The purpose of these Regulations is to regulate authorised persons and registered persons and to specify the procedures and conditions for obtaining a license, as well as the conditions for the maintenance of the license or the registration, to provide for the rules of conduct that authorised persons must comply with when conducting their business, as well as the rules and provisions governing the conduct of business, and to set the systems and controls as well as the provisions relating to client money and assets.

a. Any reference to the “Capital Market Law” in these Regulations shall mean the Capital Market Law issued by Royal Decree No. M/30 dated 2/6/1424H.

b. Expressions and terms in these Regulations have the meaning which they bear in the Capital Market Law and in the Glossary of defined terms used in the Regulations and Rules of the Capital Market Authority, unless the contrary intention appears.

a. An authorised person and a registered person must comply with the Regulations and Rules applicable to them and must provide to the Authority without delay any information, records or documents that the Authority may require for the purpose of administration of the Capital Market Law and its Implementing Regulations.

b. The governing body and employees of an authorised person and a registered person, must comply with any requirement issued by the Authority to appear to explain any matter or to assist in any enquiry relating to the administration of the Capital Market Law and its Implementing Regulations.

a. The Authority may waive a provision of these Regulations in whole or in part as it applies to an applicant or an authorised person either on an application from the applicant or the authorised person or on its own initiative.

b. The Authority will make an announcement of the waiver of any provisions where it believes that:

• 1) the waiver of the provision may be of application to more than one type of authorised persons; and

• 2) the publication of the waiver will not materially prejudice the authorised persons.

This is to achieve the policy of the Authority to promote competition, including retaining a level playing field between authorised persons.

a. The Principles provided for in this Part are a general statement of the fundamental obligations of authorised persons. They are intended to form a universal statement of the standards of conduct expected of authorised persons under these Regulations.

b. An authorised person must comply with the following principles:

• 1) Integrity, by conducting its business with integrity.

•  2) Skill, care and diligence, by conducting its business with due skill, care and diligence.

• 3) Efficiency of management and control, by taking reasonable care to organise its affairs responsibly and effectively, with adequate risk management policies and systems.

• 4) Financial prudence, by maintaining adequate financial resources in accordance with the Rules issued by the Authority.

• 5) Proper market conduct, by observing proper standards of market conduct.

• 6) Protection of Clients’ assets, by arranging for adequate protection of its clients’ assets.

• 7) Co-operation with regulators, including disclosing to the Authority any material event or change in the authorised person’s business operations or organization.

• 8) Communications with clients, by communicating information to them in a way which is clear, fair and not misleading.

• 9) Paying due regard to customers’ interests, by treating them fairly and paying due regard to their interests.

• 10) No conflicts of interest, by managing conflicts of interest fairly, both between itself and its customers and between a customer and another client.

• 11) Customers’ suitability, by taking reasonable care to ensure the suitability of its advice and discretionary managing decisions for any customer to whom it provides those services.

a. For the purposes of these Regulations, an applicant for authorisation means the person that is applying for authorisation to carry on securities business. An applicant for authorisation becomes subject to these Regulations from the date of submission of his application.

b. An application for authorisation may be submitted by the founders or controlling shareholders of an applicant if the applicant is not yet established. The founders or controlling shareholders become subject to the provisions that apply to an applicant from the date of submission of the application.

c. An application for authorisation must be made on the application form prescribed by the Authority and be accompanied by the information and documents required in Annex 3.1.

d. The form and contents of the application and all information and documents filed with it must be as prescribed by the Authority.

e. An applicant must demonstrate to the Authority that:

• 1) it is fit and proper to carry on securities business of the kind and scale for which it seeks authorisation in accordance with the rules prescribed by the Authority;

• 2) it has adequate expertise and resources for the kind of securities business that it proposes to carry on in accordance with the rules prescribed by the Authority;

• 3) it has managerial expertise, financial systems, risk management policies and systems, technological resources, and operational procedures and systems that are sufficient to fulfil its business and regulatory obligations and to conduct the kind of securities business that it proposes to carry on; and

• 4) its directors, officers, employees and agents who will be involved in the applicant’s securities business have the necessary qualifications, skills, experience and integrity to carry on the kind of securities business that it proposes to carry on.

f. In order to engage in dealing, custody and managing business, an applicant must be established in the Kingdom and must be:

• 1) a subsidiary of a local bank;

• 2) a joint stock company;

• 3) a subsidiary of a Saudi joint stock company that is engaged in financial services business; or

• 4) a subsidiary of a foreign financial institution that is licensed under the Banking Control Law issued by Royal Decree No. M/5 dated 22/2/1386H.

• The applicant may be of any legal form established in the Kingdom to apply for a license to conduct arranging or advising.

g. The paid up capital of the applicant must not be less than the following:

• 1) dealing and custody: SR 50 million;

• 2) managing: SR 20 million for managing investment funds and client portfolios; and SR 5 million for managing private non-real-estate investment funds and sophisticated investor portfolios;

• 3) arranging: SR 2 million; and

• 4) advising: SR 400,000

h. An applicant must have its management and head office in the Kingdom.

i. If the applicant has close links with another person, the Authority must be satisfied with the integrity, regulatory status, business record and financial soundness of any such person, and that such close links will not impair the effective supervision of the applicant, or its operations and compliance with these Regulations.

j. The applicant for authorisation must pay such fees as may be prescribed by the Authority.