DISCLOSURE

(IFSAH)

Disclosing Information t
Securities’ Issuers and Investment
Funds in Saudi Stock Exchange
(Tadawul)

A learning curriculum issued by the Financial

Academy. First Edition – August 2019

This learning curriculum includes 5 chapters

and constitutes the main reference to pass iFsah
Professional Exam.
 In the name of Allah,
the Most Gracious, the Most Merciful
 ‫ح ﻛﺎدﻳﻤﻴﺔ اﻟﻤﺎﻟﻴﺔ ‪1442 ،‬ﻫـ‬
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‫اﻛﺎدﻳﻤﻴﺔ اﻟﻤﺎﻟﻴﺔ‬
‫إﻓﺼﺎح ‪ -‬اﻟﻠﻐﺔ ا„ﻧﺠﻠﻴﺰﻳﺔ‪ / .‬اﻛﺎدﻳﻤﻴﺔ اﻟﻤﺎﻟﻴﺔ ‪ -.‬اﻟﺮﻳﺎض ‪1442 ،‬ﻫـ‬
‫‪..‬ص ؛ ‪..‬ﺳﻢ‬

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‫‪ -‬ﺗﻌﻠﻴﻢ أ‪.‬اﻟﻌﻨﻮان‬ ‫‪ 1-‬اﻻدارة اﻟﻤﺎﻟﻴﺔ‬

‫دﻳﻮي ‪1442/4386 658٫5‬‬

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Welcome to the learning curriculum issued by the Financial Academy. This book is designed
to qualify candidates for Money Exchange and Transfer 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 otherwise 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 Acad-
emy through the phone number: +966114662688 / Fax: +966114662368.

Note that the exam is based on this plan and we advise candidates of Money Exchange and
Transfer 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: +966114662688
Fax: +966114662368
All 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

01
Chapter I: Saudi Stock Exchange
11
Chapter II: Electronic Disclosure System (iFsah)
25
Chapter III: Listed Companies Disclosure Laws and Regulation
42
Chapter IV: Laws and Regulations relating to Investment Funds’ Disclosures
55
Chapter V: Financial Statements and Reports (XBRL)
62
Annexes
67
Multiple Choice Questions
77
Resources & References

Studying this book may take up to 70 hours

Chapter One

Saudi Stock Exchange

1. Historical Overview of Saudi Stock Exchange

2. Capital Market Authority

3. Saudi Stock Exchange

4. Committee for the Resolution of Securities Disputes

5. Manipulation and Insider Trading

This Chapter includes about 6 out of 100 questions in the exam.

 Introduction:
This chapter provides an overview of the objective about the existence of nancial markets
and nancial instruments traded in these markets, as well as some characteristics of effec-
tive 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 under-
stand characteristics, returns pattern and risks of these investments.

Some Important De nitions in Capital Market Law:

Learning Objective
Chapter
One
Be familiar with certain de nitions 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 speci ed:
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.
Affliate: 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 in uence over the actions
and decisions of another person.
Underwriter: a person who buys securities from the issuer or an af liate 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 af liate 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, un-
derwrite 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.
Internal Regulations: the regulations issued by the Authority in relation to the Authority’s admin-
istrative and nancial affairs and its personnel and staff affairs.

2
For the purposes of this Law the term “Securities” shall mean:

A. Convertible and tradable shares of companies;

B. Tradable debt instruments issued by companies, the government, public institutions or public
organizations;
C. Investment units issued by investment funds;
D. Anyinstrumentsrepresentingpro tparticipationrights,anyrightsinthedistributionof
assets; or either or the foregoing;
E. 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 instru-
ments from the de nition 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 Secu- Chapter
rities, based on the requirements of the safety of the market and the protection of investors. One
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 con-
sidered 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.

1.1 Historical Overview of Saudi Stock Exchange

The Saudi Stock Exchange unof cially started in Saudi Arabia in the early fties 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 nancial,
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 direct-
ly report to the President of the Council of Ministers. It has a legal personality and nancial and
administrative autonomy. It is vested with all authorities as may be necessary to discharge its re-
sponsibilities 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.

1.2.1 CMA Functions

Learning Objective:

Be familiar with CMA authorities

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 con dence 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.
3
 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, manip-
Chapter
ulation and inside information trading.
One • Maintain fairness, ef ciency 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 nancial services to compete internationally. Consistent with its mission to produce top
quality and highly ef cient securities exchange market products and services, the exchange consti-
tutes to be an added advantage for all bene ciaries 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 suf cient information.

1.3.1 The Exchange Objectives:

Learning Objective:

Be familiar with the Exchange objectives

The objectives of the Exchange include the following:

1. Ensuring fair, ef cient and transparent listing requirements, trading rules and technical
mechanisms and information for Securities listed on the Exchange;
2. Providing sound and rapid settlement and clearance rules and procedures through its
Securities Depositary Center;
3. Establishing and enforcing professional standards for brokers and their agents; and
4. Ensuringthe nancialstrengthandsoundnessofbrokersthroughtheperiodicreviewof
their compliance with capital adequacy requirements, and setting such arrangements to
protect the funds and Securities in the custody of brokerage companies.

4
1.3.2 Exchange Role
Learning Objective:

Be familiar with Exchange’s Regulatory Framework and Mechanism

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

Indirect Flow of Funds

Direct Flow of Funds

5
 Direct Flow of Funds
Investment can simply be de ned as the existing obligation to provide funds or any other resourc-
es for investment together with the expectation of future nancial gains in return for the invested
funds. Investment can be in the form of nancial 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 nancial 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 ex-
change nancial assets and real assets.

1.3.3 Exchange Regulatory Framework

Chapter
Learning Objective:
One

Be familiar with Exchange’s Regulatory Framework and Mechanism

The nancial 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 “broker-
age 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 vol-
umes and speci c information about listed companies.

1.4 Committee for the Resolution of Securities Disputes

Learning Objective:

Be familiar with duties and jurisdiction of the Committee

A. The Authority established a committee known as “Committee for the Resolution of Secu-
rities 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.
B. 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
6
 damages and request to revert to the original status or issue another decision as approiate and
that would guarantee the rights of the aggrieved.
C. Evidence in Securities cases shall be admissible in all forms including electronic or computer
data, telephone recordings, facsimile messages and electronic mail.

1.5 Manipulation and Insider Trading

A. 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 in-
ducing 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
B. The Authority shall set out rules determining the acts and practices, which shall constitute Chapter
violations of paragraph (A) of this Article. These rules shall specify the acts and practices ex- One
cluded 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, de
ne 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.
C. 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. To perform any act or practice aiming at creating a false or misleading impression of an ex-
isting 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. Undertaking transactions in Securities, which do not involve a true transfer of owner-
ship thereof.
b. Entering an order or orders for the purchase of a particular Security with prior knowl-
edge 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.
c. 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.
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 creating
actual 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.

In addition;
A. 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.

7
 B. No person may purchase or sell a Security based on information obtained from an in-
sider while knowing that such person, by disclosing such insider information related to
the Security, has violated paragraph (A) of this Article.
C. The Authority has the power to establish the rules for specifying and de ning 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.

Chapter
One

8
 Chapter one
End - of - Chapter Questions

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 Two
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
• De nition 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 Of cer)
• 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.
 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 nancial and non- nancial information, so that investor is suf ciently 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 con dent while running their business with the
required level of responsibility, credibility, ef ciency.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 infor-
mation, announcements and nancial statements.

Chapter
Two
2.1 Disclosure and Transparency:
Learning Objective:

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

Disclosure:
Disclosure is de ned as revealing of ( nancial and non- nancial) information relevant to all interest-
ed and concerned parties in a company. Such disclosure may take place periodically or immediate-
ly at the time of information, so that information is made available to everyone at the same time
and no one has bene ted before others.
Transparency:
Transparency is de ned as full disclosure of true administrative and nancial status of any entity.
Transparency requires that published material data, reports or events re ect 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. Transparency shall take place at the appropriate time, as delayed transparency is usually
worthless.
2. Transparency shall be made available to all parties at the same time.
3. Transparency shall be clear and unambiguous.
“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 nancial data relating to
company›s activities and decision-making processes.

12
2.1.1 Importance of Disclosure and Transparency
Learning Objective:

Be familiar with importance of disclosure and transparency of

corporate information

Disclosure and transparency have a major importance due to the following reasons:
• Increase reliable information delivered in time to decision makers inside and outside a
company for timely decision-making that directly affect growth and pro tability.
• Disclosed information affects users of nancial statements and decision makers – sharehold-
ers, 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. Chapter
• Disclosure and transparency together with proper audit help to reduce possibility of fraud Two

and corruption.Therefore, such factors allow companies to compete with best offers and
differentiate from other companies not exercising good governance.

2.1.2 Development of Disclosure and Transparency in the Exchange

Learning Objective:

Historical Overview of disclosure in the Exchange

Arab Automotive Company was the rst 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. Sev-
eral 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 contin-
ued 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 con dence through independent supervising
authority managing the market and increasing disclosure and transparency.
13
 Therefore, Capital Market Law, by virtue of royal directives, was issued to de ne role and mission
of new supervisory, regulatory and operational institutions in Capital Market, and to separate su-
pervisory 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 Market
Saudi Stock Exchange (Tadawul): It mainly carries out operations of the Exchange.
Committee for Resolution of Securities Disputes (CRSD): a committee specialized in set-
tling 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 nancial 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
Chapter
(Tadawul). This was in accordance with Article 20 of the Capital Market Law establishing Tadawul
Two 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 de
ned in the Capital Market Law (CML) issued by Royal Decree Number (M/30), dated on June 2003
,16.The Exchange is also the of cial 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 af liate 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 Minis-
ters through nomination of CMA’s Board Chairman, where a Chairperson and a Vice Chairperson
are selected among them. Membership shall be as follows:
1. Ministry of Finance Representative
2. Ministry of Commerce and Investment Representative
3. SAMA Representative
4. Four Members Representing Licensed Brokerage Firms.
5. Two Members Representing Joint-Stock Companies Listed on the Exchange.

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
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 con dential
14
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 develop-
ments 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 signi cant 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). 1.

2.3 Obligation to Disclose Material Developments Chapter

Two
(a) An issuer must disclose to the Authority and the public without delay any material devel-
opments in its sphere of activity which are not public knowledge, and which may affect the
assets and liabilities or nancial position or the general course of business of the issuer or
its subsidiaries and which may:
1. Reasonably lead to movements in the price of the issuer›s listed securities
2. Signi cantly affect an issuer’s ability to meet its commitments in respect of listed debt
instruments.
In determining whether a development falls within the scope of thisArticle,an issuer must assess
whether a prudent investor would be likely to consider information about the development in
making his investment decisions.
(b) TheissuermustimmediatelyandwithoutdelaydisclosetotheAuthorityandthepublic any of the
following developments (as referred to in (a) above):
1. 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 nancial
statements or audited annual nancial statements, whichever is later;
2. 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 nancial statements
or audited annual nancial statements, whichever is later;
3. any losses equal to or greater than %10 of the issuer’s net assets; according to the latest re-
viewed interim nancial statements or audited annual nancial statements, whichever is later;
4. any signi cant change in the issuer’s production environment or activity including (but not
limited to) the availability of resources and the possibility of obtaining them;
5. 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 compo-
sition of the directors, the audit committee or to CEO’s position of the sponsor and the
special purposes entity;
6. 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 reviewed
interim nancial statements or audited annual nancial statements, whichever
is later;
7. 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;
15
 8. the increase or decrease in the net assets of the issuer equal to or greater than %10
according to the latest reviewed interim nancial statements or audited annual nancial
statements, whichever is later;
9. the increase or decrease in the net assets of the issuer equal to or greater than %10
according to the latest audited annual nancial statements;
10. 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 nancial statements;
11. 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 nancing there-
fore 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 nancial statements;
12. 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 nancial statements;
(Article (63) of Rules on the Offer of Securities and Continuing Obligations).
Chapter
Two
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 emer-
gence of joint-stock companies and legal legislation that oblige joint-stock companies to publish
nancial statements at a speci c time, as well as to provide scienti c evidence to link issuance of
annual nancial 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 signi cant relationship between trading volume and extent of accounting infor-
mation disclosure.
To prove such hypotheses, nancial reports of companies whose shares are listed on the Exchange
were analyzed. Based on such analysis, the studies came up with several ndings, most important
of which are as follows:
1. In order for an investor to make rational investment decisions, it shall identify major changes
affecting share price indicated on published nancial reports of companies whose shares are
listed on the Exchange.
2. Inappropriate timing of accounting information contained in published nancial reports is
one of signi cant criticisms of such reports, as it limits their reliability as a major source of
information, while investor relies mainly on such reports in making investment decisions.
3. Researchers agree that share prices on the Exchange re ect available information about
such shares, but disagree on type of information and prices responsiveness.

16
2.5 De nition 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 sys-
tem that allows companies to prepare, enter, store and disclose nancial and non- nancial informa-
tion required under regulations and instructions posted on Tadawul website, where standardized
electronic forms are provided to facilitate disclosure process in Arabic and English.
• 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.
• TheExchangeprovidesanumberoftoolstohelpcompaniesprepare,disclose,andsave Chapter
different data and information so as to save time, effort and cost. Two
• iFsah helps all parties concerned with providing accurate information through exibility
of forms and approved tables.

2.6 Objectives and properties of iFsah

2.7 Characteristics of iFsah

• Publish nancial statements.
• Financial statements: support several formats while saving (HTML – Excel - PDF).
• Publish announcements in table form with the capacity of attaching documents.
• PublishandupdatedetailedinformationofBOD,AuditCommitteeandSeniorExecutives.
• 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.
17
 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 State-
ments,and Board Reports),as well as Company“Pro le” that includes“Overview”, “History” and
other company-related information.

Example: Company Proile

Chapter
Two

18
Next page shows all company-related announcements

Chapter
Two

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

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

19
 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 advertise-
ment, 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

Chapter
Two Each company shall authorize a liaison of cer to access iFsah for publishing announcements, dis-
closing company-related information and updating company pro le 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 veri cation,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.

2.10 Types of iFsah Users

Learning Objective:

Be familiar with duties and responsibilities of data discloser

Liaison Of cer is the connection point between company’s management and Tadawul, who adver-
tises 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.

20
2.12 Mandatory Requirements for Companies

Announcement Requirements Others

Chapter
Two

2.13 Common Issues

• Non-compliance with company announcements’ instructions.
• Insuf cient 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.

21
 2.15 Data Acceptance and Rejection Process on iFsah
Learning Objective:

Chapter
Two

22
 Chapter Two
End - of - Chapter Questions

Revision Questions:

1 What are requirements for transparent information? Page 12

2 What is liaison of cer’s role and responsibility? Page 20

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

23
Chapter Three

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.
 Introduction:
Corporate governance is an important issue for companies, both domestically and abroad
in this era, as nancial crises and issues that have previously occurred and faced by the glob-
al economy have made it necessary to adopt Companies’ Oversight and Control Frame-
work with a locally and internationally clear and recognized framework.This led the regu-
latory authorities to take the responsibility for legislating and issuing a general governance
framework according to speci c regulations of companies operating in countries, and in
accordance with standards adopted by corporate management that are in line with the
internal market.
The signi cance of “Corporate Governance” comes from its concern on fostering BOD’s
role in companies, as well as developing and strengthening internal control systems, mon-
itoring work ow, and executing work in a manner that maintain Company’s stability and
protects shareholders and stakeholders.This will certainly be realized only by applying spe-
ci c principles that ensure the Company will follow a clear approach, guarantee stable
nancial assets and grow pro ts.

3.1 Corporate Governance Regulations in KSA

Chapter
Three 3.1.1 Sale and Purchase of Foreign Currencies:
Learning Objective:

Be Familiar with Basic the Concept of Corporate Governance.

Corporate governance are rules to lead and guide the Company that includes mechanisms to reg-
ulate the various relationships between the Board, Executive Directors, shareholders and stake-
holders. 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. Substantial Shareholders of the Company.
2. Board members of the Company or any of its af liates and their relatives.
3. Senior Executives of the Company or any of its af liates and their relatives.
4. Board members and Senior Executives of Substantial Shareholders of the company.
5. Entities, other than companies, owned by a Board member or any Senior Executive or
their relatives.
6. Companies in which a Board member or a Senior Executive or any of their relatives is partner.

26
 7. 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.
8. 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
de nition.
9. Companies in which a Board member or a Senior Executive or any of their relatives has
in uence on their decisions even if only by giving advice or guidance.
10. Anypersonwhoseadviceorguidancein uencethedecisionsoftheCompany,theBoard
and the Senior Executives, including Holding companies or af liates.

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
Chapter
particularly aim at the following: Three
1. Enhancing the role of the Company’s shareholders and facilitating the exercise of their rights.
2. Stating the Roles and responsibilities of the Board and the Executive Management.
3. Enhancing the role of the Board and the committees and developing their capabilities to
enhance the Company’s decision-making mechanisms.
4. Achieving transparency, impartiality and equity in the Exchange, its transactions, and the
business environment and enhancing disclosure therein.
5. Providing effective and balanced tools to deal with con icts of interest.
6. Enhancing accountability and control mechanisms for the Company’s employees.
7. Establishing the general framework for dealing with Stakeholders and protecting their rights.
8. Supporting the effectiveness of the system for overseeing Companies and the toolsthereof.
9. 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.

Shareholder Access to Information

A. The Board shall make available to the shareholder complete, clear, accurate and non- mis
leading 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.
B. 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.
C. 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).

Roles of Extrordinary General Assembly

1. The Extraordinary General Assembly shall have the following Roles:
Amending the Company’s bylaws, except for amendments that are deemed null and void
pursuant to the provisions of Companies Law.

27
 2. Increasing the Company’s share capital in accordance with the situations provided by Com-
panies Law and Its Implementing Regulations.
3. Decreasing the Company’s share capital if it exceeds the Company’s needs or in the event
the Company incurs nancial losses, in accordance with the situations provided by Compa-
nies Law and Its Implementing Regulations.
4. Resolving to form a consensual reserve for the Company as provided for in its bylaws to be
set aside for a speci c purpose, and the disposal thereof.
5. Resolving to maintain or liquidate the Company before the end of the term speci ed in its
bylaws.
6. Approving the Company›s shares buy-back.
7. Issuing preferred shares or approving their buying, or converting ordinary shares into pre-
ferred 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.
8. Issuing debt instruments or nancing deeds convertible into shares, and stating the maximum
number of shares that may be issued against these instruments or deeds.
9. Allocate Shares that are issued upon the capital increase or part of them for the employees
of the Company, and its af liates or some of them, or any of them.
10. Suspending preemptive rights of shareholders in subscribing for the capital increase in ex-
Chapter
Three change 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.

Roles of Ordinary General Assembly

Except 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. Appointing and dismissing Board members.
2. 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.
3. 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.
4. 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.
5. Forming the audit committee pursuant to the provisions of Companies Law and Its Imple-
menting Regulations.
6. Approving the Company›s nancial statement.
7. Approving the Board report.
8. Deciding on the proposals of the Board with respect to the method of distributing the net
profits.
9. Appointing the external auditors of the Company, specifying their remunerations, reappoint-
ing them, replacing them and approving their reports.
10. . Looking into the violations and errors committed by the external auditors of the Compa-
ny 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
28
 their duties, and respond to that as it deems appropriate in this regard.
11. 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.
12. Using the Company’s consensual reserve, if such has not been set aside for a specific pur-
pose, 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
13. Forming other reserves besides the statutory reserve and consensual reserve and disposal
of the same.
14. 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 accor-
dance with Article (129) of Companies Law.
15. 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 transac-
tion. 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)

Shareholders› Assembly
Chapter
a. The Ordinary General assembly shall convene in accordance with the situations and cir- Three
cumstances stated in Companies Law and Its Implementing Regulations and the Company’s
bylaws.
b. The Ordinary General Assembly shall convene at least once per year within the six months
following the end of the Company›s nancial year.
c. 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 Assem-
bly 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.
d. The date, place and agenda of the General Assembly shall be announced at least 21 days pri-
or 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 Compa-
ny›s head of ce is located. The Company may invite the General and Special Shareholders›
Assemblies to convene using methods of contemporary technologies.
e. 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.
f. 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 res-
olutions using methods of contemporary technologies pursuant to the Regulatory Rules and
Procedures issued pursuant to Companies Law related to Listed Joint Stock Companies.
g. 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.
h. The Company shall ensure recording the details of the shareholders who desire to attend at
the Company›s head of ce prior to the speci ed time for convening the assembly, unless the
29
 Company›s bylaw state other means. (Corporate Governance Regulations, Article 13)

Appointment of Board Members

a. The Company’s bylaws shall specify the number of Board members, provided that such num-
ber 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 Compa-
ny’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.
c. A Board member shall not be a member of the Boards of Directors of more than ve listed
joint stock companies at the same time.
d. The Company shall notify the Authority of the names of the Board members and description
of their memberships within ve 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 ve business days from the occurrence of such changes.
(Corporate Governance Regulations, Article 17)

Issues Affecting Independence

a. 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 deci-
Chapter
Three sions that contribute to achieving the interests of the Company.
b. 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 inde-
pendence.
c. By way of example,the following negate the independence requirement for an Independent
Director:
1. If he/she holds ve 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.
2. If he/she is a representative of a legal person that holds ve percent or more of the shares
of the Company or any company within its group.
3. 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. If he/she is a relative of any Senior Executive of the Company, or of any other company
within the Company’s group.
5. 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.
6. 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.
7. If he/she has a direct or indirect interest in the businesses and contracts executed for
the Company’s account.
8. If the member of the Board receives nancial consideration from the Company in addi-
tion 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.
9. If he/she engages in a business where he competes with the Company, or conducting
businesses in any of the company›s activities.
10. If he/she served for more than nine years, consecutive or inconsecutive, as a Board
member of the Company.

30
 d. 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).

Audit Committee Formation

a. An audit committee shall be formed by a resolution of the Company›s Ordinary General As-
sembly, 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 ve, provided that one of its member is specialized in
nance and accounting.
b. The Chairman of Audit Committee shall be an Independent Director.
c. The Company›s General Assembly shall, upon a recommendation of the Board, issue a regu-
lation 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 nomi-
Chapter
nation, the term of their membership, their remunerations, and the mechanism Three
of appointing temporary members in case a seat in the committee becomes vacant.
d. Any person who works or has worked in the Company›s nance 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).

Publishing Nomination Announcement

The Company shall publish the nomination announcement on the websites of the Company and
the Exchange and through any other medium speci ed by the Authority; to invite persons wish-
ing to be nominated to the membership of the Board, provided that the nomination period shall
remain open for at least a month from the date of the announcement. (Corporate Governance
Regulations,Article 68).

Assigning Audit Function

The Company shall assign the function of auditing its annual accounts to an independent and
competent external auditor who possesses the necessary expertise and quali cations to prepare
an objective and independent report to the Board and the shareholders, setting out whether the
Company’s nancial statements clearly and impartially express the nancial position of the Com-
pany and its performance in the signi cant areas. (Corporate Governance Regulations, Article 80).

Appointing External Auditor

The Ordinary General Assembly shall appoint the Company›s external auditor based on a rec-
ommendation from the Board, provided that the following requirements are met:
1. The nomination shall be based on a recommendation from the audit committee.
2. The external auditor shall be authorized by the Competent Authority.
3. The external auditor›s interests shall not con ict with the interests of the Company.
4. The number of nominees shall not be less than two. (Corporate Governance Regulations,
Article 81).

31
 Board’s Report
The Board’s report shall include the Board›s operations during the last scal year and all factors
that affect the company›s businesses; such report shall include the following:
1. Implemented and non-implemented provisions of these Regulations, and justi cations therefor.
2. Names, quali cations, and experience of the Board and committees members and Executive
Management.
3. 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;
4. Composition of the Board and classi cation of its members, as follows: Executive Directors,
Non-Executive Director, or Independent Director;
5. 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.
6. 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.
7. 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.
Chapter
Three 8. Disclose the remuneration of the Board members and Executive Management as stated in
Article (93) of these Regulations.
9. Any punishment, penalty, precautionary procedure or preventive measure imposed on the
Company by the Authority or any other supervisory, regulatory or judiciary authority, de-
scribing the reasons for non-compliance, the imposing authority and the measures, under-
taken to remedy and avoid such noncompliance in the future.
10. Results of the annual review of the effectiveness of the internal control procedures of the
Company and the opinion of the audit committee with respect to the adequacy of the Com-
pany›s internal control system.
11. The Audit Committee’ recommendation on the need for appointing an internal auditor for
the Company, if there is no internal auditor.
12. The Audit Committee’s recommendationcon ictingwithBoardresolutionorthosewhich the
Board disregards relating to appointment, dismissal, assessment or determining the remu-
neration of an external auditor, as well as justi cations for those recommendations and
reasons for disregarding them.
13. Details of the Company›s social contributions, if any.
14. A list of the dates of General Assembly meetings held during the last scal year and the
names of the Board members who attended them.
15. A description of the main scope of business of the company and its af liates. If there
are two or more, a statement showing each activity and how it affects the company
businesses and results shall be attached.
16. A description of the company›s signi cant plans and decisions (including changes to
the structure, expanding the company›s operations or halting them) and the future
expectations.
17. Information on any risks facing the company (operational, nancial or market risks) and
the policy of managing and monitoring these risks.
18. A summary in a form of table or graph showing the company›s assets, liabilities and
results of the last ve scal year or since the incorporation date, whichever is shorter.
19 Geographical analysis of the company›s and its af liates› revenues.
20. Any material differences in the operational results compared to the preceding year›s
results, along with any expectations announced by the company.
32
21. Any inconsistency with the standards approved by the Saudi Organizations for Certi ed
Public Accountant.
22 Name of each af liate 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).

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 de ned

by CMA”

As a part of Capital Market Authority›s (CMA) efforts to promote the capital market in KSA,
boost investors’ con dence, 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 accu-
Chapter
mulated losses up to or more than %50 of its capital in light of Companies Law issued by Royal Three
Decree No. (M/3) dated 1437/01/28 AH, as well as title thereof to become Procedures & In-
structions 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) 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 re ect the total Accumulated Losses, its percent-
age 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 nancial 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 nancial results announcement.
b) Following the public announcement referred to in paragraph (a) of this Article, the Ex-
change shall add a ag 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.
c) Upon receiving an external auditor’s report illustrating its nancial 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 announce-
ment should re ect the remedial steps taken by the company to restore its position includ-
ing attaching the external auditor’s report referred to in this paragraph.
d) The Exchange shall delete the ag referred to in paragraph (b) of this Article following the
company’s announcement of its nancial position remedy as indicated in paragraph (c) of
this Article. (Article 3).

33
 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 %35 or more and less than %50 of
its Share Capital. The announcement should re ect the total Accumulated Losses, its per-
centage 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 nancial 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 nancial results announcement.
b) Following the public announcement referred to in paragraph (a) of this Article, the Exchange
shall add a ag 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 nancial position, the company
c) 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 announce-
ment should re ect the remedial steps taken by the company to restore its positions in-
cluding attaching the external auditor’s report referred to in this paragraph.
d) The Exchange shall delete the ag referred to in paragraph (b) of this Article following the com-
pany’s announcement of its nancial position remedy as indicated in paragraph (c) of this Article.
Chapter
Three e) 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)

Company’s accumulated losses are equal to or more 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 %50 or more of its Share Capital.The
announcement should re ect 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 nancial 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 nancial
results announcement.
b) Following the public announcement referred to in paragraph (a) of this Article, the Exchange
shall add a ag 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.
c) Subject to the provisions of Article (150) of Companies Law, the company shall, after an-
nouncing that its Accumulated Losses reached %50 or more of its Share Capital, announce
the following:-
1. 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 extraordi-
nary general assembly to address theAccumulated Losses.
2. The Board of Directors› recommendation to the extraordinary general assembly re-
garding 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.
3. The date of the last day to complete the process of subscription of the capital increase
to address the Accumulated Losses, where applicable.
d) Upon receiving an external auditor’s report illustrating its nancial 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.
34
 The announcement should re ect the remedial steps taken by the company to restore its
positions including attaching the external auditor’s report referred to in this paragraph.
e) The Exchange shall delete the ag referred to in paragraph (b) of this Article following the
company’s announcement of its nancial position remedy as indicated in paragraph
(d) of this Article.
f) 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).

Delisting
A 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 para-
graph (1) of Article (150) of Companies’ Law. (Article 6).

3.5 Instructions on Announcements of Joint-Stock Companies

Listed in Saudi Stock Exchange
Learning Objective:
Chapter
Three

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 Imple-
menting 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:
- Instru-ctions on companies› Announcements of their nancial results.
- Instructions on companies› Announcements of administrative changes
- Instructions on companies› Announcements of capital change
- Instructions on companies› Announcements of reverse acquisition
- Instructions on companies› Announcements of general assemblies
- Instructions on companies› Announcements of cash pro ts
- Instructions on companies› Announcements of contracts
- Instructions on companies› Announcements of SAMA approval of insurance products
- Instructions on companies› Af rmative and Corrective Announcements
- Instructions on companies› Announcements of signing Memorandums of Understanding
- Instructions on companies› Announcements of projects
- Instructions on companies› Announcements of sale, purchase, mortgage or lease
transactions
- Instructions on companies› Announcements of receiving nance
- Instructions on companies› Announcements of company›s purchase and sale of shares
- Instructions on companies› Announcements of lawsuits
- Instructions on companies› Announcements of previously announced developments
35
 - Instructions 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.

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 Securities

Where 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 conse-
quences of such an action on the price of its listed securities.
Chapter
Three
Means and Formal Requirements of Disclosure
a. All noti cations 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 speci cally designated by the Ex-
change for such purpose.
a. b. Both Arabic and English are the of cial languages used to explain and interpret any and all
noti cations and disclosures. In case of any contradiction between the Arabic version and the
English version, the Arabic version shall prevail.
c. A disclosure to the public must identify clearly the issuer and the parties related to the dis-
closure, and the subject matter, the time and date of the disclosure in accordance with the
Implementing Regulations and the Exchange Rules.
d. 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:
1. The name of the individual who made the disclosure in question.
2. The time and date on which the material information that is the subject of the disclo-
sure was received or obtained by the issuer;and/or
3. The mean in which the material information which is the subject of the disclosure was
received or obtained by the issuer.
e. The content of a disclosure to the public is a matter, which must be determined by the issuer.
f. 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 con rms, 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.
g. Neither the Authority nor the Exchange shall be responsible for the content of such
g. disclosure, its accuracy or its completeness, and expressly disclaim any liability whatsoever
for any loss arising from, or incurred in reliance upon, any part of such disclosure

The Exchange’s power to request provision/disclosure of further information or data

a. The Exchange may request an issuer in writing to provide certain information or data.
b. The issuer must provide the requested information or data pursuant to paragraph (a) of
36
 this Article within the period, format, and means speci ed by the Exchange.
c. Paragraphs (a) and (b) of this Article apply only to information and data required by the Ex-
change in connection with the performance of its functions under these Rules.

Disclosure Timing
An issuer is required to make a disclosure to the public as soon as possible following the occur-
rence 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
- 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

Power to Suspend Trading or Delisting

a. The Exchange will suspend trading of issuer’s securities in any of the following circumstances:
1. When the issuer does not comply with disclosure of its periodic nancial information
Chapter
within the speci ed period pursuant to the relevant Implementing Regulations. Three
2. When the auditor›s report on the nancial statements of the issuer includes an adverse
opinion or a refusal to express opinion until such opinion or disclaimer is removed.
3. As for funds listed in accordance with these Rules, when the auditor›s report on Fund’s
nancial statements includes an adverse opinion or a refusal to express opinion until
such opinion or disclaimer is removed.
4. 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.
5. 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.
6. 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.
7. 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 speci ed by the Exchange.
b. 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.
c. 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 circum-
stances of paragraph (a) of this Article to occur.
d. 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.
e. Where the suspension of securities’ trading continues for six months while the issuer
did not take appropriate actions to resolve suspension issues, the Authority may cancel
issuer›s listed securities.
f. 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 applica-
tion for listing in accordance with these Rules and comply with applicable requirements
under the Rules on the Offer of Securities and Continuing Obligations.

37
 g. 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 Ex-
change Rules.

Power to Suspend Trading or Delisting

The Authority may at any time suspend the trading of securities or cancel their listing as it deems
t, in any of the following circumstances:
1. The Authority considers it necessary for the protection of investors or the maintenance of
an orderly market.
2. 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.
3. The issuer fails to pay on time any fees due to the Authority or the Exchange or any nes
due to the Authority.
4. The Authority considers that the issuer or the issuer’s (business, level of operations or as-
sets) are no longer suitable to warrant the continued listing of its securities on the Exchange.
5. 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.
Chapter
Three 6. In the case of cross-listed securities, the listing of the foreign issuer’s securities has been
cancelled elsewhere.
7. 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 mate-
rial to comply with the Capital Market Law, its Implementing Regulations and the Exchange
Rules.
8. 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.
9. Upon the expiry of term of debt instruments and convertible debt instruments.
10. Upon the announcement of a reverse takeover containing insuf cient information about the
proposed transaction. If the issuer announces suf cient information regarding the Target, and
the Authority is satis ed, following the issuer’s announcement, that there will be suf cient
information available for the public about the proposed transaction of
the reverse takeover, the Authority may decide not to suspend at this stage.
11. Upon the leakage of information of the proposed transaction of the reverse takeover, and
the issuer is unable to assess accurately its nancial position and unable to inform
the Exchange accordingly.

Voluntary Cancellation of listing

a. 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 simul-
taneous noti cation to the Exchange and include in its request the following information:
1. Speci c reasons for the request for the cancellation.
2. A copy of the form of the disclosure described in paragraph (d) or (e) of this Article, as
applicable.
3. 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.

38
 4. 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.
5. The names and contact details of the nancial advisor and legal advisor appointed pur-
suant to the Rules on the Offer of Securities and Continuing Obligations.
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,
b. The Authority may at its discretion accept or reject the request for cancellation.
c. 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.
d. 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.
e. 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 can-
cellation and the nature of the event resulting in the cancelation and the extent to which it
affects the issuer’s activities. Chapter
f. As for funds listed in accordance with these Rules, where a cancellation is made at the Three
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).

39
 Chapter Three
End - of - Chapter Questions

Revision Questions:

1 What does “Corporate Governance” mean? Page 27

2 Mention Some Corporate Governance Objectives. Page 28

3 Illustrate Issues Affecting Independence. Page 31

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 uti-
lize 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 uctuation in market value of components of such a variety.This is expressed by say-
ing 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 in-
vestment in securities.There are investors who have ample nancial 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 va-
riety (funds) of securities and investment funds have been incorporated, allowing them to
purchase a number of shares in such portfolios, commensurate with their available nancial
resources.

Chapter
Four

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.

44
4.2 Compliance Department and Compliance Director:
4.2.1 Eligibility Requirements:
The Fund Manager must be a person authorized to carry out management activities.

4.2.2 Principles of Compliance Department:

a) The Fund Manager must act for the bene t of unitholders in accordance with these Regula-
tions, the Authorized Persons Regulations, the terms and conditions of the investment fund,
and (the information memorandum in respect to the public fund).
b) The fund manager must comply with all principles and duties required under Authorized
Persons Regulations including the duciary 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.
c) With respect to the investment funds, Fund Manager›s responsibilities shall include:
1) Fund management.
2) Fund operations, including administrative services to the fund.
3) Offering of fund units.
4) Ensuring the accuracy of the terms and conditions of the investment fund, (the infor-
mation memorandum in respect to the public funds), and verify that the terms and
conditions are complete, clear, accurate, and not misleading.
d) The Fund Manager shall have the primary responsibility for compliance with these Regula-
tions, 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 Man-
Chapter
ager shall be responsible towards unitholders for losses incurred by the investment fund due Four
to fraud, negligence, misconduct or willful default of Fund Manager.
e) 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. Un-
less 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 unquali ed for such investment by any other relevant law.
g) 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.
h) 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 im-
plementation of the program upon its request.

4.3 Register of Unitholders:

a) The Fund Manager must establish a register of unitholders and must maintain it in the King-
b) dom.
The register shall be conclusive evidence as to the persons entitled to units entered on the
c) register.
The Fund Manager must maintain at least the following information in the register:
1. The name and address of each unitholder;
2. The national identi cation number, residence permit number (Iqama), passport
number or commercial registration number of the unitholder when applicable, or any
other identi cation as determined by the Authority;
3. The nationality of the unitholder;
4. The date on which the unitholder was registered in the register;
45
 5. Details of all transactions in relation to units conducted by each unitholder;
6. The running balance of the number of units (including fractions of a unit) held by each
unitholder.
7. Any restriction or right attached to units owned by the unitholder.
d) 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).
e) TheFundManagermustupdatetheregisterofunitholdersimmediatelytore ectchanges to infor-
mation referred to in Paragraph (c) of this Article. (Article 12 of Investment Funds Regula-
tions).

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 manag-
er is appointed or at any earlier time determined by the Authority. (Article 21 of the Investment
Funds Regulations).

4.5 Public Funds:

Chapter
Four 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 nd must submit an application to the
Authority for approval in accordance with the form speci ed in Annex 4 of these Regulations.The
Applicant must be an authorized person that is authorized to carry out the activity of manage-
ment.TheapplicantmustnotifytheAuthorityimmediatelyofanychangeinthedocumentation and infor-
a) mation provided to the Authority.
The applicant must pay the fees set by the Authority for registration. (Article 30 of Invest-
b) ment Funds Regulations).

4.5.2 Contractual Form Structure of a Public Fund:

a) A public fund shall be established by the signing of the terms and conditions of the relevant
fund between the rst potential unitholders and the fund manager.
The terms and conditions shall contain the information required by Annex 1 of these
Regulations and the relevant provisions of these Regulations.
b) The contractual relationship between the potential unitholders and the fund manager is
established by signing the terms and conditions of the relevant fund.
c) 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)

4.5.3 Areas of Investments

a) 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.
b) The Fund Manager must invest the assets and money of a public fund, in the following types
of investments only:
1. Securities;
2. Money market transactions concluded with a party subject to SAMA supervision or
46
 equivalent regulator in a jurisdiction other than the Kingdom;
3. Bank deposits with a local bank or institution regulated by SAMA or equivalent
regulator in a jurisdiction other than the Kingdom;
4. Real estate assets; and
5. Commodities.Any restriction or right attached to units owned by the unitholder.
c) The fund manager must not invest the money and assets of a public fund in securities issued
by the fund manager or its af liates unless this is permitted by the terms and conditions of
the relevant public fund.
d) The subscription monies received from a unitholder must not be placed on deposit, which is
not invested with an af liate of the fund manager other than on terms and conditions equiv-
alent to at least the terms entered into by persons dealing at arm’s length.
e) Without prejudice to paragraph (b) of this Article, the public fund manager must not lend
the fund’s assets or money to any person.
f) 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 direct-
ly or contingently liable for any obligation or indebtedness of any person.
g) 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 recog-
e) nized by the Authority as having equivalent regulation. The Authority shall have the discre-
tion to assess whether the jurisdiction has regulatory standards and requirements at least
equivalent to those of the Authority.
Chapter
h) The borrowing of a public fund must not exceed (%10) of its net asset value. Four
i) 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).

4.6 Specialized Public Funds

Specialized public funds, which are regulated by the provisions of these regulations, shall include:
1. Money Market Funds;
2. eeder Funds;
3. Fund of Funds; and
4. Capital Protected Funds.
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

4.7 Breach of Investment Limitations

a) If any of the investment limitations referred to in these Regulations or other relevant reg-
ulations 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 ve (5) days of such breach, the
necessary steps to rectify the breach, and the Authority may change this period at its discretion.
b) 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 con-
trol of the fund manager, fund sub-manager and the breach has not been recti ed within (5)
days, the fund manager must notify the Authority of such event in writing, indicating the ac-
tion and period of time required to rectify the matter and the Authority may in its absolute
discretion vary the time limit for recti cation of such breach.
47
 c) 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 of cer and/or compliance
committee and to the fund board.The compliance of cer and/or compliance committee shall
maintain a permanent record of the breaches and document the action taken and pe- riod
of time required to rectify any such breach.
d) The fund manager shall include in the annual report all breaches of the investment limita-
tions referred to in paragraph (a) and paragraph (b) of this Article. (Article 52 of Investment
Funds Regulations).

4.8 Reporting to Unitholders

a) The fund manager must prepare the annual reports that includes (audited nancial state-
ment) 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.
b) 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 speci ed
in the terms and conditions and information memorandum as well as in the fund manager’s
website and on the exchange’s website.
c) 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 speci ed in the terms and conditions, the information memorandum as well as in the fund
Chapter
Four manager website and on the exchange’s website.
d) 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.
e) 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 gures at the registered of ces of the fund manager.
f) The fund manager must provide each unitholder with details of the net asset value of the
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.
g) 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 nancial year within (30) days of the end of the nancial
year, this statement must include the outline of service fees, expenses, and charges discount-
ed from the unitholder, and speci ed in the fund’s terms and conditions and infor- mation
memorandum, in addition to details of all the violations of investments limitations described
in these Regulations, the terms and condition, or the information memorandum.
h) 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 speci ed by the
Authority.The information must include, at least, the followings at least:
1) List of issuers which shares constitute the largest ten investments in the fund portfolio
their percentages as it is in the rst day of the quarter.
2) The percentage of total fees and charges of the concerned quarter to the average of
the net assets value of the fund.
3) The amount and percentage of pro ts distributed in the quarter in question if any.
4) The fund’s manager investments amount and percentage to the net assets value as it is
at the end of the concerned quarter.
5) The amount and percentage of the concerned quarter’s dealing expenses to the public
fund’s average net assets value.
48
 6) Standards and index to measures the risks.
7) 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 mate-
rials in respect of a foreign fund unless the following conditions are ful lled:
1) 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;
2) The securities advertisement is to satisfy the relevant requirements of the Securities Busi-
ness Regulations and the Authorized Persons Regulations. (Article 94 of Investment Funds
Regulations).

4.10 Announcements of Real Estate Investment Traded Funds

1. Announcements of Replacement Custodian Appointment by the Fund Manager:
a. Announcement’s website:
- Fund Manager’s website
- The Exchange’s website
b. Announcement title shall be as follows:
“(Fund Manager Name) Announcement on appointment of (Replacement Custodian Name) as
custodian of (Fund Name)”
Chapter
c) Detailed Announcement: Four
Fund Manager Name) announce appointment of (Replacement Custodian) as custodian of (Fund
Name) starting from: (day), on (.../.../...AH) corresponding to (.../.../...AD).

2. Announcement of Public Fund Dividends:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
“(Fund Manager Name) Announcement on dividends to unitholders of (Fund Name)”
c. Detailed Announcement:
“(Fund Manager Name) announces dividends of (cash pro ts/ investment units) to unitholders of
(Fund Name) for pro t entitlement period as follows:
1. Distributed pro ts total SAR (......).
2. Dividends will be based on ................ (Number of units) existing units.
3. The distributed pro t is SAR ...... per unit, and its percentage of unit’s initial price is ......%
4. Dividends percentage is ...% of the net asset value starting from (day), (.../.../...AH) Cor-
responding to (.../.../...AD).
5. Unitholders’ eligibility of dividends shall be based on Register of Unitholders by the end of
(day) (.../.../...AH) corresponding to (.../.../...AD).
6. Dividends shall be paid within ... days.
The Fund Manager also would like to remind Unitholders to update their bank account informa-
tion in order to ensure that their pro ts are deposited directly in their accounts.

3. Announcement of Fund Expiry and Liquidation Period:

a. Announcement’s website:
b. Announcement title shall be as follows:
“(Fund Manager Name) announcement on fund expiry and liquidation period”
Detailed Announcement: - Fund Manager’s website - The Exchange’s website
49
 (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. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) Announcement on a change to (Fund Name) Board membership.
c. Detailed Announcement:
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 Busi- ness
Regulations and the Authorized Persons Regulations. (Article 94 of Investment Funds Regulations).
(Fund Manager Name) announces a change to (Fund Name) Board membership due to (Resig-
nation/ 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) (Member Name) (Membership Status: Independent/ Not Independent)
2) (Member Name) (Membership Status: Independent/ Not Independent)
3) (Member Name) (Membership Status: Independent/ Not Independent)
Chapter
Four 5. Announcement of Call to Attend Fund Unitholders Meeting
a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announcement on call to attend (Fund Name) unitholders meeting.
c. Detailed Announcement:
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
Ful ll First Meeting Quorum.
a. Announcement’s website: -Fund Manager’s website -The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) Announcement on call to attend (Fund Name) unitholders’ Second Meet-
ing.
c. Detailed Announcement:
(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) corre-
sponding to (.../.../...AD), to discuss the following agenda: (Proposed decisions).

6. Announcement of Unitholders Meeting Outcomes:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announcement on outcomes of (Fund Name) Unitholders Meeting
c. Detailed Announcement:
(Fund Manager Name) announces outcomes of (Fund Name) unitholders’ meeting held on (.../.../...
AH) corresponding to (.../.../...AD), as follows: (Meeting’s Outcomes are mentioned)
50
7. Announcement of Non-Convening of Unitholders Meeting:
a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announcement on non-convening of (Fund Name) unitholders meeting.
c. Detailed Announcement:
(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-con- vening
of meeting shall be mentioned).

8. Announcement of Interim Financial Reports Accessible by the Public:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announces that (Fund Name) interim nancial report is accessible by the
public for the period ended on .../.../....
c. Detailed Announcement:
(Fund Manager Name) announces (Fund Name) interim nancial report is accessible. Below is a
summary of interim nancial results for the period ended on .../.../...:
- Net assets at the end of the period (...) (currency).
- Total expenses and fees for the period (...) (currency).
- Net Income/(Loss) for the period (...) (currency).
Chapter
- Number of existing units at the end of the period (...) units. Four
- Net Asset Value (...) (currency).
- Total returns for the period (%).
A link must be placed on the Exchange’s website and Fund Manager’s website referring to interim
nancial statements.

9. Announcement of Annual Financial Reports Accessible By the Public:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announces that (Fund Name) annual nancial report is accessible by the
public for the year ended on .../.../....
c. Detailed Announcement:
(Fund Manager Name) announces (Fund Name) annual nancial report is accessible. Below is a
summary of annual nancial results for the scal year ended on .../.../...:
- 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 (%).
A link must be placed on the Exchange’s website and Fund Manager’s Website referring to interim
nancial statements.

10. Announcement of Speci c Events:

a. Announcement’s website:
- Fund Manager’s website
- The Exchange’s website
51
 b. Announcement title shall be as follows:
(Fund Manager Name) announcement on occurrence of speci ed events in relation to (Fund
Name).
c. The detailed announcement must include the following items:
1) Event Description
2) Event Consequences.

11. Announcement of Substantial Evolution:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announcement on (Fund Name) substantial evolution.
c. The detailed announcement must include the following items:
1) Event Description
2) Event Consequences

12. Announcement of Updating Fund’s Terms & Conditions:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) announcement on updating (Fund Name) terms & conditions.
c. Detailed announcement:
Chapter
Four (Fund Manager Name) announces updating (Fund Name) terms & conditions starting from (.../.../...
AH) corresponding to (.../.../...AD). Updated Terms and Conditions can be accessible at the follow-
ing link: (Insert Terms & Conditions Link.)

13. Announcement on Details of Fundamental Changes to Fund’s Terms & Conditions:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) Announcement on details of fundamental changes to (Fund Name) terms
& conditions.
c. Detailed announcement:
(Fund Manager Name) announces fundamental changes to (Fund Name) terms & conditions, on
con- dition that the change shall be come into effect on (.../.../...AH) corresponding to (.../.../...AD).

14. Corrective Announcement:

a. Announcement’s website:
- Fund Manager’s website
- The Exchange’s website (as applicable)
b. Announcement title shall be as follows:
(Fund Manager Name) Corrective Announcement on (Announcement Subject
c. The detailed announcement must include the following items:
1) 2) 3) 4)
Previous announcement date on Tadawul’s and Fund Manager’s websites (as applicable). Misstate-
ment in previous announcement
Error correction
Error Consequences (if any).
d. Detailed announcement:

52
In order to rectify (Fund Manager Name) announcement published on (.../.../...AD), (Fund Man-
ager) would like to clarify (Correction Details).

15. Follow up Announcement:

a. Announcement’s website:
- Fund Manager’s website - The Exchange’s website
b. Announcement title shall be as follows:
(Fund Manager Name) Follow up Announcement on (Announcement Subject).
c. The detailed announcement must include the following items:
1) Previous announcement date onThe Exchange and Fund Manager’s website (as applicable).
2) Occurred Change.
3) Change Consequences (if any).
d. Announcement Form:
Further to (Fund Manager Name) announcement published dated (.../.../...AD); (Fund Manager)
would like to clarify (Correction Details).

Chapter
Four

53
 Chapter Four
End - of - Chapter Questions

Revision Questions:

1 Mention Fund Manager’s Duties. Page 44

2 What Do Specialized Public Funds Include? Page 46

3 What Should Reports to Unitholders Include? Page 47

Chapter FIVE

Financial Statements
and Reports (XBRL)
• Using Extensible Business Reporting Language (XBRL).
• XBRL;Tool of Financial and Accounting Disclosure
• XBRL Concept.
• Bene ts of Reporting via XBRL.
• Financial Report and Optimizing Disclosure Methods.

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 nancial 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, glob-
al nancial 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 nancial 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
Chapter
things. XBRL provides the nancial community a standardized approach to deal with business
Five reports in general and nancial 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 de ned XBRL as “an international electronic standard that adopts nan-
cial information clauses coding according to IAS, so that they can be sent, stored and processed
elec- tronically in any system. It can then be easily reviewed in the standard format used in
nancial reports presentation”.
Paying attention to XBRL has become essential from the perspective of both data- producing
company and bene ciaries alike. Perhaps Microsoft has the largest shareholders worldwide. De-
spite capabilities of Microsoft’s analysts and investors, they still need to:
Review large numbers of nancial statements.
- Re-enter nancial information into their system.
- More time.
- More analysis expenses.
- Make such information and analysis results accessible to individuals.
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, nancial communities, media bodies or the public.This will lead to increasing costs and
ensuring safety and quality of that data.
1. It facilitates provision of nancial information on companies.
2. 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.
58
For example, any computer software cannot request speci c information such as (Total Rev-
enues 2015) from a nancial 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 nancial statements in several formats will increase performance
of nancial statements and make it available to everyone. Instead of spending ten hours to exam-
ine data and several hours to analyze them, a few minutes are now suf cient to obtain data and
several hours are suf cient to analyze them; however, several minutes will be suf cient to obtain
analysis results by virtue of nancial 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 nancial reports and statements.
The interest in developing accounting reports conversion mechanisms used by accountants, audi-
tors and nancial analysts using computing technologies with the involvement of software devel-
opers aims at proposing common speci cations that are used to improve processing and presen-
tation 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:
Chapter
1) Accountants and auditors. Five
2) Establishments and companies that generate default documents.
3) Analysts who analyze default document data.
4) Organizations and Standard setters, which ensure terms meet requirements of reports un-
der their own supervision.
XBRL is useful in automatic translation of data cards, offering a solution to multilingualism obsta-
cle that hinders development efforts of many nancial 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 Bene ts of Reporting via XBRL

Direct access to reports using XBRL technologies via web services realizes the following advan-
tages:

Better Security:
The common reporting language has become digital language.The business community, represent-
ed by major organizations and stock exchanges worldwide, seeks to move to exchange informa-
tion via Internet.

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

59
 Second:
XBRL became a critical tool for re-engineering reporting processes at companies and organiza-
tions. 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 exibility 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
addi- tion to the potentiality to be analyzed to include speci c and non- nancial measures.
Fourth: XBRL data is invested within analytical and commercial programs. Companies can there-
fore 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 re ected 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
de- cision 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:
Chapter
1. Facilitates nancial data exchange.
Five
2. Is immediately extracted.
3. Has data that are more accurate since being obtained from the source directly.

Better Business Environment:

XBRL has made a signi cant difference in quality of decision and optimizing competitiveness due
to diversity, speed, accuracy and power in information collection and analysis, thus strength-
ening management decision-making. Furthermore, XBRL helped re-use information in various
forms, which in turn enhanced its bene ts in decision-making process in several ways:
1. Quick circulation and instant conveyance of events and decisions to managers.
2. Increasing reliability of information.
3. Decreasing costs and increasing ef ciency of reporting.

5.5 Financial Report and Optimizing Disclosure Methods

Using modern technologies supports development of accounting and nancial 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 nancial
statements in different le formats (e.g. PDF and XSL, etc.), which are published on websites in HTML.
However, traditional nancial 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 nancial statements’ notes may be hidden.
Conversely, Excel nancial reports has more exibility in terms of processing and graphical repre-
sentation, editing as well as conducting multiple mathematical operations, however, it does not
pro- vide suf cient and globally required capabilities with respect to display, representation and
analysis.
60
XBRL-based nancial report has greater exibility necessary for all of its bene ciaries, including:
1. Accountants: Those who closely examine, collect and summarize internal data for use in
nancial reports, which increases their competency and accuracy in preparing nancial re-
ports and statements to be published on website and shared internally.
2. Auditors:Those who review nancial records, by focusing on information analysis, reducing
data errors for faster processing and easier access.
3. 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 operat-
ing costs, which allow Executive Directors to focus on value added to data.
4. Investors:Those who invest more con dently, so they get bene t from capabilities of auto-
mated analysis and from receiving information in reusable electronic formats.
5. Financial Advisors:Those who properly conduct analyses and understand nancial condi- tions.
6. Professional Organizations: Entities that can quickly retrieve and analyze reports’ data.
7. Software Developers:Those who develop software compatible with XBRL in terms of ex-
port and import, to increase full capability to operate with other nancial and analytical
applications.
8. Technology Consultants: By offering new opportunities to information technology consul-
tants, including preparing analysis and audit programs, where tasks and responsibilities in-
crease, 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 pro-
grams will facilitate procedures of documenting such audit reports.

Chapter
Five

61
 Chapter Five
End - of - Chapter Questions

Revision Questions:

1 Mention advantages of reporting via XBRL. Page 59

2 Alk about use of modern technologies and their role in developing ac-
counting and nancial disclosure methods. Page 60

3 XBRL have made a big difference in decision quality and enhancement

of competitiveness. Explain. Page 60
Annexes
Annexes
iFsah Home Page includes the following options:
1. View Existing Entries
2. Username and Access
3. “Edit Pro le” option
4. “Contact us” option, which includes contact information as well as all system usage manuals.
5. Help
6. Edit display language.
7. Exit

Edit Pro le and Change Password Page

66
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 nd user guide through “State-
ments Options” menu.

68
The System also provides banks and insurance companies related statements.

69
Multiple Choice Questions

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.
Multiple Choice Questions
Chapter One Questions
Saudi Stock Exchange

Choose the correct answer from the given options

1. Capital markets are divided into:

(a) Spot and future market.
(b) Primary and secondary market.
(c) Regulate and monitor activities of entities supervised by CMA.
(d) None of the above.

2. CMA authorities include:

(a) Protect investors from unfair and unsound practices involving fraud, deceit, cheating,
manipulation or insider trading.
(b) Develop appropriate measures to mitigate risks pertaining to joint-stock companies.
(c) Regulate and monitor activities of entities supervised by SAMA.
(d) All of the above.

3.If a person obtains inside information through family, business or contractual relation-
ship, such person:
(a) Can directly trade in security related to such information.
(b) Can disclose such information to another person with expectation that such person will
trade in such security.
(c) Is not permitted to directly or indirectly trade in Security related to such information.
(d) Can indirectly trade in security related to such information.

72
Chapter Two Questions
Investment Funds Disclosures Laws and Regulations

Choose the correct answer from the given options

1. Electronic Disclosure System is:

(a) A versatile electronic system that allows companies to prepare, enter, store and disclose
only nancial information required under regulations and instructions posted on Tadawul
website.
(b) A versatile electronic system that allows companies to prepare, enter, store and disclose
only non- nancial information required under regulations and instructions posted on
Tad- awul website.
(c) A versatile electronic system that allows companies to prepare, enter, store and disclose
nancial and non- nancial information required under regulations and instructions posted
on Tadawul website.
(d) (None of the above

2. Tadawul should be informed in case of:

(a) Liaison of cer’s appointment.
(b) Liaison of cer’s replacement.
(c) Liaison of cer’s resignation.
(d) All of the above.

3. Data Acceptance and Rejection Process on iFsah:

(a) An e-mail from data entry clerk followed by an e-mail from company supervisor then an
e-mail from Tadawul management of cer indicates input rejection or acceptance.
(b) An e-mail from data entry clerk to Tadawul management of cer indicates input process.
(c) Ane-mailfromcompanysupervisortoTadawulmanagementof cerindicatesinputprocess.
(d) An e-mail from company supervisor followed by an e-mail from data entry clerk then an
e-mail from Tadawul management of cer indicates input process.

73
Chapter Tree Questions
Investment Funds Disclosures Laws and Regulations

Choose the correct answer from the given options

1. CMA may at any time, as deemed appropriate, suspend trading of securities or cancel its
listing, in any of the following circumstances (choose three):
(a) Whenissuerdoesnotdiscloseitsperiodic nancialinformationwithinthespeci edperiod
pursuant to relevant Implementing Regulations.
(b) When auditor’s report on issuer’s nancial statements does not include an adverse opinion
or a disclaimer of opinion.
(c) 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.
(d) (If liquidity requirements are satis ed after lapse of period determined by the Exchange to
issuer to remedy situation, unless CMA agrees otherwise.
e) When Issuer’s EGM makes a resolution to reduce its capital for the two trading days
follow- ing such resolution’s issuance.

2. CMA authorities include:

(a) Date of Board meeting.
(b) Reasons for capital increase.
(c) Amount, which the company requests to receive.
(d) All of the above..

74
Chapter Four Questions
Investment Funds Disclosures Laws and Regulations

Choose the correct answer from the given options

1. 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):
(a) List of issuers and their percentages whose shares constitute the largest ten investments.
(b) Risk indicators and standards.
(c) Amount and percentage of such Quarter’s handling expenses in relation to Public Fund’s
average net assets value.
(d) Percentage of total fees and charges of such quarter in relation to average of Fund’s net
assets value.
(e) Market performance indicators and standards.

2. In case of violating any investment requirements set out in Investment Fund Regulations, Pub-
lic 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:
(a) 3
(b) 5
(c) 7
(d) 10

75
Chapter Five Questions
Financial Statements and Reports (XBRL)

Choose the correct answer from the given options

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

2. XBRL is considered as:

(a) An accounting standard.
(b) A digital language designed to improve usage of current standards.
(c) An accounting principle.
(d) All of the above.

3. Data users are:

(a) Accountants and auditors.
(b) Institutions and companies.
(c) Analysts.
(d) All of the above.

76
Answers:
Answers to Questions

Chapter One

Question No. Answer

1 b
2 d
3 c

Chapter Two

Question No. Answer

1 c
2 d
3 a

Chapter Three

Question No. Answer

1 a, c & e
2 d
3 a

Chapter Four

Question No. Answer

1 a, c & d
2 b
3 b

Chapter Five

Question No. Answer

1 a
2 b
3 d

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