Capital Market Authority: Reforms that restore confidence in the market

Since the appointment of Mr. Mazen bin Turki Al-Sudairi as Chairman of the Board of the Capital Market Authority last August, I have followed with interest the decisions and regulatory projects issued by the Authority, especially since I discussed in a previous article the conditions of the stock market and the decline in the prices of a number of companies, especially some companies that were offered for subscription at high prices, and then lost a large percentage of their value after listing.

Professor Mazen indicated that the Authority has prepared an executive action plan to launch reforms within a period not exceeding 90 days, which reflects an awareness of the challenges and the need to deal with them with practical steps. These steps gain their importance from the position of the financial market in the national economy, as it is a channel for financing, investment and savings, and trust in it is linked to the clarity of information, the efficiency of systems, and the fairness of dealing between participants, and from here, what It proposes reforms that deserve to be followed up and evaluated, distinguishing between what was issued as a regulatory draft and what has actually become effective. In the IPO file, it is important to stop when the Chairman of the Authority was quoted as saying that a high coverage rate alone is not enough to judge the success of the offering, and that the performance of the stock after listing is considered an important indicator among the evaluation indicators. It was also pointed out that work should be done to redefine the responsibilities of the parties participating in the offering and listing, including It includes advisors, underwriting managers, and issuing companies, and to conduct investigations into a number of previous offerings. This intersects with the project to improve the practices of initial offerings that the Authority put forward to seek opinions, and among the most prominent aspects of it are linking requests to participate in building the order book with the available liquidity and the actual ability to repay, enhancing the responsibility of the underwriter, and raising the quality of financial information and expectations available to investors. As long as the project is still in the opinion poll stage, it is more accurate to view it as a proposed organizational direction for which the views will be studied before adopting its final form.The decline in the price of a share, after listing it alone, means that the offering price was unfair, as prices are affected by the performance of companies, economic conditions, liquidity, and investors’ expectations, but the repetition of the significant decline in some cases justifies a review of evaluation and disclosure methodologies, and clearly defining the responsibilities of professional parties. The purpose of this is not to issue advance judgments, but rather to enhance the quality of offerings, and draw lessons from previous experiences, while announcing the results that can be announced. Within the framework of the regulations. With regard to the participation of individuals, the news indicated the authority’s tendency towards increasing their share in offerings, with the 30% being presented as a basic direction, and the possibility of it varying in large subscriptions. It is important to clarify that this percentage is not a fixed share applied to all offerings; Privatization should take into account the nature and size of each offering, and balance between expanding participation and the efficiency of allocation. As for algorithmic trades, the head of the authority explained, according to the news, that the authority is following them to ensure their compliance with regulations, achieving justice, and that they are not in confrontation with technology. On the other hand, the proposed regulatory project includes supervisory controls, including a proposed ceiling on the ratio of orders to executed transactions, with Excluding securities with very high liquidity, the project is still under review, and it is scheduled to begin work on its final form after its approval as of November 1, 2026. Among the topics that directly touch the investor is the project of earnings discussion meetings, and the Authority proposes that companies listed on the main market hold two meetings.annually; To discuss its results, and to allow investors to view the presentation and the recorded meeting, and if these provisions are adopted, they will support the access of information to shareholders, and give them a better opportunity to understand the companies’ performance and expectations. In the securities lending file, on September 30, the Authority circulated to financial market institutions the necessity of adhering to regulatory requirements, including obtaining the client’s express and written approval before lending his securities, while continuing to monitor compliance. Legal measures will be taken in case of violation. The news also indicated that the Authority is studying additional controls related to short selling, in order to benefit from market tools and preserve the integrity of transactions and the rights of investors. A strong financial market is not measured by the movement of the index alone, but rather by its ability to provide reliable information, apply fair rules, and provide opportunities for various categories of investors. What we hope is that the reforms will continue in a balanced spirit that combines investor protection and encouragement. companies to offer and grow, and enhance the attractiveness of the market locally and internationally. Protecting the investor does not mean guaranteeing him from natural market fluctuations, but rather it means enabling him to make his decision on the basis of clear information, and in a supervisory environment that maintains fair dealings and equal opportunities, and these are basic foundations for building confidence and promoting long-term investment in the Saudi financial market. The question remains: If... The announcement of the new Chairman of the Authority that within 90 days, reforms of the Capital Market Authority will be carried out to restore confidence in the stock market and the Authority, so why did the Authority not take these reform decisions within ten?past years?