd-of-Chapter Questions:

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Listed Companies Disclosure Laws and Regulations

Corporate Governance Regulations in KSA

Related Parties

Regulations’ Objectives

Procedures & Instructions Related to Stock-Market Listed Companies with

Accumulated Losses up to or more than %20 of its Capital.

Instructions on Announcements of Joint-Stock Companies Listed in Saudi Stock

Exchange.

Listing Requirements & Obligations

.

.

.

.

.

.

.

This part of curriculum provides about 20 out of 100 questions in the exam

Chapter Three

Introduction

Corporate governance is an important issue for companies, both domestically and abroad in this era, as financial crises and issues that have previously occurred and faced by the global economy have made it necessary to adopt Companies’ Oversight and Control Framework with a locally and internationally clear and recognized framework. This led the regulatory authorities to take the responsibility for legislating and issuing a general governance framework according to specific regulations of companies operating in countries, and in accordance with standards adopted by corporate management that are in line with the internal market.The significance of “Corporate Governance” comes from its concern on fostering BOD’s role in companies, as well as developing and strengthening internal control systems, monitoring workflow, and executing work in a manner that maintain Company’s stability and protects shareholders and stakeholders. This will certainly be realized only by applying specific principles that ensure the Company will follow a clear approach, guarantee stable financial assets and grow profits.

3.1 Corporate Governance Regulations in KSA

3.1.1 Corporate GovernanceLearning Objective:

Be Familiar with Basic the Concept of Corporate Governance.

Corporate governance are rules to lead and guide the Company that includes mechanisms to regulate the various relationships between the Board, Executive Directors, shareholders and stakeholders. Therefore, it establishes rules and procedures to facilitate the decision making process, adds transparency and credibility to it with the objective of protecting the rights of shareholders and stakeholders and achieves fairness, competitiveness and transparency on the Exchange and the business environment.

3.2 Related Parties:

Learning Objective:

“ Be familiar with Related Parties”

Related parties are as follows: 1. 2. 3. 4. 5.

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Substantial Shareholders of the Company. Board members of the Company or any of its affiliates and their relatives.Senior Executives of the Company or any of its affiliates and their relatives.Board members and Senior Executives of Substantial Shareholders of the company.Entities, other than companies, owned by a Board member or any Senior Executive or their relatives.

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6. 7. 8.

9.

10.

3.3 Regulations’ Objectives

Learning Objective:

Be familiar with Regulations’ Objectives

These Regulations aim at establishing an effective legal framework to govern the Company, and particularly aim at the following: 1. 2. 3.

4.

5. 6. 7. 8. 9.

Shareholder Access to Information A.

B.

C.

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Companies in which a Board member or a Senior Executive or any of their relatives is partner.Companies in which a Board member or a Senior Executive or any of their relatives is a member of its Board of directors or is one of its Senior Executives. Joint stock companies in which a member of the Board or a Senior Executive or any of their relatives owns (%5) or more, subject to the provisions of paragraph (D) of this definition.Companies in which a Board member or a Senior Executive or any of their relatives has influence on their decisions even if only by giving advice or guidance.Any person whose advice or guidance influence the decisions of the Company, the Board and the Senior Executives, including Holding companies or affiliates.

The Board shall make available to the shareholder complete, clear, accurate and non-misleading information to enable him/her to properly exercise his/her rights. Such information shall be provided at the proper times and shall be updated regularly.The method used to provide information to the shareholders shall be clear and detailed and shall include a list of the Company›s information that the shareholders may obtain. This information shall be made available to all shareholders of the same class.The Company shall use the most effective methods in communicating with shareholders and shall not discriminate among shareholders in respect of providing information. (Corporate Governance Regulations, Article 6).

Enhancing the role of the Company’s shareholders and facilitating the exercise of their rights.Stating the Roles and responsibilities of the Board and the Executive Management.Enhancing the role of the Board and the committees and developing their capabilities to enhance the Company’s decision-making mechanisms.Achieving transparency, impartiality and equity in the Exchange, its transactions, and the business environment and enhancing disclosure therein.Providing effective and balanced tools to deal with conflicts of interest.Enhancing accountability and control mechanisms for the Company’s employees.Establishing the general framework for dealing with Stakeholders and protecting their rights.Supporting the effectiveness of the system for overseeing Companies and the tools thereof.Raising awareness of Companies in respect of the concept of professional conduct and encouraging them to adopt and develop such concept in accordance with their nature.

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Roles of Ordinary General AssemblyExcept for roles reserved to the Extraordinary General Assembly, the Ordinary General Assembly shall have Roles in all affairs of the Company, and particularly the following: 1. 2.

3.

4.

5.

Appointing and dismissing Board members.Permitting a Board member to have direct or indirect interest in the business and contracts that are executed for the Company›s account, in compliance with the provisions of Companies Law and Its Implementing Regulations.Permitting a Board member to take part in any activities that may lead to competition with the Company, or competition in any of its activities, in compliance with the provisions of Companies Law and its Implementing Regulations.Monitoring the compliance of the Board members with the provisions of Companies Law and Its Implementing Regulations and other relevant laws and the Company’s bylaws; inspecting any damage that may occur as a result of their violation of such provisions or mismanagement of the affairs of the Company, determine the liability resulting therefrom and undertaking the procedures it deems proper in this regard pursuant to Companies Law and Its Implementing Regulations.Forming the audit committee pursuant to the provisions of Companies Law and Its Implementing Regulations.

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Amending the Company’s bylaws, except for amendments that are deemed null and void pursuant to the provisions of Companies Law.Increasing the Company’s share capital in accordance with the situations provided by Companies Law and Its Implementing Regulations.Decreasing the Company’s share capital if it exceeds the Company’s needs or in the event the Company incurs financial losses, in accordance with the situations provided by Companies Law and Its Implementing Regulations.Resolving to form a consensual reserve for the Company as provided for in its bylaws to be set aside for a specific purpose, and the disposal thereof.Resolving to maintain or liquidate the Company before the end of the term specified in its bylaws.Approving the Company›s shares buy-back.Issuing preferred shares or approving their buying, or converting ordinary shares into preferred shares or converting preferred shares into ordinary shares as per the Company›s bylaws and the Regulatory Rules and Procedures issued pursuant to Companies Law related to Listed Joint Stock Companies.Issuing debt instruments or financing deeds convertible into shares, and stating the maximum number of shares that may be issued against these instruments or deeds.Allocate Shares that are issued upon the capital increase or part of them for the employees of the Company, and its affiliates or some of them, or any of them.Suspending preemptive rights of shareholders in subscribing for the capital increase in exchange for cash or giving priority to non-shareholders in cases as deemed in the interest of the Company if so is provided for in the Company›s bylaws.

6. 7. 8.

9.

10.

11.

12.

13.

14.

15.

Shareholders› Assembly a.

b.

c.

d.

Approving the Company›s financial statement.Approving the Board report.Deciding on the proposals of the Board with respect to the method of distributing the net profits.Appointing the external auditors of the Company, specifying their remunerations, reappointing them, replacing them and approving their reports.Looking into the violations and errors committed by the external auditors of the Company when performing their duties and any difficulties, reported by the Company’s external auditors, regarding their empowerment by the Company’s Board or Management to review the books, records and other documents, statements and clarifications required to perform their duties, and respond to that as it deems appropriate in this regard.Resolving to withhold from setting aside statutory reserve when it reaches an amount equal to (%30) of the Company’s paid share capital and resolving to distribute the surplus of such percentage to the Company’s shareholders in financial years where the Company does not generate net profits.Using the Company’s consensual reserve, if such has not been set aside for a specific purpose, provided that using such reserve shall be based on a proposal submitted by the Board and used in ways that benefit the Company or the shareholders.Forming other reserves besides the statutory reserve and consensual reserve and disposal of the same.Setting aside amounts from the Company’s net profits to set up social organizations for the benefit of the Company’s employees or to assist any such existing establishments in accordance with Article (129) of Companies Law.Approving the sale of more than (%50) of the assets of the Company, whether in one or several transactions within a period of 12 months from the date of the first selling transaction. In case selling these assets includes what falls within the powers of the Extraordinary General Assembly, the approval of the said Assembly is required. (Corporate Governance Regulations, Article 12)

The Ordinary General assembly shall convene in accordance with the situations and circumstances stated in Companies Law and Its Implementing Regulations and the Company’s bylaws.The Ordinary General Assembly shall convene at least once per year within the six months following the end of the Company›s financial year.The General and Special Shareholders› Assemblies shall convene upon an invitation from the Board in accordance with the situations stated in Companies Law and Its Implementing Regulations and the Company’s bylaws. The Board shall invite the Ordinary General Assembly to convene upon the request of the external auditor, the audit committee or a number of shareholders holding shares equal to at least (%5) of the share capital of the Company. The external auditor may invite the assembly to convene if the Board does not invite the assembly within thirty days from the date of the external auditor›s request.The date, place and agenda of the General Assembly shall be announced at least ten days prior to the date thereof; the invitation shall be published on the website of the Exchange, the Company›s website and in a daily newspaper distributed in the province where the Company›s head office is located. The Company may invite the General and Special Shareholders› Assemblies to convene using methods of contemporary technologies.

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e.

f.

g.

h.

Appointment of Board Members a.

b.

c.

d.

Issues Affecting Independence a.

b.

c.

1. 2.

3.

The Company may amend the agenda of the General Assembly within a period between publishing the announcement referred to in paragraph (d) of this Article and the date of convening the General Assembly meeting, provided that the Company shall announce this as prescribed in paragraph (d) of this Article.Shareholders shall be granted the opportunity to effectively participate and vote in the General Assembly meetings. The meetings of the General Assemblies of shareholders may be convened and shareholders may participate in their deliberations and vote on their resolutions using methods of contemporary technologies pursuant to the Regulatory Rules and Procedures issued pursuant to Companies Law related to Listed Joint Stock Companies.The Board shall work on facilitating the participation of the largest number of shareholders in the meetings of the General Assembly, including choosing the appropriate place and time of such meeting.The Company shall ensure recording the details of the shareholders who desire to attend at the Company›s head office prior to the specified time for convening the assembly, unless the Company›s bylaw state other means. (Corporate Governance Regulations, Article 13)

The Company’s bylaws shall specify the number of Board members, provided that such number shall not be less than three and not more than eleven.b) The General Assembly shall elect the Board members for the term stated in the Company’s bylaws, provided that such term shall not exceed three years. Board members may be re-elected, unless otherwise provided for in the Company’s bylaws.A Board member shall not be a member of the Boards of Directors of more than five listed joint stock companies at the same time.The Company shall notify the Authority of the names of the Board members and description of their memberships within five business days from the commencement date of the Board term or from the date of their appointment, whichever is shorter,, as well as any changes that may affect their membership within five business days from the occurrence of such changes. (Corporate Governance Regulations, Article 17)

An Independent Director shall be able to perform his/her duties, express his/her opinions and vote on decisions objectively with no bias in order to help the Board make correct decisions that contribute to achieving the interests of the Company.The Board shall annually evaluate the extent of the member›s independence and ensure that there are no relationships or circumstances that affect or may affect his/her independence.By way of example, the following negate the independence requirement for an Independent Director:

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If he/she holds five percent or more of the shares of the Company or any other company within its group; or is a relative of who owns such percentage.If he/she is a representative of a legal person that holds five percent or more of the shares of the Company or any company within its group. If he/she is a relative of any member of the Board of the Company, or any other company within the Company’s group.

4.

5.

6.

7.

8.

9.

10.

d.

Audit Committee Formation a.

b. c.

d.

Publishing Nomination Announcement The Company shall publish the nomination announcement on the websites of the Company and the Exchange and through any other medium specified by the Authority; to invite personswishing to be nominated to the membership of the Board, provided that the nomination

Unless the Nominations Committee considers otherwise, the businesses and contracts with the board member to meet his/her personal needs shall not be deemed as an interest that affect the independence of the board member which require an authorization from the ordinary general assembly, provided that such businesses and contracts are carried out in the same conditions and settings followed by the company with all contractors and dealers, and that such businesses and contracts must be within the normal course of the Company›s activities. (Corporate Governance Regulations, Article 20).

An audit committee shall be formed by a resolution of the Company›s Ordinary General Assembly, and the members of the audit committee shall be from the shareholders or others, provided that at least one of its members is an Independent Director and that no Executive Director is among its members. The number of the members of the audit committee shall not be less than three or more than five, provided that one of its member is specialized in finance and accounting.The Chairman of Audit Committee shall be an Independent Director.The Company›s General Assembly shall, upon a recommendation of the Board, issue a regulation for the audit committee which shall include the rules and procedures for the activities and duties of the committee, the rules for selecting its members, the means of their nomination, the term of their membership, their remunerations, and the mechanism of appointing temporary members in case a seat in the committee becomes vacant.Any person who works or has worked in the Company›s finance Department, the Executive Management or for the Company’s external auditor during the preceding two years may not be a member of the audit committee. (Corporate Governance Regulations, Article 54).

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If he/she is a relative of any Senior Executive of the Company, or of any other company within the Company’s group.If he/she is a Board member of any company within the group of the Company for which he/she is nominated to be a Board member.If he/she is an employee or used to be an employee, during the preceding two years, of the Company, of any party dealing with the Company or any company within its group, such as external auditors or main suppliers; or if he/she, during the preceding two years, held a controlling interest in any such parties. If he/she has a direct or indirect interest in the businesses and contracts executed for the Company’s account. If the member of the Board receives financial consideration from the Company in addition to the remuneration for his/her membership of the Board or any of its committees exceeding an amount of (SAR 200,000) or %50 of his/her remuneration of the last year for the membership of the board or any of its committees, whichever is less.If he/she engages in a business where he competes with the Company, or conducting businesses in any of the company›s activities.If he/she served for more than nine years, consecutive or inconsecutive, as a Board member of the Company.

period shall remain open for at least a month from the date of the announcement. (Corporate Governance Regulations, Article 68).

Assigning Audit FunctionThe Company shall assign the function of auditing its annual accounts to an independent and competent external auditor who possesses the necessary expertise and qualifications to prepare an objective and independent report to the Board and the shareholders, setting out whether the Company’s financial statements clearly and impartially express the financial position of the Company and its performance in the significant areas. (Corporate Governance Regulations, Article 80).

Appointing External AuditorThe Ordinary General Assembly shall appoint the Company›s external auditor based on a recommendation from the Board, provided that the following requirements are met: 1. 2. 3. 4.

Board’s ReportThe Board’s report shall include the Board›s operations during the last fiscal year and all factors that affect the company›s businesses; such report shall include the following: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

The nomination shall be based on a recommendation from the audit committee. The external auditor shall be authorized by the Competent Authority. The external auditor›s interests shall not conflict with the interests of the Company. The number of nominees shall not be less than two. (Corporate Governance Regulations, Article 81).

Implemented and non-implemented provisions of these Regulations, and justifications therefor. Names, qualifications, and experience of the Board and committees members and Executive Management.Names of companies inside and outside the Kingdom in which a Board member is a member of their current or previous Board member or manager;Composition of the Board and classification of its members, as follows: Executive Directors, Non-Executive Director, or Independent Director;Procedure taken to the Board to inform its members, Non-Executive Directors in particular, of the shareholders› suggestions and remarks on the Company and its performance.A brief description of the Roles and duties of the committees, such as the audit committee,the nomination committee and the remuneration committee indicating their names, names of their chairmen, names of their members, the number of their respective meetings, dates of those meetings and the members› attendance details of each meeting.Where applicable, the means used by the Board to assess its performance, the performance of its committees and members and the external body which conducted the assessment and its relation with the Company, if any.Disclose the remuneration of the Board members and Executive Management as stated in Article (93) of these Regulations.Any punishment, penalty, precautionary procedure or preventive measure imposed on the Company by the Authority or any other supervisory, regulatory or judiciary authority, describing the reasons for non-compliance, the imposing authority and the measures, undertaken to remedy and avoid such noncompliance in the future.Results of the annual review of the effectiveness of the internal control procedures of

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11.

12.

13. 14.

15.

16.

17.

18.

19. 20.

21.

22.

the Company and the opinion of the audit committee with respect to the adequacy of the Company›s internal control system.The Audit Committee’ recommendation on the need for appointing an internal auditor for the Company, if there is no internal auditor.The Audit Committee’s recommendation conflicting with Board resolution or those which the Board disregards relating to appointment, dismissal, assessment or determining the remuneration of an external auditor, as well as justifications for those recommendations and reasons for disregarding them.Details of the Company›s social contributions, if any.A list of the dates of General Assembly meetings held during the last fiscal year and the names of the Board members who attended them.A description of the main scope of business of the company and its affiliates. If there are two or more, a statement showing each activity and how it affects the company businesses and results shall be attached.A description of the company›s significant plans and decisions (including changes to the structure, expanding the company›s operations or halting them) and the future expectations.Information on any risks facing the company (operational, financial or market risks) and the policy of managing and monitoring these risks.A summary in a form of table or graph showing the company›s assets, liabilities and results of the last five fiscal year or since the incorporation date, whichever is shorter.Geographical analysis of the company›s and its affiliates› revenues.Any material differences in the operational results compared to the preceding year›s results, along with any expectations announced by the company.Any inconsistency with the standards approved by the Saudi Organizations for Certified Public Accountant.Name of each affiliate company, its capital, the company›s ownership percentage, the main scope of business, country of operation and country of incorporation. (Corporate Governance Regulations, Article 90).

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3.4 Procedures & Instructions Related to Stock-Market Listed Companies with Accumulated Losses up to or more than %20 of its Capital.

Learning Objective:

“ Be familiar with disclosure requirements of troubled companies as defined by CMA”

As a part of Capital Market Authority›s (CMA) efforts to promote the capital market in KSA, boost investors’ confidence, upgrade procedures to minimize securities transactions risks, and according to Capital Market Law issued by Royal Decree No. (M/30) dated 1424/06/02 AH; CMA Board has resolved to amend procedures and instructions on listed companies with accumulated losses up to or more than %50 of its capital in light of Companies Law issued by Royal Decree No. (M/3) dated 1437/01/28 AH, as well as title thereof to become Procedures & Instructions Related to Stock-Market Listed Companies with Accumulated Losses up to or more than %20 of its Capital, provided that amended procedures and instructions shall be applicable as from 1438/07/25 AH corresponding to 2017/04/22 AD.

Company’s accumulated losses are equal to or more than %20 and less than %35 of share capital a)

b)

c)

d)

Company’s accumulated losses are equal to or more than %35 and less than %50 of share capital a)

The company should, immediately and without delay, disclose to the public in a separate announcement when its Accumulated Losses reach %20 or more and less than %35 of its Share Capital. The announcement should reflect the total Accumulated Losses, its percentage of the capital, and the main reasons that caused the losses, with reference that these procedures will be applicable. In case the announcement coincides with the interim or annual financial results announcement, the company is exempt from the disclosure as a separate announcement if it disclosed the required information as per this paragraph in the interim or annual financial results announcement.Following the public announcement referred to in paragraph (a) of this Article, the Exchange shall add a flag next to the company’s name on the Exchange website indicating that the company’s Accumulated Losses reached %20 or more and less than %35 of its Share Capital.Upon receiving an external auditor’s report illustrating its financial position, the company should, immediately and without delay, disclose to the public by a separate announcement upon reduction of its Accumulated Losses from %20 of its Share Capital. The announcement should reflect the remedial steps taken by the company to restore its position including attaching the external auditor’s report referred to in this paragraph.The Exchange shall delete the flag referred to in paragraph (b) of this Article following the company’s announcement of its financial position remedy as indicated in paragraph (c) of this Article. (Article 3).

The company should, immediately and without delay, disclose to the public in a separate announcement when its Accumulated Losses reach %35 or more and less than %50 of

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b)

c)

d)

e)

Company’s accumulated losses are equal to or more than %50 of share capital a)

b)

c)

1.

2.

3.

d)

its Share Capital. The announcement should reflect the total Accumulated Losses, its percentage of the capital, and the main reasons that caused the losses, with reference that these procedures will be applicable. In case the announcement coincides with the interim or annual financial results announcement, the company is exempt from the disclosure in a separate announcement if it disclosed the required information as per this paragraph in the interim or annual financial results announcement.Following the public announcement referred to in paragraph (a) of this Article, the Exchange shall add a flag next to the company’s name on the Exchange website indicating that the company’s Accumulated Losses reached %35 or more and less than %50 of its Share Capital.Upon receiving an external auditor’s report illustrating its financial position, the company should, immediately and without delay, disclose to the public by a separate announcement upon reduction in its Accumulated Losses from %35 of its Share Capital. The announcement should reflect the remedial steps taken by the company to restore its positions including attaching the external auditor’s report referred to in this paragraph.The Exchange shall delete the flag referred to in paragraph (b) of this Article following the company’s announcement of its financial position remedy as indicated in paragraph (c) of this Article.Upon the reduction of Accumulated Losses of a company below %35 and not less than %20 from its Share Capital, Article (3) of these Procedures and Instructions shall be applicable. (Article 4)

The company should, immediately and without delay, disclose to the public in a separate announcement when its Accumulated Losses reach %50 or more of its Share Capital. The announcement should reflect the total Accumulated Losses, its percentage of the capital, and the main reasons that caused the losses, with reference that these procedures will be applicable. In case the announcement coincides with the interim or annual financial results announcement, the company is exempt from the disclosure in a separate announcement if it disclosed the required information as per this paragraph in the preliminary or yearly financial results announcement.Following the public announcement referred to in paragraph (a) of this Article, the Exchange shall add a flag next to the company’s name on the Exchange website indicating that the company’s Accumulated Losses reached %50 or more of its Share Capital.Subject to the provisions of Article (150) of Companies Law, the company shall, after announcing that its Accumulated Losses reached %50 or more of its Share Capital, announce the following:-

Upon receiving an external auditor’s report illustrating its financial position, the company should, immediately and without delay, disclose to the public by a separate announcement the reduction in its Accumulated Losses from %50 of its Share Capital.

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The date of the last day on which the Board of Directors may invite the extraordinary general assembly to convene, and the date of the last day for convening the extraordinary general assembly to address the Accumulated Losses.The Board of Directors› recommendation to the extraordinary general assembly regarding its Accumulated Losses immediately following its issuance, either to increase or decrease the company›s capital, or to dissolve the company before the prescribed date in its by-laws.The date of the last day to complete the process of subscription of the capital increase to address the Accumulated Losses, where applicable.

e)

f) DelistingA company’s shares will be delisted where the company is dissolved by force of law according to paragraph (2) of Article (150) of Companies’ Law or when the extraordinary general assembly decides to dissolve the company before the prescribed date in its by-laws according to paragraph (1) of Article (150) of Companies’ Law. (Article 6).

3.5 Instructions on Announcements of Joint-Stock Companies Listed in Saudi Stock ExchangeLearning Objective:

“ Be familiar with Instructions on Companies’ Announcements”

CMA has issued, updated and amended these instructions to help companies listed on Saudi Stock Exchange to strictly comply with provisions of Companies Law, Capital Market Law and Implementing Regulations thereof, especially Articles pertaining ongoing obligations contained in Rules on Offer of Securities, Continuing Obligations, Listing Rules, Securities Regulations and Rules for listing on Parallel Market in order to enhance transparency and disclosure in Capital Market, and help investors make their investment decisions based on correct and adequate information.These instructions set out key aspects to be contained in all Companies’ announcements posted on Saudi Stock Exchange (Tadawul) website.Below are some models according to CMA announcements’ instructions: - - - - - - - - - - - - -

- -

The announcement should reflect the remedial steps taken by the company to restore its positions including attaching the external auditor’s report referred to in this paragraph.The Exchange shall delete the flag referred to in paragraph (b) of this Article following the company’s announcement of its financial position remedy as indicated in paragraph (d) of this Article.Upon the reduction of Accumulated Losses of a company below %50 and not less than %20 from its Share Capital, Articles (3) or (4) of these Procedures and Instructions shall be applicable, depending on the situation. (Article 15).

Instructions on companies› Announcements of their financial results.Instructions on companies› Announcements of administrative changesInstructions on companies› Announcements of capital change Instructions on companies› Announcements of reverse acquisitionInstructions on companies› Announcements of general assembliesInstructions on companies› Announcements of cash profitsInstructions on companies› Announcements of contracts Instructions on companies› Announcements of SAMA approval of insurance productsInstructions on companies› Affirmative and Corrective AnnouncementsInstructions on companies› Announcements of signing Memorandums of UnderstandingInstructions on companies› Announcements of projectsInstructions on companies› Announcements of sale, purchase, mortgage or lease transactions Instructions on companies› Announcements of receiving finance Instructions on companies› Announcements of company›s purchase and sale of shares

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- - -

-

-

3.6 Continuing Obligations

All disclosures made by an issuer to the public must be complete, clear, accurate, not misleading and shall comply with all disclosure requirements set forth in Capital Market Law, Implementing Regulations thereof and the Exchange’s Rules.Where an issuer wishes to vary its capital or total value of its fund’s asset’, or to take any other action which could lead to adjusting price of issuer›s listed securities, the issuer must disclose to the public details and consequences of such an action on price of its listed securities.

Obligation to Disclose Actions that May Affect Price of Listed SecuritiesWhere an issuer wishes to vary its capital or take any other action which could lead to adjusting the price of the issuer›s listed securities, it must disclose to the public the details of the consequences of such an action on the price of its listed securities.

Means and Formal Requirements of Disclosure a.

b.

c.

d.

1. 2.

3.

e.

f.

g.

Instructions on companies› Announcements of lawsuitsInstructions on companies› Announcements of previously announced developmentsInstructions on announcements of companies whose losses are up to or more than %20 of its capital.Instructions on companies› Announcements in accordance with requirements of Article 150 of Companies Law.Instructions on company’s announcements can be accessed via CMA website.

All notifications to the Exchange and disclosures to the public by an issuer must be in both Arabic and English, and must be made through the system specifically designated by the Exchange for such purpose.Both Arabic and English are the official languages used to explain and interpret any and all notifications and disclosures. In case of any contradiction between the Arabic version and the English version, the Arabic version shall prevail.A disclosure to the public must identify clearly the issuer and the parties related to the disclosure, and the subject matter, the time and date of the disclosure in accordance with the Implementing Regulations and the Exchange Rules.Upon a request in writing, an issuer must be able to provide the Exchange with the following information relating to any disclosure to the public:

The content of a disclosure to the public is a matter, which must be determined by the issuer.Any disclosure must include a statement to the effect that the issuer accepts full responsibility for the accuracy of the information contained in it and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or information the omission of which would make the disclosure misleading, incomplete or inaccurate.Neither the Authority nor the Exchange shall be responsible for the content of such disclosure, its accuracy or its completeness, and expressly disclaim any liability whatsoeverfor any loss arising from, or incurred in reliance upon, any part of such disclosure

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The name of the individual who made the disclosure in question. The time and date on which the material information that is the subject of the disclosure was received or obtained by the issuer; and/orThe mean in which the material information which is the subject of the disclosure was received or obtained by the issuer.

The Exchange’s power to request provision/disclosure of further information or data a. b. c.

Disclosure TimingAn issuer is required to make a disclosure to the public as soon as possible following the occurrence of an event that is required to be disclosed pursuant to these Rules or pursuant to any applicable continuing obligations set out in the Implementing Regulations and the Exchange Rules. In all cases, the disclosure has to be made before the start of the trading period that follows the occurrence of the relevant event.

Disclosure Forms -

Power to Suspend Trading or Delisting a.

1.

2.

3.

4.

5.

6.

7.

b

c

d.

e.

The Exchange may request an issuer in writing to provide certain information or data.The issuer must provide the requested information or data pursuant to paragraph (a) of this Article within the period, format, and means specified by the Exchange.Paragraphs (a) and (b) of this Article apply only to information and data required by the Exchange in connection with the performance of its functions under these Rules.

The issuer must comply with the Disclosure Forms that are mentioned in instructions of companies’ announcements while preparing the disclosure or the report required pursuant to the Capital Market Law, its Implementing Regulations and the Exchange Rules

The Exchange will suspend trading of issuer’s securities in any of the following circumstances:

The Exchange may lift the suspension referred thereto in Subparagraphs 3 ,2 ,1 of Paragraph (a) of this Article after one trading session following the absence suspension reason.The Exchange may at any time propose to the Authority to suspend the trading of any listed security or cancel its listing where in its opinion it is likely that any of the circumstances of paragraph (a) of this Article to occur.An issuer whose securities are subject to a listing suspension must continue to comply with Capital Market Law, Implementing Regulations thereof and the Exchange’s Rules.Where the suspension of securities’ trading continues for six months while the issuer

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When the issuer does not comply with disclosure of its periodic financial information within the specified period pursuant to the relevant Implementing Regulations.When the auditor›s report on the financial statements of the issuer includes an adverse opinion or a refusal to express opinion until such opinion or disclaimer is removed.As for funds listed in accordance with these Rules, when the auditor›s report on Fund’s financial statements includes an adverse opinion or a refusal to express opinion until such opinion or disclaimer is removed.If the liquidity requirements set out in Part 2 and Part 8 of these Rules are not met after the lapse of the period determined by the Exchange to the issuer to rectify its position, unless the Authority agrees otherwise.If the trading of the foreign issuer’s securities has been suspended elsewhere, in case of cross-listed securities, until such suspension is lifted in the other exchange.Upon a resolution issued by the extraordinary general assembly that requires the issuer to reduce the capital for the two trading days following the issuance of the resolution.When a resolution issued by the issuer’s extraordinary general assembly transferring its shares from the parallel market to the main market for the period specified by the Exchange.

f.

g.

Power to Suspend Trading or DelistingThe Authority may at any time suspend the trading of securities or cancel their listing as it deems fit, in any of the following circumstances: 1.

2.

3.

4.

5.

6.

7.

8.

9. 10.

11.

did not take appropriate actions to resolve suspension issues, the Authority may cancel issuer›s listed securities.Upon completion of a reverse takeover by the issuer, the listing of the issuer’s shares shall be cancelled. Should it wish to re-list its shares, the issuer must submit a new application for listing in accordance with these Rules and comply with applicable requirements under the Rules on the Offer of Securities and Continuing Obligations.This Article shall not prejudice the suspension of trading and cancellation of listing resulting from the losses of the company pursuant to relevant Implementing Regulations and Exchange Rules.

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The Authority considers it necessary for the protection of investors or the maintenance of an orderly market.The issuer fails, in a manner that the Authority considers it material, to comply with the Capital Market Law, its Implementing Regulations or the Exchange Rules.The issuer fails to pay on time any fees due to the Authority or the Exchange or any fines due to the Authority.The Authority considers that the issuer or the issuer’s (business, level of operations or assets) are no longer suitable to warrant the continued listing of its securities on the Exchange. In respect of an Exchange Traded Fund, a Real Estate Investment Traded Fund, or any other funds listed in accordance with these Rules, the Authority considers that the fund or the fund’s (business, level of operations or assets) are no longer suitable to continue listing its units on the Exchange.In the case of cross-listed securities, the listing of the foreign issuer’s securities has been cancelled elsewhere.In respect of an Exchange Traded Fund, a Real Estate Investment Traded Fund, or any other funds listed in accordance with these Rules, the Authority believes that the custodian and/or the market maker (as applicable) failed in a manner that the Authority considers it material to comply with the Capital Market Law, its Implementing Regulations and the Exchange Rules.Upon the expiry of the fund in respect of an Exchange Traded Fund, a Real Estate Investment Traded Fund, and any other funds listed in accordance with these Rules. Upon the expiry of term of debt instruments and convertible debt instruments.Upon the announcement of a reverse takeover containing insufficient information about the proposed transaction. If the issuer announces sufficient information regarding the Target, and the Authority is satisfied, following the issuer’s announcement, that there will be sufficient information available for the public about the proposed transaction of the reverse takeover, the Authority may decide not to suspend at this stage. Upon the leakage of information of the proposed transaction of the reverse takeover, and the issuer is unable to assess accurately its financial position and unable to inform the Exchange accordingly.

Voluntary Cancellation of listing a.

1. 2.

3.

4.

5.

b. c.

d.

e,

f.

An issuer whose securities have been listed may not cancel the listing of its securities on the Exchange without the prior approval of the Authority. In order to obtain the Authority›s approval, the issuer must submit a request of the cancelation to the Authority with a simultaneous notification to the Exchange and include in its request the following information:

The Authority may at its discretion accept or reject the request for cancellation.An issuer must only obtain the consent of its extraordinary general assembly to cancel a listing after the Authority has approved that cancellation, and the consent of the special assembly for the debt instruments holders if the issuer is a special purposes entity.As for funds listed in accordance with these rules, the issuer shall obtain consent of units’ owners, by way of an ordinary fund’s resolution, to delist after obtaining Authority’s approval.Where a cancellation is made at the issuer’s request, the issuer must make a disclosure to the public as soon as possible. This disclosure must include at least the reason for cancellation and the nature of the event resulting in the cancelation and the extent to which it affects the issuer’s activities.As for funds listed in accordance with these Rules, where a cancellation is made at the issuer’s request, the issuer must make a disclosure to the public as soon as possible. This disclosure must include at least reason for cancellation and nature of event giving rise to cancelation and how far it affects Fund’s activities. (Article 37 of Listing Rules).

40

Specific reasons for the request for the cancellation.A copy of the form of the disclosure described in paragraph (d) or (e) of this Article, as applicable. If the cancellation is to take place as a result of an acquisition or other corporate action by the issuer, a copy of the relevant documentation and a copy of each related communication to shareholders.Where the issuer is a special purposes entity, a copy of the relevant documentation and a copy of any related communication sent to the owners or the debt instruments holders, if the cancellation is to take place as a result of an action taken by the special purposes entity or the sponsor. The names and contact details of the financial advisor and legal advisor appointed pursuant to the Rules on the Offer of Securities and Continuing Obligations.

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Revision Questions:

1.

2.

3.

What does “Corporate Governance” mean? Page 27

Mention Some Corporate Governance Objectives. Page 28

Illustrate Issues Affecting Independence. Page 31

Chapter ThreeEnd-of-Chapter Questions:

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Chapter Four

Laws and Regulations relating to Investment Funds’ Disclosures

Fund Disclosures

Fund Management

Register of Unitholders

Investment Decisions

Public Funds

Specialized Public Funds

Breach of Investment Limitations

Reporting to Unitholders

Securities Advertisements and Promotional Materials

Announcements of Real Estate Investment Traded Funds

.

.

.

.

.

.

.

.

.

.

This part of curriculum provides about 28 out of 100 questions in the exam

Introduction

According to fundamentals of thinking in the investment area, an investor should not utilize its savings to buy a single security, but rather buy a variety of securities issued by a number of fund managers in order to realize diversity guaranteeing appropriate protection against fluctuation in market value of components of such a variety. This is expressed by saying that one should not put all eggs he has in one basket, or what is expressed in Concept of Investment in terms of diversity policy.

The small amount of savings is not the only reason for investors› reluctance to direct investment in securities. There are investors who have ample financial resources to purchase a suitable variety of securities, but they are reluctant to do so either because of lack of experience and knowledge to manage such variety, or because they do not have enough time. To meet needs of those investors, companies specialized in forming and managing variety (funds) of securities and investment funds have been incorporated, allowing them to purchase a number of shares in such portfolios, commensurate with their available financial resources.

4.1 Funds Disclosures

Learning Objective:

Be aware of disclosure information as provided for in the Regulations.

Article 3 of the Investment Funds Regulations shows compliance with the Regulations.

Compliance with the Regulation: a) A person, who intends to offer units in an investment fund, or to establish an investment

fund in the Kingdom, must comply with these Regulations.

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The Fund Manager must act for the benefit of unitholders in accordance with these Regulations, the Authorized Persons Regulations, the terms and conditions of the investment fund, and (the information memorandum in respect to the public fund).The fund manager must comply with all principles and duties required under Authorized Persons Regulations including the fiduciary duty towards unit holders, which includes the duty to act in the best interests of the unit holders, and duty to exercise all reasonable care.With respect to the investment funds, Fund Manager›s responsibilities shall include:

4.2 Funds Management

4.2.1 Eligibility Requirements:The Fund Manager must be a person authorized to carry out management activities.

4.2.2 Fund Management and Fund Manager Duties: a)

b)

c) 1) 2) 3) 4)

d)

e)

f)

g)

h)

The Fund Manager shall have the primary responsibility for compliance with these Regulations, whether he discharges his responsibilities and duties directly or assigned a third party to do so by virtue of these Regulations and Authorized Persons Regulations. The Fund Manager shall be responsible towards unitholders for losses incurred by the investment fund due to fraud, negligence, misconduct or willful default of Fund Manager.The Fund Manager must develop policies and procedures that detect risks effecting the fund›s investments and ensure treatment of these risks as soon as possible. These policies and procedures must include conducting risks assessment, at least, once a year. Unless the Authority determines otherwise, the Fund Manager may not limit the eligibility of the investment in the fund to nationals of any state or group of states or in a particular fund. This clause does not prevent the Fund Manager from rejecting investment from any person or entity that is deemed unqualified for such investment by any other relevant law. The Fund Manager must comply with the provisions of Annex (11) of these Regulations when applying for an approval from or notifying the Authority requests.The Fund Manager must implement a compliance monitoring program for every fund under its management. The Fund Manager must provide the Authority with the results of the implementation of the program upon its request.

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Fund management.Fund operations, including administrative services to the fund.Offering of fund units.Ensuring the accuracy of the terms and conditions of the investment fund, (the information memorandum in respect to the public funds), and verify that the terms and conditions are complete, clear, accurate, and not misleading.

4.4 Investment Decisions

If a fund manager is removed pursuant to Article (20) of these Regulations, it shall cease to make any investment decisions in relation to the relevant fund as soon as the replacement fund manager is appointed or at any earlier time determined by the Authority. (Article 21 of the Investment Funds Regulations).

4.5 Public Funds:

4.5.1 Application to the Authority for the Establishment of, and Offering of Units in, a Public Fund: Any person seeking to establish, and offer units in, a public find must submit an application to the Authority for approval in accordance with the form specified in Annex 4 of these Regulations. The Applicant must be an authorized person that is authorized to carry out the activity of management. a)

b)

4.5.2 Contractual Form Structure of a Public Fund: a)

The applicant must notify the Authority immediately of any change in the documentation and information provided to the Authority.The applicant must pay the fees set by the Authority for registration. (Article 30 of Investment Funds Regulations).

A public fund shall be established by the signing of the terms and conditions of the relevant fund between the first potential unitholders and the fund manager.

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4.3 Register of Unitholders:

a)

b)

c) 1) 2)

3) 4) 5) 6)

7) d)

e)

The Fund Manager must establish a register of unitholders and must maintain it in the Kingdom. The register shall be conclusive evidence as to the persons entitled to units entered on the register. The Fund Manager must maintain at least the following information in the register:

The register of unitholders must be made available for inspection by the Authority at its request. An extract of the register of unitholders must be provided by the Fund Manager to any unitholder free of charge (at no coast) upon request (such extract must to show all the information that is relevant to the requesting unitholder only).The Fund Manager must update the register of unitholders immediately to reflect changes to information referred to in Paragraph (c) of this Article. (Article 12 of Investment Funds Regulations).

The name and address of each unitholder;The national identification number, residence permit number (Iqama), passport number or commercial registration number of the unitholder when applicable, or any other identification as determined by the Authority;The nationality of the unitholder; The date on which the unitholder was registered in the register;Details of all transactions in relation to units conducted by each unitholder;The running balance of the number of units (including fractions of a unit) held by each unitholder.Any restriction or right attached to units owned by the unitholder.

b)

c)

4.5.3 Areas of Investments

The terms and conditions shall contain the information required by Annex 1 of these Regulations and the relevant provisions of these Regulations. The contractual relationship between the potential unitholders and the fund manager is established by signing the terms and conditions of the relevant fund.A unitholder who has signed terms and conditions of the relevant fund shall be deemed to be a customer of the fund manager for the purposes of the Authorized Persons Regulations. (Article 32 of Investment Funds Regulations)

a)

b)

1) 2)

3)

4) 5) c)

d)

e)

f)

g h) i)

The assets and money of a public fund must be invested in investments in accordance with these Regulations, other applicable laws and regulations, and the terms and conditions and the information memorandum. The Fund Manager must invest the assets and money of a public fund, in the following types of investments only:

The fund manager must not invest the money and assets of a public fund in securities issued by the fund manager or its affiliates unless this is permitted by the terms and conditions of the relevant public fund. The subscription monies received from a unitholder must not be placed on deposit, which is not invested with an affiliate of the fund manager other than on terms and conditions equivalent to at least the terms entered into by persons dealing at arm’s length.Without prejudice to paragraph (b) of this Article, the public fund manager must not lend the fund’s assets or money to any person.The fund manager must not invest the public fund›s money and assets in any type of assets that would result in the fund assuming, guaranteeing, endorsing or otherwise become directly or contingently liable for any obligation or indebtedness of any person.Any investment fund into which the public fund’s assets and money are invested must be in another public fund, which is registered with the Authority, or a public investment fund, which is subject to an equivalent regulatory oversight in a jurisdiction outside KSA recognized by the Authority as having equivalent regulation. The Authority shall have the discretion to assess whether the jurisdiction has regulatory standards and requirements at least equivalent to those of the Authority.The borrowing of a public fund must not exceed (%10) of its net asset value.The public fund’s money and assets must not be used to acquire any asset that involves the assumption of any liability, which is unlimited. (Article 40 of Investment Funds Regulations).

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Securities;Money market transactions concluded with a party subject to SAMA supervision or equivalent regulator in a jurisdiction other than the Kingdom;Bank deposits with a local bank or institution regulated by SAMA or equivalent regulator in a jurisdiction other than the Kingdom;Real estate assets; andCommodities.

4.6 Specialized Public Funds

Specialized public funds, which are regulated by the provisions of these regulations, shall include: 1. 2. 3. 4.

Money Market Funds;Feeder Funds;Fund of Funds; andCapital Protected Funds.

4.7 Breach of Investment Limitations

a)

b)

c)

d)

4.8 Reporting to Unitholders

a)

h)

i)

d)

f)

The fund manager must prepare the annual reports that includes (audited financial statement) short-form annual reports and interim reports in accordance with the requirements of Annex 5 of these Regulations and must be provided by the fund manager to unitholders on request and without charge.Annual reports must be made available to the public no later than (70) days from the end of the period to which the report relates in such locations and by such means as specified in the terms and conditions and information memorandum as well as in the fund manager’s website and on the exchange’s website.The interim reports must be prepared and made available to the public within (35) days from the end of the period to which the report relates in such locations and by such means as specified in the terms and conditions, the information memorandum as well as in the fund manager website and on the exchange’s website.A feeder fund or fund of funds must make its fund reports available within (21) days after the release of the fund reports of the fund(s) in which it invests.The fund manager shall make available for inspection by unitholders the current net asset value of the public funds to which it is fund manager free of charge, and all historical net asset value figures at the registered offices of the fund manager.The fund manager must provide each unitholder with details of the net asset value of the

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any of the investment limitations referred to in these Regulations or other relevant regulations or in the public fund’s terms and conditions, or the information memorandum are breached due to an act of the fund manager or the fund sub-manager, the fund manager must notify the Authority in writing immediately and must take, within five (5) days of such breach, the necessary steps to rectify the breach, and the Authority may change this period at its discretion.If any of the investment limitations referred to in these Regulations or in the public fund’s terms and conditions are breached due to a change of circumstance that is beyond the control of the fund manager, fund sub-manager and the breach has not been rectified within (5) days, the fund manager must notify the Authority of such event in writing, indicating the action and period of time required to rectify the matter and the Authority may in its absolute discretion vary the time limit for rectification of such breach.The fund manager shall report all breaches of the investment limitations referred to in paragraph (a) and paragraph (b) of this Article to the compliance officer and/or compliance committee and to the fund board. The compliance officer and/or compliance committee shall maintain a permanent record of the breaches and document the action taken and period of time required to rectify any such breach.The fund manager shall include in the annual report all breaches of the investment limitations referred to in paragraph (a) and paragraph (b) of this Article. (Article 52 of Investment Funds Regulations).

In addition to these specialized public funds, applications may be made to the Authority for the Authority to consider other types of specialized investment funds. The Authority on a case-by-case basis will consider each such application.

g)

h)

1)

2)

3) 4)

5)

6) 7)

4.10 Announcements of Real Estate Investment Traded Funds

1. Announcements of Replacement Custodian Appointment by the Fund Manager: a. - - b.“(Fund Manager Name) Announcement on appointment of (Replacement Custodian Name) as custodian of (Fund Name)” c.Fund Manager Name) announce appointment of (Replacement Custodian) as custodian of (Fund Name) starting from: (day), on (…/…/…AH) corresponding to (…/…/…AD).

units owned by it and the record of transactions in fund units made by it within (15) days. of each transaction in units of the public fund by the relevant unitholder.The fund manager must send to the unitholder (including former unitholder during the year that statement was prepared) an annual statement summarizing their transactions in units in the public fund during the course of a financial year within (30) days of the end of the financial year, this statement must include the outline of service fees, expenses, and charges discounted from the unitholder, and specified in the fund’s terms and conditions and information memorandum, in addition to details of all the violations of investments limitations described in these Regulations, the terms and condition, or the information memorandum.The fund manager must, at the end of each quarter, disclose information about the public fund on its website and on the exchange’s website or by any other means specified by the Authority. The information must include, at least, the followings at least:

List of issuers which shares constitute the largest ten investments in the fund portfolio their percentages as it is in the first day of the quarter.The percentage of total fees and charges of the concerned quarter to the average of the net assets value of the fund.The amount and percentage of profits distributed in the quarter in question if any.The fund’s manager investments amount and percentage to the net assets value as it is at the end of the concerned quarter.The amount and percentage of the concerned quarter’s dealing expenses to the public fund’s average net assets value.Standards and index to measures the risks.Fund’s performance standards and index. (Article 71 of Investment Funds Regulations).

4.9 Securities Advertisements and Promotional Materials

Distributors may not advertise or communicate securities advertisements and promotional materials in respect of a foreign fund unless the following conditions are fulfilled: 1)

2)

The securities advertisement is sent solely to persons to whom a private placement of a foreign fund may lawfully be made in accordance with this Part;The securities advertisement is to satisfy the relevant requirements of the Securities Business Regulations and the Authorized Persons Regulations. (Article 94 of Investment Funds Regulations).

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2. Announcement of Public Fund Dividends: a. - - b,“(Fund Manager Name) Announcement on dividends to unitholders of (Fund Name)” c.“(Fund Manager Name) announces dividends of (cash profits/ investment units) to unitholders of (Fund Name) for profit entitlement period as follows: 1. 2. 3. 4.

5.

6. The Fund Manager also would like to remind Unitholders to update their bank account information in order to ensure that their profits are deposited directly in their accounts. 3. Announcement of Fund Expiry and Liquidation Period: a. - - b.“(Fund Manager Name) announcement on fund expiry and liquidation period” 4) c.(Fund Manager Name) announces expiry of (Fund Name) on (Fund Expiry Date). The Fund shall be liquidated and investment amounts shall be distributed to unitholders within (a week/month-to distribute investment amounts to unitholders) starting from fund expiry date. 4. Announcement of Change to Fund’s Board Membership: a. - - b. (Fund Manager Name) Announcement on a change to (Fund Name) Board membership. c.(Fund Manager Name) announces a change to (Fund Name) Board membership due to (Resignation/ Dismissal/Appointment/Death) of Board Member (Member Name) (Membership Status: Independent/ Not Independent) as of (…/…/…AH) corresponding to (…/…/…AD), such that Fund’s Board members shall be, following the change, as follows: 1) 2) 3)5. Announcement of Call to Attend Fund Unitholders Meeting a. - - b.

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

Distributed profits total SAR (……).Dividends will be based on ................ (Number of units) existing units.The distributed profit is SAR …… per unit, and its percentage of unit’s initial price is ……% Dividends percentage is …% of the net asset value starting from (day), (…/…/…AH) Corresponding to (…/…/…AD).Unitholders’ eligibility of dividends shall be based on Register of Unitholders by the end of (day) (…/…/…AH) corresponding to (…/…/…AD). Dividends shall be paid within … days.

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

(Member Name) (Membership Status: Independent/ Not Independent)(Member Name) (Membership Status: Independent/ Not Independent)(Member Name) (Membership Status: Independent/ Not Independent)

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

(Fund Manager Name) announcement on call to attend (Fund Name) unitholders meeting. c.(Fund Manager Name) invites (Fund Name) unitholders to attend unitholders’ meeting that will be held at (Meeting Place) at (Meeting Time) on (…/…/…AH) corresponding to (…/…/…AD), to discuss the following agenda: (Proposed Decisions).

(5.2) Announcement of Call to Attend Fund Unitholders’ Second Meeting due to Failure to Fulfill First Meeting Quorum.

a. - - b.(Fund Manager Name) Announcement on call to attend (Fund Name) unitholders’ Second Meeting. c(The fund manager name) invites (the Fund name) unitholders to attend the second meeting of unitholders that will be held at (the place of the meeting) at (meeting time) on (…/…/…H) corresponding to (…/…/…AD), to discuss the following agenda: (Proposed decisions).

6. Announcement of Unitholders Meeting Outcomes: a. - - b.(Fund Manager Name) announcement on outcomes of (Fund Name) Unitholders Meeting. c.(Fund Manager Name) announces outcomes of (Fund Name) unitholders’ meeting held on (…/…/…AH) corresponding to (…/…/…AD), as follows: (Meeting’s Outcomes are mentioned)7. Announcement of Non-Convening of Unitholders Meeting: a. - - b. (Fund Manager Name) announcement on non-convening of (Fund Name) unitholders meeting. c.(Fund Manager Name) announces that (Fund Name) unitholders’ meeting scheduled to be held on (…/…/…AH) corresponding to (…/…/…AD), will not be held due to (Reasons for non-convening of meeting shall be mentioned).8. Announcement of Interim Financial Reports Accessible by the Public: a. - - b.(Fund Manager Name) announces that (Fund Name) interim financial report is accessible by the public for the period ended on …/…/…. c.

Detailed Announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

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(Fund Manager Name) announces (Fund Name) interim financial report is accessible. Below is a summary of interim financial results for the period ended on …/…/…: - - - - - -A link must be placed on the Exchange’s website and Fund Manager›s website referring to interim financial statements.9. Announcement of Annual Financial Reports Accessible By the Public: a. - - b.(Fund Manager Name) announces that (Fund Name) annual financial report is accessible by the public for the year ended on …/…/…. c.(Fund Manager Name) announces (Fund Name) annual financial report is accessible. Below is a summary of annual financial results for the fiscal year ended on …/…/…: - - - - - -A link must be placed on the Exchange’s website and Fund Manager›s Website referring to interim financial statements.10. Announcement of Specific Events: a. - - b.Fund Manager Name) announcement on occurrence of specified events in relation to (Fund Name). c. 1) 2)11. Announcement of Substantial Evolution: a. - - b.(Fund Manager Name) announcement on (Fund Name) substantial evolution. c 1) 2)12. Announcement of Updating Fund’s Terms & Conditions: a. -

Net assets at the end of the period (…) (currency).Total expenses and fees for the period (…) (currency).Net Income/(Loss) for the period (…) (currency).Number of existing units at the end of the period (…) units. Net Asset Value (…) (currency).Total returns for the period (%).

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed Announcement:

Net assets at the end of the period (…) (currency).Total expenses and fees for the year/ period (…) (currency).Net Income/(Loss) for the year/ period (…) (currency).Number of existing units at the end of the year/ period (…) units. Net Asset Value (…) (currency).Total returns for the period (%).

Announcement’s website:Fund Manager’s website The Exchange’s websiteAnnouncement title shall be as follows:

The detailed announcement must include the following items: Event Description Event Consequences

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows.

The detailed announcement must include the following items: Event Description Event Consequences

Announcement’s website:Fund Manager’s website

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- b.(Fund Manager Name) announcement on updating (Fund Name) terms & conditions. c.(Fund Manager Name) announces updating (Fund Name) terms & conditions starting from (…/…/…AH) corresponding to (…/…/…AD). Updated Terms and Conditions can be accessible at the following link: (Insert Terms & Conditions Link.)13. Announcement on Details of Fundamental Changes to Fund’s Terms & Conditions: a. - - b.(Fund Manager Name) Announcement on details of fundamental changes to (Fund Name) terms & conditions. c.(Fund Manager Name) announces fundamental changes to (Fund Name) terms & conditions, on condition that the change shall be come into effect on (…/…/…AH) corresponding to (…/…/…AD).Details of fundamental changes are (………).14. Corrective Announcement: a. - - b.(Fund Manager Name) Corrective Announcement on (Announcement Subject). a. 1) 2) 2) 4) d.In order to rectify (Fund Manager Name) announcement published on (…/…/…AD), (Fund Manager) would like to clarify (Correction Details).15. Follow up Announcement: a. - - b.(Fund Manager Name) Follow up Announcement on (Announcement Subject). a. 1) 2) 3) d.Further to (Fund Manager Name) announcement published dated (…/…/…AD); (Fund Manager) would like to clarify (Correction Details).

The Exchange’s websiteAnnouncement title shall be as follows:

Detailed announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s websiteAnnouncement title shall be as follows:

Detailed announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s website (as applicable)Announcement title shall be as follows:

The detailed announcement must include the following items: Previous announcement date on Tadawul’s and Fund Manager’s websites (as applicable). Misstatement in previous announcement Error correction Error Consequences (if any).Detailed announcement:

Announcement’s website:Fund Manager’s websiteThe Exchange’s website Announcement title shall be as follows:

The detailed announcement must include the following items: Previous announcement date on The Exchange and Fund Manager’s website (as applicable). Occurred Change. Change Consequences (if any). Announcement Form:

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ChapterFour

Revision Questions:

1.

2.

3.

Mention Fund Manager’s Duties. Page 44

What Do Specialized Public Funds Include? Page 46

What Should Reports to Unitholders Include? Page 47

Chapter FourEnd-of-Chapter Questions:

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Chapter Five

Financial Statements and Reports (XBRL)

Using Extensible Business Reporting Language (XBRL).

XBRL; Tool of Financial and Accounting Disclosure

XBRL Concept.

Benefits of Reporting via XBRL.

Financial Report and Optimizing Disclosure Methods.

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This part of curriculum provides about 12 out of 100 questions in the exam

Introduction

This unit provides an overview of method and requirements for financial statements’ disclosure.

5.1 Using Extensible Business Reporting Language (XBRL)

Learning Objective

Be familiar with XBRL

XBRL is an abbreviation for Extensible Business Reporting Language.XBRL idea is to issue standardized reports with comparable contents worldwide. Indeed, global financial data standardization is an existing problem that concern all accounting and auditing professionals. Such services used to have high costs. XBRL became more important after being released, as various entities in stock exchange and financial companies were obliged to report by using XBRL

5.2 XBRL; Tool of Financial and Accounting Disclosure

Individuals and organizations encounter many problems upon exchange of information, such as using different terms to describe the same thing or using the same term to describe other things.XBRL provides the financial community a standardized approach to deal with business reports in general and financial statements and their contents in particular, including preparing and publishing them in several formats, giving access to reliably cut and share some of their data automatically. It does not constitute an accounting standard, but a digital language designed to optimize use of current standards.Kurt Ramen, Chairman of International Accounting Standards Committee and Chairman of XBRL International, also defined XBRL as “an international electronic standard that adopts financial information clauses coding according to IAS, so that they can be sent, stored and processed electronically in any system. It can then be easily reviewed in the standard format used in financial reports presentation”.Paying attention to XBRL has become essential from the perspective of both data- producing company and beneficiaries alike. Perhaps Microsoft has the largest shareholders worldwide. Despite capabilities of Microsoft’s analysts and investors, they still need to: - - - - -Microsoft has to re-enter data manually to make its companies’ information available in a hard copy and published online, so that it renders available to different users, whether government agencies, financial communities, media bodies or the public. This will lead to increasing costs and ensuring safety and quality of that data.XBRL addresses problems in two main ways: 1.

Review large numbers of financial statements.Re-enter financial information into their system.More time.More analysis expenses.Make such information and analysis results accessible to individuals.

It facilitates provision of financial information on companies.

ChapterFive

58

ChapterFive

2.

For example, any computer software cannot request specific information such as (Total Revenues 2015) from a financial statement since it does not know where to look and does not have the ability to know whether the digit indicates dollars, cents or kilograms. Use of XBRL in preparation and publication of financial statements in several formats will increase performance of financial statements and make it available to everyone. Instead of spending ten hours to examine data and several hours to analyze them, a few minutes are now sufficient to obtain data and several hours are sufficient to analyze them; however, several minutes will be sufficient to obtain analysis results by virtue of financial analysis programs.

5.3 XBRL Concept

The evolution of accounting performance must keep up with surrounding technical developments to suit the growing needs of users, in form and content. Users are usually interested in accounting performance outputs represented in financial reports and statements.The interest in developing accounting reports conversion mechanisms used by accountants, auditors and financial analysts using computing technologies with the involvement of software developers aims at proposing common specifications that are used to improve processing and presentation of these reports.Because of the qualitative and geographical expansion of business and widespread use of Internet among large, medium and small business sectors, attention was drawn to exchanging accounting reports electronically in order to increase speed and accuracy of their use and improve their standards.Using XBRL has improved value and timing of business-related information by providing smarter rather than larger data.Data Users: 1) 2) 3) 4)

XBRL is useful in automatic translation of data cards, offering a solution to multilingualism obstacle that hinders development efforts of many financial reporting data users. This leads to sharing data in an electronic format, which will open the door to compare data regardless of where it was originated worldwide. This will give rise to an unprecedented wave of excellent high quality data in global stock exchange, which is supposed to cut invested capital cost.

5.4 Benefits of Reporting via XBRL

Direct access to reports using XBRL technologies via web services realizes the following advantages:

Better Security:The common reporting language has become digital language. The business community, represented by major organizations and stock exchanges worldwide, seeks to move to exchange information via Internet.

Accountants and auditors.Establishments and companies that generate default documents.Analysts who analyze default document data.Organizations and Standard setters, which ensure terms meet requirements of reports under their own supervision.

It facilitates use of such information by individuals, companies, government, analysts and investors. Computer software may utilize this method since they can easily extract every piece of information from XBRL.

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First:Global information, as XBRL became the business standard using Internet services. Software worldwide has become able to understand and analyze XBRL report information.

Second: XBRL became a critical tool for re-engineering reporting processes at companies and organizations. Moving to this tool aims at helping in a faster, more accurate and controllable manner; thus obtaining more reliable information to promote global trade.

Third: XBRL has flexibility of text reports that contain images viewable in various ways. Information is not locked, but can be moved freely and independently according to consumer’s demand, in addition to the potentiality to be analyzed to include specific and non-financial measures.Fourth: XBRL data is invested within analytical and commercial programs. Companies can therefore share their information with each other and related parties instantly, thereby improving work effectiveness and accuracy. This in turn will increase understanding of information related to a company, and will therefore be reflected on capital exchange analyses and reports.

Better Technology:The business world has never been under pressure at any time than nowadays to communicate information more rapidly and accurately among managers, clients, business partners, creditors, investors, regulators, etc. Speed and ease of access to information has become the basis for decision makers to use such information. XBRL is the fastest path to improve access to and use of information for consumption and production through direct reports using Web services.

Better Data: XBRL security standards and online information transfer render XBRL applicable in information collection and support and enabling businessmen’ direct communication, as well as improving methods of data exchange at institutions, companies and concerned authority. Therefore, it: 1. 2. 3.Better Business Environment:XBRL has made a significant difference in quality of decision and optimizing competitiveness due to diversity, speed, accuracy and power in information collection and analysis, thus strengthening management decision-making. Furthermore, XBRL helped re-use information in various forms, which in turn enhanced its benefits in decision-making process in several ways: 1. 2. 3.

Facilitates financial data exchange.Is immediately extracted.Has data that are more accurate since being obtained from the source directly.

Quick circulation and instant conveyance of events and decisions to managers.Increasing reliability of information. Decreasing costs and increasing efficiency of reporting.

ChapterFive

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ChapterFive

5.5 Financial Report and Optimizing Disclosure Methods

Using modern technologies supports development of accounting and financial disclosure methods due to improvement of information’s quality and transparency, ensuring its reliability and securing its contents all the way to stock markets. There have been several methods of presenting financial statements in different file formats (e.g. PDF and XSL, etc.), which are published on websites in HTML. However, traditional financial report in PDF is hard to own or edit its data in an automated manner, and what makes it worse, a lot of important information in financial statements’ notes may be hidden.Conversely, Excel financial reports has more flexibility in terms of processing and graphical representation, editing as well as conducting multiple mathematical operations, however, it does not provide sufficient and globally required capabilities with respect to display, representation and analysis.

XBRL-based financial report has greater flexibility necessary for all of its beneficiaries, including: 1.

2.

3.

4.

6. 7.

8.

Accountants: Those who closely examine, collect and summarize internal data for use in financial reports, which increases their competency and accuracy in preparing financial reports and statements to be published on website and shared internally.Auditors: Those who review financial records, by focusing on information analysis, reducing data errors for faster processing and easier access.Executive Directors: Those who can use XBRL as a transparent and supervisory method to deliver what they want to provide directly through analytical tools for investors and analysts in the form of XML reports. Further, XBRL helps in decreasing potential errors and operating costs, which allow Executive Directors to focus on value added to data.Investors: Those who invest more confidently, so they get benefit from capabilities of automated analysis and from receiving information in reusable electronic formats.Financial Advisors: Those who properly conduct analyses and understand financial conditions.Professional Organizations: Entities that can quickly retrieve and analyze reports’ data.Software Developers: Those who develop software compatible with XBRL in terms of export and import, to increase full capability to operate with other financial and analytical applications.Technology Consultants: By offering new opportunities to information technology consultants, including preparing analysis and audit programs, where tasks and responsibilities increase, making auditors and reviewers search for more technologies to improve and support auditing process with analysis. Auditors examine audits and use programs to conclude basic auditing steps on data stored as analytical tools using XBRL. At the same time, such programs will facilitate procedures of documenting such audit reports.

61

Revision Questions:

1.

2.

3.

Mention advantages of reporting via XBRL. Page 59

Talk about use of modern technologies and their role in developing accounting and

financial disclosure methods. Page (101)What Should Reports to Unitholders Include?

Page 60

XBRL have made a big difference in decision quality and enhancement of competitiveness.

Explain. Page 60

Chapter FiveEnd-of-Chapter Questions:

62

Chapter FiveEnd-of-Chapter Questions:

Annexes

Annexes

iFsah Home Page includes the following options: 1. 2. 3. 4. 5 6. 7.

Edit Profile and Change Password Page

View Existing EntriesUsername and Access“Edit Profile” option “Contact us” option, which includes contact information as well as all system usage manuals.HelpEdit display language.Exit

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Data is uploaded through Data Upload Menu and then entries will be uploaded, using PDF and XBRL formats.

Entry Screen (iFile)

67

After clicking “Login”, enter Username and Password.

\

All login data should be entered and then click on send “arrow” to open all menus for entry. )

Other companies-related statements are available. You can also find user guide through “Statements Options” menu.

The System also provides banks and insurance companies related statements.

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Questions were developed to give examiners an overview of test questions.However, kindly be aware that these are not actual test questions approved by iFsah.

MCQ

Chapter One Questions

Saudi Stock ExchangeChoose the correct answer from the given options

1. (a) (b) (c) (d)

2. (a)

(b) (c) (d)

3. (a) (b)

(c) (d)

Capital markets are divided into:Spot and future market. Primary and secondary market.Regulate and monitor activities of entities supervised by CMA.None of the above.

CMA authorities include:Protect investors from unfair and unsound practices involving fraud, deceit, cheating, manipulation or insider trading.Develop appropriate measures to mitigate risks pertaining to joint-stock companies.Regulate and monitor activities of entities supervised by SAMA.All of the above.

If a person obtains inside information through family, business or contractual relationship, such person:Can directly trade in security related to such information.Can disclose such information to another person with expectation that such person will trade in such security.Is not permitted to directly or indirectly trade in Security related to such information.Can indirectly trade in security related to such information.

72

71

Chapter Two Questions

Electronic Disclosure System (iFsah)Choose the correct answer from the given options

1. (a)

(b)

(c)

(d)

2. (a) (b) (c) (d)

3. (a)

(b) (c)

(d)

Electronic Disclosure System is: A versatile electronic system that allows companies to prepare, enter, store and disclose only financial information required under regulations and instructions posted on Tadawul website.A versatile electronic system that allows companies to prepare, enter, store and disclose only non-financial information required under regulations and instructions posted on Tadawul website.A versatile electronic system that allows companies to prepare, enter, store and disclose financial and non-financial information required under regulations and instructions posted on Tadawul website.None of the above

Tadawul should be informed in case of::Liaison officer’s appointment.Liaison officer’s replacement. Liaison officer’s resignation.All of the above.

Data Acceptance and Rejection Process on iFsah:An e-mail from data entry clerk followed by an e-mail from company supervisor then an e-mail from Tadawul management officer indicates input rejection or acceptance.An e-mail from data entry clerk to Tadawul management officer indicates input process.An e-mail from company supervisor to Tadawul management officer indicates input process.An e-mail from company supervisor followed by an e-mail from data entry clerk then an e-mail from Tadawul management officer indicates input process.

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Chapter Three Questions

Listed Companies Disclosure Laws and RegulationsChoose the correct answer from the given options

1.

(a)

(b)

(c)

(d)

(e)

2. (a) (b) (c) (d)

CMA may at any time, as deemed appropriate, suspend trading of securities or cancel its listing, in any of the following circumstances (choose three):When issuer does not disclose its periodic financial information within the specified period pursuant to relevant Implementing Regulations.When auditor›s report on issuer’s financial statements does not include an adverse opinion or a disclaimer of opinion.If trading of foreign issuer’s securities has been suspended in another market, in case of cross-listed securities, until such suspension is lifted in such market.If liquidity requirements are satisfied after lapse of period determined by the Exchange to issuer to remedy situation, unless CMA agrees otherwise.When Issuer’s EGM makes a resolution to reduce its capital for the two trading days following such resolution’s issuance.

Date of Board meeting.Reasons for capital increase.Amount, which the company requests to receive.All of the above.

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Chapter Four Questions

Investment Funds Disclosures Laws and RegulationsChoose the correct answer from the given options

1.

(a) (b) (c)

(d)

(e)

2.

(a) (b) (c) (d)

Public Fund information disclosed by Fund Manager, by the end of each quarter, on its website and the Exchange’s website shall include (choose three): List of issuers and their percentages whose shares constitute the largest ten investments.Risk indicators and standards.Amount and percentage of such Quarter’s handling expenses in relation to Public Fund’s average net assets value.Percentage of total fees and charges of such quarter in relation to average of Fund’s net assets value.Market performance indicators and standards.

In case of violating any investment requirements set out in Investment Fund Regulations, Public Fund’s terms and conditions, or information memorandum due to an action committed by Fund Manager, Fund Manager should promptly notify CMA in writing …… days of such violation:37710

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Chapter Five Questions

Financial Statements and Reports (XBRL)Choose the correct answer from the given options

1. (a) (b) (c) (d)

2. (a) (b) (c) (d)

2. (a) (b) (c) (d

XBRL means: Issuing standardized reports with comparable contents worldwide.Issuing reports in a particular language for each country.Issuing reports in different languages.None of the above.

XBRL is considered as:An accounting standard.A digital language designed to improve usage of current standards.An accounting principle.(All of the above.

Data users are:Accountants and auditors.Institutions and companies.Analysts.All of the above.

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Answers

Answers to Questions

123

123

123

123

123

bda

cda

a, c & eda

a, b & cbb

abd

Question Answer

Question Answer

Question Answer

Question Answer

Question Answer

Chapter One

Chapter Two

Chapter Three

Chapter Four

Chapter Five

80

Resources & References

1. Arabic References:

Mukhtar Mohamed Baloul (1408 AH), Securities Investor Guide, University House, Tihama, KSA.

Mahmoud Ibrahim Abdel Salam Turki, (1995 AD) Financial Reports Analysis, King Saud University, Riyadh, KSA.

Sami Hamouda, Banks Current Investment Methods and its Potential Developments. Beirut: Union of Arab Banks, 1998.

Mohammed Sultan Al-Sahli, (2006 AD) Profit Management in Saudi Companies, Management Institute Journal, Riyadh, Issue 37.

Saudi Stock Exchange: Is it free or controlled? Tadawul Magazine, 5th Issue, summer 2003, CMA, KSA.

Riyadh Chamber of Commerce and Industry. (1410 AH) How to Read Financial Statements of an Economic Entity. Research Department, KSA.

Rules on Offer of Securities and Continuing Obligations issued by CMA.

Companies Law issued by MOCI. Capital Market Law issued by CMA.

Listing Rules approved by CMA’s Board Resolution.

Instructions for Investment Funds Announcements issued by CMA BOD.

Corporate Governance Regulations issued by CMA BOD.

Procedures & Instructions Related to Stock-Market Listed Companies with Accumulated Losses up to or more than %20 of its Capital issued by CMA BOD.

Investment Funds Regulations issued by CMA BOD.

Websites:

Saudi Capital Market Authority’s website: www.cma.org.sa

Saudi Stock Exchange (Tadawul) website:www.tadawul.com.sa

Saudi Organization for Certified Public Accountants website:www.socpa.org.sa

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3.

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5.

6.

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8.

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.2

.3

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.3

مختــار محمــد بلــول )1408 هـــ(، دليــل المســتثمر فــي الأوراق الماليــة. الــدار الجامعيــة، تهامــة، المملكــة العربيــة الســعودية.

محمــود إبراهيم عبد الســام تركــي،)1995م( تحليــل التقارير المالية. جامعــة الملك ســعود، الريــاض، المملكة العربية الســعودية.

حاضرهــا فــي للبنــوك الاســتثمارية الوســائل ســامي. حمــودة، والإمكانيــات المحتملــة لتطويرهــا. بيــروت: اتحــاد المصــارف العربيــة

.1998

الشــركات فــي الربــح إدارة م( 2006( ســلطان. محمــد الســهلي، .37 العــدد الريــاض، الإدارة، معهــد دوريــة الســعودية،

ســوق الأســهم الســعودية: مخيــرة أم مســيرة؟ مجلــة تــداول، العــدد الخامــس، صيــف 2003 م هيئــة الســوق الماليــة، الســعودية.

الغرفــة التجاريــة الصناعية بالريــاض )1410 هـ( كيف تقــرأ القوائم المالية لمنشــأة اقتصادية. إدارة البحوث، المملكة العربية الســعودية.

ــن ــادرة ع ــتمرة الص ــات المس ــة والالتزام ــرح الأوراق المالي ــد ط قواعــة. ــوق المالي ــة الس ــس هيئ مجل

نظام الشركات الصادر عن وزارة التجارة والصناعة.

نظام السوق المالية الصادر عن هيئة السوق المالية.

قواعد الإدراج الموافق عليها بقرار مجلس هيئة السوق المالية.

ــن ــادرة ع ــتثمارية الص ــق الاس ــات الصنادي ــة بإعان ــات الخاص التعليممجلــس هيئــة الســوق الماليــة.

لائحة حوكمة الشركات الصادرة عن مجلس هيئة السوق المالية.

الإجــراءات والتعليمــات الخاصــة بالشــركات المدرجــة أســهمها فــي الســوق التــي بلغــت خســائرها المتراكمــة 20 % فأكثــر مــن رأســمالها

الصــادرة عــن مجلــس هيئــة الســوق الماليــة.

لائحة صناديق الاستثمار الصادرة عن مجلس هيئة السوق المالية.

www.cma.org.sa :الموقع الإلكتروني لهيئة السوق المالية السعودية

الموقع الإلكتروني للسوق المالي السعودي )تداول(:www.tadawul.com.sa

الموقع الإلكتروني للهيئة السعودية للمحاسبين القانونيين www.socpa.org.sa

84

Umm Salmah Al Ansari St. Al MutamaratRiyadh 12712, Saudi Arabia

Telephone: +966-11- 466-2688cs@fa.org.sa

Fax: +966-11 - 466-2936 / 466-2966