Purpose of the guide
Companies across the globe face local, regional and global challenges in their respective competitive business environments. In order to remain competitive, businesses, private and public, need to stay at the forefront of the growth frontier through the implementation of sound business plans. A critical factor associated with the implementation of growth agenda is the access to capital. The stock markets are one of the largest sources for businesses and entrepreneurs to access capital, be it in the form of debt or equity.
To support such businesses in the Kingdom of Saudi Arabia, Saudi Stock Exchange (Tadawul) has prepared this Listing Guide to present the benefits of going public and listing on Tadawul. This Guide helps address some of the frequently asked questions about ‘going public’, the listing requirements and other concerns faced by companies consider ‘going public’.
The Guide also outlines the key steps required by businesses to become a listed company and the key regulatory obligations to be followed in the Kingdom as stipulated by the Capital Market Authority (CMA) and Tadawul.
We trust you will find this publication useful and wish you every success, both in bringing your company to the market and as a publicly traded company. As the largest stock exchange in the region, we look forward to welcoming you to be among the prestigious group of listed companies in Saudi Arabia.
Introduction to the guide
Listing 36
Post-listing phase 37
Indicative listing related costs 37
Tadawul fees 39
4. Responsibilities After A Company Goes Public 40
Effective corporate governance 42
Obligations and disclosures 45
Public and investor relations 46
5. Role Of The Capital Market Authority (CMA) 48
Introduction to CMA 50
— Functions and responsibilities 50
— Duties and authorities 50
Market conduct regulations (Trading rules) 51
Listing of foreign companies in Saudi Arabia/cross listing 52
6. Tadawul Services 58
Tadawul’s services 60
— Trading services 60
— Depository services 61
— Listing services 62
7. FAQ’s And Glossary 64
Table of contents
1
2
3
7
6
5
4
1. Introducing Tadawul 4 Incorporation of Tadawul 6Tadawul’s vision and mission statement 8
Key objectives 9
Past five years key statistics relating to Tadawul’s activities 10
2. Going Public 14
What is an IPO? 16
Why list? 16
— Advantages 17
— Key challenges 18
Why list on Tadawul? 19
CMA Listing Rules – Requirements 20
3. Executing Your Plan To Go Public 22
Company’s decision to go public 25
Appoint advisors 28
Preparation phase 30
Submit IPO application 34
CMA review and decision 35
Book building 36
Introducing Tadawul
Timeline
Incorporation of Tadawul
Tadawul traces its history back to the mid-1930s when the ‘Arabian Automobile Company’ was established as the first joint stock company in Saudi Arabia. Regular expansion of economic markets and the introduction of localownership of part of foreign banks led to the emergence of large corporations in 1970s. SAMA was the government body charged with regulating and monitoring market activities until CMA was established on 1424H/2003G. CMA is the sole regulator and supervisor of the capital market. It issues the required rules and regulations to protect investors and ensure fairness and efficiency in the market.
On 1428H/2007G, the Council of Ministers approved the establishment of Saudi Stock Exchange Company (Tadawul).This was in accordance with Article 20 of the Capital Market Law. Tadawul is the largest stock exchange in the Middle East region, with the largest initial public offerings (IPOs), capital raised and market capitalization.
1984
\Ministerial Committee formed to develop and regulate the market 2013
\Introducing the new tradable rights framework
2009 \World federation of
exchange membership \Launch of e-trading for
sukuks and bonds
2007 \Formation of
Saudi Stock Exchange (Tadawul)
2001 \Beginning of electronic
settlement and clearance (T+0) 1985 \Establishment of Saudi Share registration company 2008
\Applying sector index \Opened market for
foreign investors through SWAP agreement
2003
\Framework to establish stock exchange and Capital Market Authority
1990 \Automated trading system launched 2010
\Launch of ETF trading \Electronic voting \Launch of new identity 2011 \Launch of Tadawulty services 2015 \Qualified foreign investors allowed to invest in listed shares
Key objectives
Tadawul’s main objectives to guide its vision are as follows:
Operating the market efficiently and delivering
service excellence:
\ Operate the market effectively and efficiently \ Ensure market integrity, quality and fairness \ Support investor education and awareness efforts \ Develop service excellence for customers (brokers,
issuers, investors, vendors, etc.)
\ Develop the Exchange’s capabilities and competencies
Developing a leading financial exchange by supporting
competitive investment and financing channels:
\ Support efficient capital raising for companies
\ Provide innovative, diversified, and integrated financial markets, products, services and instruments
\ Attract national and international market participants \ Integrate and leverage offerings across the value chain \ Facilitate provision of superior financial returns and
shareholder value
Tadawul’s vision and
mission statement
Vision
To be an integrated financial
exchange that fosters the
development of a diverse
Saudi capital market and
competes internationally
Mission
To offer sound, efficient and
attractive capital market
products and services that
deliver superior value to
our market participants and
stakeholders
Sector
2010 2011 2012 2013 2014
Insurance 31 31 33 35 35 Agriculture & Food Industries 14 15 16 16 16 Building & Construction 14 15 15 16 17 Petrochemical Industries 14 14 14 14 14 Industrial Investment 13 13 14 14 14
Cement 9 10 12 13 14
Banks & Financial Services 11 11 11 11 12
Retail 10 10 11 12 14
Real Estate Development 8 8 8 8 8 Multi-investment 7 7 7 7 7 Telecommunication &
Information Technology 4 5 5 5 5
Transport 4 4 4 4 4
Media & Publishing 3 3 3 3 3 Hotel & Tourism 2 2 3 3 4 Energy & Utilities 2 2 2 2 2
TOTAL 146 150 158 163 169
The table below shows the number of listed companies by sector over the period 2010 to 2014.
Past five years key statistics relating to Tadawul’s activities
As at the end of 2014, Tadawul had a total of 169 companies listed on the exchange. These companies are classified into 15 market sectors. The Tadawul All Share Index (TASI) comprises the companies listed on Tadawul and acts as a key analytical tool to track the stock market’s performance. It is one of the key indicator to investors’ overall sentiment and performance of companies listed on the Exchange. Tadawul publishes various sector specific indices such as retail, cement, transport, petrochemical industries, insurance, etc. which can assist market participants in analyzing sector performance. Tadawul, also, provides a market for trading Sukuks, bonds and exchange traded funds (ETF’s).
Sector
2010 2011 2012 2013 2014
Insurance 380,000 160,000 60,000 157,500 — Agriculture & Food Industries 413,100 — 1,328,400 — — Building & Construction 612,000 331,500 — 540,000 729,000 Petrochemical Industries — — — — — Industrial Investment 757,500 — 234,000 — — Cement 650,000 489,500 1,796,000 900,000 275,000 Banks & Financial Services — — — 22,500,000 Retail — 396,000 539,600 364,500 900,000 Real Estate Development 1,020,000 — — — — Multi- Investment — 350,000 — — — Telecommunication &
Information Technology — — — — —
Transport — — — — —
Media & Publishing — — — — — Hotel & Tourism — — 1,368,000 — 825,000 Enegy & Utilities — — — — —
TOTAL 3,832,600 1,727,000 5,326,000 1,962,000 25,229,000,000 The table below highlights the annual amount of capital raised (SR ‘000) between 2010 and 2014 across various sectors
2011 2012 2013 1,271 1099 1,400 1,929 1,753 1,370 2,000 SR bil lion 1,750 1,500 1,250 1,000 Market Cap Trading Value
At the end of 2014, the market capitalization of all companies listed on Tadawul was SR 1,813 billion, and the value of shares traded was SR 2,146 billion. The chart below highlights the trend with respect to market and trading value over the past 5 years.
2014 1,813 2,146 2010 1,325 759
Going Public
What is an IPO?
An Initial Public Offering (IPO) – is the first offering of shares made by a company to the general public. It is one of the most crucial strategic decisions that can be made in the lifetime of a company. It offers the existing owners an opportunity to not only obtain access to a wider pool of capital and expand the investor base but also bring about key structural and operational changes in a company.
For investors, an IPO is an opportunity to invest, become a part owner of the company and play an important role in the strategic decisions associated with its future growth. One of the most significant reasons to invest in an IPO is to earn return through dividends and the performance of the stock price which reflects the financial growth prospect of the company and the industry in which it operates.
Why list?
“Going public” is a significant transformational decision in a company’s development that requires a series of planned, pervasive changes to the company, its owners and its culture to achieve long-term strategic objectives including business continuity, market leadership and shareholder wealth value maximization.
Access to wider capital pool
Helps in regional and global expansion
Easier to benchmark a company’s market position
in a sector Encouraging employees’ commitment Enhances liquidity for shareholders Advantages of listing Enhances visibility of the company Creates certainty about a company’s going
concern status
Improves credibility of a company in
the market Easier to value for potential mergers and
acquisitions Increases the investor base and diversifies risk
Enhances visibility of the company
A listing provides the benefit of showcasing the business strategy and performance through increased media coverage and availability of analysts’ reports. It helps in enhancing the corporate brand and attracts new investors, customers and suppliers without incurring extra spending. Potential investors get an opportunity to participate in the company’s growth plans, its market positioning, financial performance, etc.
Access to wider capital pool
Going public enhances the options that are available to a company with respect to raising capital. Access to a wider pool of equity capital can help a company achieve its growth objectives along with providing flexible financing alternatives. Typically, a listed company is also in a position to raise debt capital at a lower rate of interest with longer maturity duration. Listing on a stock exchange adds confidence to investors.
Creates certainty about a company’s going concern status
Establishment of a separate legal entity, which is listed, provides enhanced comfort around continuity of a company’s operations in the longer-term. This is contrary to the risks involved in the case of a family business, where the second and third generations of the family may face challenges and becomes difficult to promise the same continuity of interest, management and performance as the first generation. Also, internal disputes are sometimes common within family businesses, which can hinder the performance of a family owned and managed enterprise.
Helps in going global
A public joint stock company works under the regulatory guidance of CMA, which requires the company to publish information on a regular and timely basis. Disclosure of a
Advantages of Listing
company’s financial performance to investors is mandatory under various regulations, and assists in improving transparency, and eases access to broader options of growth for business including Mergers and Acquisitions (M&A), Joint Ventures (JV), and expansion into foreign countries. This could also help in attracting foreign investment into the company where it will increase investors base and diversifies risk.
Increases investor base and diversifies risk
Involvement of a large number of institutions and individuals investing in a listed entity helps diversify the risk involved and provides a company with more options to enter new markets.
Enhances liquidity for shareholders
Investment in a listed company is considered a more liquid form of investment due to the ease and ability of investors to buy and sell shares on the exchange, making such investments more attractive. Tadawul offers a significantly higher level of liquidity compared with other GCC countries.
Easier to value for potential mergers
and acquisitions
One of the critical components in M&A activity is the valuation. Given that listed companies have a quoted price per share available on the exchange on a daily basis, it makes it easier for the companies to engage in M&A activities.
Encourages employees’ commitment
Many listed companies motivate their employees through long-term share incentive schemes (Employee Share Options Programs or ‘ESOPs ’) which can provide employees with the benefits of ownership. This is a feature that can help attract key talent to the company and encourage long-term employment and goal alignment between employee and company.
Improves credibility of a company in
the market
Transparency and availability of information relating to a listed company in the market provides confidence to various stakeholders associated with the company. They can evaluate their investments, and make a buy or sell decision with ease. A well performing company always takes advantage of this to ensure that it generates a stronger brand and credibility in the market.
Easier to benchmark a company’s
market position in a sector
It is easier to compare a listed company to its peers due to the availability of information. For instance, a petrochemical company can be compared to other listed entities in the same industry as well as with the Petrochemical sector index to establish its relative performance.
Challenges of listing
Longer decision making process
Cost and time lag Transparency/Disclosure
and greater responsibility
Key challenges of listing
While there are a number of benefits of being a publicly listed company, there are also challenges, especially with respect to legal and disclosure requirements and on-going regulatory costs.
Transparency/disclosure and greater responsibility
CMA has outlined the disclosure requirements to be followed by companies listed on Tadawul. These requirements enhance the responsibility of a public company towards CMA, Tadawul and investors. Whilst transparency and disclosure can be the strengths, they can also act as a major challenge for a public company as they lose aspects of confidentiality, especially in cases where the company’s peers are not listed. In such cases, there can be an apparent concern around having more information in the public domain over the competitors. Regulatory rules also add another layer of necessary compliance for a listed company.
Cost and time lag
Listing a company has its associated costs; these include expenses incurred on legal, financial, accounting, external consultants/advisors and compliance matters. These additional expenses need to be carefully evaluated and compared with the benefits of an IPO, when deciding to go for listing. An IPO can often take a long time to complete due to the work associated with preparing a company to go public. (Also refer to indicative listing related costs outlined on p39 of this guide).
Longer decision making process
As compared to private companies where strategic decisions are typically taken by the owner or a small group of decision makers, major strategic decisions require board of director and sometimes shareholder approval as they have an impact on the performance of the company. Accordingly, the decision making process for a public company takes longer as the company is required to follow set governance rules and regulations around board of director and shareholder meetings.
Why list on Tadawul?
Tadawul provides a platform for companies to attract various investors through access to the exchanges large liquidity pool and broad investor base complimented by its ‘state of the art’ trading infrastructure which connects investors, traders and brokers. Saudi Arabia being the largest economy within the region adds to the strategic significance of Tadawul and enhances its attractiveness further.
Tadawul also has a ‘best in class’ primary market team which is solely focused on ensuring that businesses maximize value by being listed on the Exchange.
Why Tadawul State of the art trading infrasructure
support post - IPO
Long
-term investor relations
econ om y in t h e re gi on Acce ss t o th e bi gg es t pr im ar y m ar ke t tea m B es t i n clas s
Why list on Tadawul?
Tadawul provides a platform for companies to attract various investors through access to the exchanges large liquidity pool and broad investor base complimented by its ‘state of the art’ trading infrastructure which connects investors, traders and brokers. Saudi Arabia being the largest economy within the region adds to the strategic significance of Tadawul and enhances its attractiveness further.
Tadawul also has a ‘best in class’ primary markets team which is solely focused on ensuring that businesses maximize value by being listed on the Exchange.
CMA Listing Rules – Requirements
CMA has issued Listing Rules and regulations that need to be followed and complied with by companies seeking to list on Tadawul. The Listing Rules provide key requirements that an issuer needs to follow pre and post the listing process, after the issuer’s board has approved the listing of the securities of the company.
1. Appointment of Advisors: CMA requires the issuer
to appoint an independent Financial Advisor who is licensed by the CMA to advise the company on various CMA related rules and regulations. There are specific requirements that the Financial Advisor needs to fulfill with respect to the listing process, which are outlined in the Listing Rules. An independent Legal Advisor licensed to practice in Saudi Arabia must also be appointed
2. Conditions for registration and admission to listing:
3. Listing and registration: The actual process of listing
requires the issuer to ensure that the offered securities are fully underwritten by an underwriter authorized by CMA. Further, the issuer, in consultation with its Financial Advisor, needs to submit documentation such as an application for registration, prospectus, etc. in accordance with the Listing Rules. Acceptance of the listing is subject to CMA’s approval of the issuer’s compliance with the Capital Market Law and CMA’s Regulations.
4. Compliance with listing rules: An issuer must comply
with the Listing Rules and provide information and explanations to CMA as and when required. The Financial Advisor appointed by the issuer can assist in providing all the required information along with clarifications. It is important to note that CMA may take appropriate actions in the interest of investors.
5. Continuous obligations: Listed companies are required
to comply with CMA’s listing and other applicable rules and regulations on an on-going basis to ensure continuity of their status as a listed company. Some of the key obligations include requirements relating to disclosure of material developments and financial information in accordance with the prescribed time lines, announcements, publications, duties of the board of directors, notification relating to securities, payments of fees, etc.
The Listing Rules also cover provisions relating to capital injection and reduction. Some of the aspects discussed above are aimed at providing a general overview of key requirements and do not cover the detailed requirements that an issuer would have to follow with respect to the listing process. For more details, please refer to the Listing Rules issued by CMA which are available at www.cma.org.sa
b. Have carried out a main activity for at least 3 years with substantially the same management
c. Have at least 200 public shareholders
d. Have 3 years audited financial statements and the latest interim financial statements produced since the date of the last annual report and the most recent audited financial statements
e. An appropriately experienced management team
f. The company must not have carried out certain financial restructuring within the last 1 year g. It must have sufficient working capital for the
next 1 year
h. The aggregate value of shares listed must be at least SR100 Million
i. Following the offering, at least 30% of the shares must be owned by the public The key conditions that need to be met in order to be listed on Tadawul are;
a. The company must be a Saudi Joint Stock Company except where the provisions of article 14 (cross listing) of these rules apply
Executing your plan to go public
A company that intends to go public should follow the process detailed opposite for listing on the Saudi Stock Exchange (Tadawul).
Company decision Once it has decided to
go public, a company should have a business plan, and
a targeted timeframe for listing
Appoint Advisors
Appointment of Financial and Legal and other
Advisors
Preparation phase Ensure overall readiness,
Conduct due diligence, prepare valuation, prospectus and application
forms
Submit IPO Application
Filing of an application to CMA along with all relevant
documents
CMA review and decision CMA reviews the
application and assesses the adequacy of discoursers
in the prospectus and if acceptable, announces its approval through Tadawul
and CMA’s website
IPO book building
Marketing to institutional investors, allocation between retail and institutional determined
Subscription period Subscription period, IPO
proceeds received, share holder allocation and refunds, provide Tadawul
with shareholder file
List on Tadawul
After completing the information and documentations required
by Tadawul’s and CMA’s, an announcement will be made in Tadawul and CMA’s
websites, and secondary trading will begin
First step: Company’s decision to go public
An IPO in itself is not an isolated event but a series of steps in an important transformation journey of companies. Each step acts as a milestone for the success of the process and thus the transformation of a private company, to a large public compan , to a large institutionalized public company.To launch a successful IPO, one of the more critical steps is to ‘prepare and plan’. Planning includes understanding the importance of the IPO for the prescribed objective. Whilst the execution process of an IPO event itself generally lasts for 6 to 12 months at least, the overall timeframe for realizing substantial value from an IPO begins at least 1-2 years before the actual listing and continues well beyond that. Some of the more important steps during this journey are listed on this page. The key to a successful IPO (value obtained and time taken) is to start implementing as many of these steps as possible well before the start of the implementation of the IPO process.
\ Ensure all key shareholders/family members understand and accept the changes that will come about as a result of transforming the business to a public company \ Confirm the strategy of the business – is there a clear
vision?
\ Ensure the company has a compelling “equity story” – i.e. strong historical track record and clear, positive growth outlook
\ Fill necessary management team gaps benchmarking the company to ensure competitiveness
\ Carry out required restructuring (capital, holding company etc) and implement required governance changes to comply with CMA guidelines
\ Ensure the company has a strong finance function that can meet strict reporting guidelines and support the IPO and ongoing budgeting and forecasting requirements \ Prepare business plan, financial projections and
understand potential IPO pricing issues, size of offer, use of proceeds
\ Consider carrying out independent pre IPO readiness assessment
\ Act like a public company even before becoming one.
Executing Your Plan To Go Public
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One of the key areas on which investors place significant emphasis is on the past and expected future financial performance of the company. The quality of the company’s equity story is one of the most important determinants the quality of the company’s equity story is one of the most important determinants of whether or not a company should consider an IPO, together with the readiness of the shareholders to accept the changes an IPO will bring about. Once a company decides to go public and the decision is approved by the board, it needs to prepare an action plan including the steps necessary for appointing a financial advisor. This is followed by the identification of key company employees to be involved in the IPO process, which generally includes a director, Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Information Officer (CIO).
Keeping options open
Most companies are now following a “multi-track approach” which involves an IPO and evaluating alternatives in parallel which act as a backup plan. A “multi-track approach” means a combination of the following approaches:
1. Considering a sale in the M&A market: This option
requires a detailed evaluation of the suitability and viability of a merger or an acquisition as an alternative to an IPO. A company needs to evaluate whether a merger or acquisition would be more beneficial to its strategic options than an IPO.
2. Private placement, a pre-IPO step: This can be done
either for the purpose of raising funds for growth and expansion instead of carrying out an IPO or bringing in one or more external shareholders to assist with and add value to a future IPO. It often involves commitment to a future IPO to provide some form of exit option for the new shareholder in return for that company providing capital and management and/or technical expertise.
3. Joint ventures and strategic alliances: This option
could provide the company with greater operational efficiencies and access to knowledge, with minimal cost. Joint ventures can be helpful in entering new and strategic markets and geographies, giving an opportunity to expand the business, access new technology, and reduce costs and risk.
Some of the other key considerations that need to be assessed at this stage include:
a. A comprehensive business plan and a detailed
timeline: The company is required to showcase its
operational, financial, and strategic initiatives along with its business strategy to be implemented in the near future. The business plan brings together these elements and acts as a key document that outlines the plan going forward. A critical component of the business plan is the detailed implementation timeline relating to any strategic initiatives.
b. Potential growth of market size and an equity
growth story: The company should be in a position
to articulate and sell the potential growth story to its investors through facts and figures and a demonstrable track record. An independent assessment of the market will eventually be required to support market disclosures in the prospectus.
c. Benchmarking with peer group and demonstrating
competitiveness: The company should start to benchmark
its relative market position through competitive benchmarking amongst its peer group.
d. Acting like a public company before the IPO: A company is required to demonstrate its strength in terms of financial performance and integrity and transparency in business to generate confidence among potential investors. Companies should start to act like a public company well before actually becoming one in order to embed these disciplines internally and provide confidence to regulators and potential investors. As this stage, undertaking an IPO readiness assessment can be a useful exercise to identify the key areas that the company needs to focus on, in order to better prepare itself for an IPO. Such an independent readiness assessment can be invaluable to the owners in providing a clear picture of what the company needs to work on before applying to go public. The reason that many IPOs are delayed or cancelled is due to the fact that the company is just not ready at the time of starting the application process. These unpleasant surprises could be easily avoided by having an independent readiness assessment carried out.
Professional and licensed external advisory team
It is critical that the company sells its IPO story to the investors and follows all the laws and regulations regarding the listing process. Experienced advisors play an important role in assisting a company present its IPO story in the most appropriate manner. The advisory group typically comprises the following advisors:
\ Lead Manager: Provides overall management of the
IPO process and works closely with all other advisors in the process.
\ Financial Advisor: CMA provides licenses to professional
advisors for providing IPO related services to applicants. They provide guidance to fulfill regulatory requirements by acting as a representative of the company as well as managing the other advisors.
\ Legal Advisor: The legal advisor assists with any
necessary restructuring of the company, reviews material contracts and agreements, advises on shareholder rights, articles and by-laws and together with the financial advisor advises the company of the requirements of the Capital Market Law and Listing Rules. The Legal Advisor also plays a very big role in the review of the prospectus.
\ Underwriter: The CMA requires any offer of securities including
IPOs to be fully underwritten by an authorized underwriter.
\ Financial Due Diligence Advisor: A key component
of the prospectus preparation is the analysis of financial information, which is typically covered as part of the financial due diligence process.
\ Public Relations/Media Advisor: Building effective
public relations, starting with bringing information to the knowledge of prospective investors and addressing their concerns is key to a successful IPO. The Public Relations Advisor conducts road shows, media campaigns, etc., using all available channels of communication with the prospective investors in accordance with the applicable Capital Market regulations.
Second step: Appoint advisors
Appointment of the advisory team
A company considering listing is required to appoint a team of advisors that deals with the IPO regulatory bodies such as CMA and Tadawul on behalf of the company.
Below is a list of advisors along with their roles who manage the process of listing, and provide guidance to the company at different stages. Lead Manager Financial Due Diligence Advisor Public Relations/ Media Advisor Financial
Advisor Legal Advisor Underwriter
\Manages the IPO process
\Manages the retail subscription
\Ensures compliance with CMA rules \Communicates with
CMA and investors \Provides advice to the company \Manages the institutional book building process \Undertakes the legal due diligence \Provides advice on
all legal matters \Ensures legal
sections of the prospectus are in accordance with the Listing Rules
\Underwrites the issue and sometimes involves other underwriters \Undertakes the financial due diligence \Manages media campaigns and road shows \Works on brand enhancement Advisors
1. Appoint a board with independent members: The company’s shareholders should consider appointing independant directors who are experienced in handling IPOs as board members. This group should have good exposure across the business and bring that experience to the IPO process.
2. Improve internal control measures: Internal controls
are defined as a process, affected by the organization structure, work and authority flows, people and management information systems, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: a) Effectiveness and efficiency of operations; b) Reliability of financial reporting; and c) Compliance with laws and regulations.
The dynamic nature of reporting requires adequate and appropriate control mechanisms to be in place. Therefore, it is necessary to ensure the existence of comprehensive internal control policies.
3. Establish a qualified audit committee: The audit
committee of the board reviews and provides insights into the annual and quarterly performance of the company and meets regularly and independently with the company’s external auditors.
4. Establish and implement an acceptable executive
compensation structure: Remuneration packages
should be balanced, in line with the profitability of the company and sufficient to reward high performing executives. The executive compensation structure should
align the long-term senior management’s objectives with the company’s business plan.
5. Implement board meetings and reporting process: Certain decisions should be taken only by the board in meetings held in accordance with established protocol. All decisions of the board should be documented and reported in accordance with company and CMA regulations. Board committees may be formed which will require their own appropriate meeting, documentation and reporting protocols.
As part of the IPO preparation phase the issuer / company will need to conduct a number of activities alongside the preparation of the prospectus. These are summarized below: \ Due diligence of historical financial information (typically
completed by accountants) \ Legal due diligence
\ Preparation of detailed financial model (income statement, balance sheet and cashflow with supporting assumptions)
\ Preparation of the valuation of the company based on various valuation techniques as required by the CMA (discounted cashflow, comparable company multiples, Tadawul Price Earning Multiples)
\ Based on valuation, shareholders set preliminary IPO price range
\ Preparation of working capital model
(and associated working capital report by accountants) \ Finalization of legal structure
\ Other due diligence (e.g. environmental, actuarial, etc.) if applicable
\ Preparation of appropriate supporting schedules for extraction of comfort in respect of the prospectus \ Implementation of appropriate financial reporting
controls prior to the IPO / listing (or alternatively the obligation to implement proposed controls with an implementation timetable in place, post IPO) \ Confirmation of management’s incentive plans.
Third step: Preparation phase
As mentioned earlier, the key to a successful IPO is for the company to plan early and start to structure itself and act like a public company well before its actual IPO. By the end of this phase, all IPO readiness requirements need to have been completed.
Ensure strong senior management team
Quality of management remains one of the most important non-financial factors considered by institutional investors in making a decision to subscribe to an IPO.
Establish a qualified audit committee Improve internal control measures Appoint a board with independent members Establish and implement an acceptable executive compensation structure Implement board meetings and reporting process
Valuation considerations
The valuation of the company and the related price at which the shares are offered to the investors is a critical aspect of the IPO preparation phase. Following is a brief description of different valuation methods that are typically adopted to value a business:
\ Discounted Cash Flow Method -The DCF method, which is an income based approach, is underpinned by the premise that the value of a business is based on the future cashflows that it will generate. This method involves estimating the future free cash flows on a year by year basis. It applies an appropriate discount rate on the projected free cash flow, which takes into account key business and operating risks of a business. It also takes into consideration the company’s capital structure \ Comparable company method – The comparable company
method, which is a market approach based method, values a business based on the trading prices of shares of companies engaged in similar lines of business and operating in the same industry sector as the company being valued. It entails identifying a suitable/relevant market multiple and applying these multiples to the company’s financial parameters. Some of the commonly used market multiples are:
— Price to Earnings (P/E)
— Enterprise Value to EBITDA (EV/EBITDA) — Price to Sales (P/S)
— Price to Book value (P/BV)
\ Net Asset Value Method – The net asset value method is generally utilized when the value of an entity is closely related to the value of its underlying assets. The value for a business calculated under this method is based on the aggregate value of its net assets i.e. assets less liabilities as of the valuation date.
Prospectus preparation
The prospectus plays a vital role in the issuance of company shares. It is an official document published by the company that contains all the key information about the company’s business, management, financial performance, risks, future plan of action etc. A prospectus also includes information relating to the securities to be traded and related terms and conditions. This information enables an investor to make an informed investment decision for that security.
Listed below are details of some of the other mandatory information which must be covered in a prospectus: \ Summary of the offer including total capital and
number of shares \ Targeted type of investors
\ Contact details of all the key personnel involved in the IPO
\ Timetable showing key dates and the subscription procedure
\ Industry information for the sector in which the company operates
\ Organizational structure
\ Key financial information and management discussion and analysis
\ Dividend policy
\ Plans for application of funds from the offer \ Key risk factors
\ Various declarations \ Legal information
\ Documents available for inspection
\ External auditor’s report for the three financial years immediately preceding the date of publishing the prospectus.
For a full list of the required contents of the prospectus,
refer to annex 4 of the Listing Rules.
Timing the market offering
The company should ensure from the initial stages that the timing of the IPO is appropriate to achieve the desired valuation. To achieve this goal, a company needs to plan well ahead and accordingly should seek to:
1. Manage the pressure appropriately: by recruiting
a highly qualified and experienced management team who can support taking the company public. Typically, a company would have to gather inputs from external advisors, including investment banks, authorized persons and auditors/financial advisers.
2. Seek the window of opportunity: The company
should assess the market and investor receptiveness to a new security issuance in this particular industry. Also, the company needs to provide adequate time to implement any organizational and other readiness changes required pre-IPO.
Fourth step: Submit IPO application
A company planning to list its shares submits an application to CMA, along with various other documents as specified in the CMA Listing Rules. Below, are some of the documents that are submitted (hard copy and electronic) at the time of filing the application for listing:
\ IPO application letter signed by an authorized officer of the company as per Annex 1 of the Listing Rules \ Letter of appointment for the Financial and Legal
Advisor
\ List containing names and civil registry numbers of directors, senior executives and their relatives \ Draft prospectus in Arabic
\ All underwriting commitment letters
\ Issuer’s certificate of commercial registration and articles of association
\ Annual report and audited annual financial statements of the issuer
\ Latest interim financial statements
\ Report by an external auditor certifying the adequacy of working capital for the 12 months following the date of publication of the prospectus
\ Legal and financial due diligence reports \ Subscription form
\ Declarations as per Annex 2 outlined in the Listing Rules The list provided above is not exhaustive, but illustrative in nature. For a detailed list of documents required, please refer to Article 19 of the CMA Listing Rules. For more information related to Prospectus filing and its approval by CMA, visit
www.cma.org.sa
Review Application and Prospectus
CMA reviews the submitted application, ensures it complies with the Listing Rule, and informs the company’s financial advisor about the missing requirements. CMA also reviews the submitted prospectus and assesses the adequacy of its disclosures. If there are any discrepancies noted or amendments needed in the submitted prospectus, the CMA notifies the company’s financial advisor.
Decision
Once the application is completed and all necessary disclosures have been properly reflected in the prospectus, the application will be presented to CMA’s board of directors for the decision.
Announce Decision on Website
Decision will be noted electronically through the websites of CMA and Tadawul.
Decision Decision on Announce
Website Review
Application & Prospectus
Fifth step: CMA review and decision
Once a prospectus is prepared by the company and its advisors, it is submitted to the CMA for its review and decision. Subject to submission of complete application, CMA reviews the prospectus and reaches a decision within 45 business days of its submission. The typical process is as follows:
Sixth step: Book building
This period covers the time after the CMA has approved the company’s IPO application but before the commencement of the subscription phase where the shares are offered to the retail investors.
Pre-marketing requirements
The company needs to prepare detailed investor presentations together with the draft prospectus and other company media information prior to the road show of presentations to the selected institutional investors. The investor presentations are conducted by the management team. Additionally institutional investors would have access to key documents; including prospectus and valuation model, contained in a data room.
Building a pipeline of potential investors is also an important component of the pre-marketing exercise with the underwriting team. Companies also should be prepared to directly reach out to potential investors through ongoing dialogue, conference attendance and marketing visits.
Understanding the audience
The management preparing for the road show should build a rapport with the target investor audience. It is important to communicate a high level of excitement and passion during road shows as this helps create a PR “buzz” around the opportunity to invest in the company’s IPO.
Extensive marketing
Marketing should be conducted through effective road show presentations, the focus of which is communicating the IPO story, the company’s strategy and future growth plans – all of which support the valuation price range. These road shows comprise extensive meetings and discussions with prospective investors that help gather ideas about their
investment criteria. Typically, institutional investors rely more on information gathered through these presentations than by visiting the company.
Price and allocation determination
Based on the levels of demand from institutional investors for the various ranges of share prices, together with the CMA’s requirement for demand coverage, the offer price and preliminary allocation between retail and institutional investors will be determined. At this point, the company’s financial advisor advises the CMA of institutional subscriptions and confirms allocations to the institutions. There will be clawback provisions agreed with the CMA such that high demand from retail investors during the IPO could result in a prorate lower allocation to institutional investors.
Seventh step: Subscription period
At this stage the price at which the companies shares will be offered to the public has been confirmed through the institutional book building process. Therefore prospectus can be finalized by inserting the offer price. Copies are lodged with the CMA, published on their website, and printed for distribution to receiving banks where they will be available for inspection by interested retail investors.
The subscription period runs for a set number of days stipulated by the CMA. IPO proceeds are received, share allocations and refunds for over subscriptions are made by the receiving banks. A final shareholder file is then sent to Tadawul along with the application for listing and request for a ticker symbol.
Eighth step: Listing
Tadawul allots shares to the shareholders as per the shareholders file and the start of trading of the company’s shares in the secondary market commences.
Post-listing phase
After a company becomes public and its shares are listed, priced and allocated to investors, the post-listing phase of activities begins. These activities are equally as important as the pre-IPO preparations. A listed company is required to:
Keep investors’ interest alive
After the successful listing of a company, the company needs to retain and increase its value. Therefore, it is essential for the company to develop a proactive investor relations strategy with the objective of maintaining the stock’s attractiveness. This includes reaching out to current and potential investors with information about the company’s business, management, market position, plans, etc. Typically, this is done through a variety of press conferences, conference calls and investor presentations. The investor relations team of a listed company also must try to attract the coverage of equity research analysts who play an instrumental role in presenting the facts in the best possible way to the investor community.
Keep its promises
Another key factor that the management of a listed company need to be mindful of is to ensure that any promises made during the IPO process are delivered. This includes appropriate usage of the IPO funds, meeting growth plans, achieving operational efficiencies, enhancing shareholder value and an improvement in share price.
The investor community keeps a close track of the usage of IPO funds. They prefer the money to be used for accelerating the company’s growth by developing new products and services, entering into new geographic markets, expansion of operations, acquisition of other companies, investment in latest technology, cost reduction programs, etc.
The management must also try to keep its operational and financial targets realistic because meeting or exceeding these
targets adds to investor confidence and helps in the long term outlook of the company.
Indicative listing related costs
There is no fixed cost related to listing of shares as the listing costs associated with the share offerings vary from company to company. In general, the cost is based on various factors that include:
\ Readiness of the company
\ Size and complexity of company’s operations
\ Quality and availability of company management team to support the IPO process
\ Amount of pre-IPO restructuring required
\ Experience of the Financial Advisor, especially in leading IPOs in the company’s sector
\ Amount invested in promotional campaigns \ Profile of advisors appointed
The table opposite highlights the total subscription cost as a percentage of the total offer value for companies that listed during the period 2010 to 2014. There is some element of fixed costs in the “total cost of subscription” so as a percentage of the offered value, larger IPOs tend to have a lower cost to value ratio.
Year/issuer Total value of offered shares (SAR ‘000) Total cost of subscription (SAR ‘000) Cost to value % 2010 Herfy Foods 413,100 13,667 3.31% AlSorayai Group 243,000 17,000 7.00% Shaker 514,500 22,000 4.28% Al-Khodari 612,000 25,000 4.08% 2011 Aslak 331,500 17,000 5.13% Extra 396,000 16,000 4.04% 2012 Takween 234,000 21,000 8.97% AlTayyar 1,368,000 50,000 3.65% Saudi Airlines Catering Company 1,328,400 33,000 2.48% Dallah Health 539,600 20,000 3.71% 2013 Care 364,500 14,000 3.85% Bawan 540,000 26,000 4.80% 2014 Farm Superstore 270,000 13,000 4.81% Al Hokair Group 825,000 26,000 3.15% Al Hammadi 630,000 20,000 3.17% NCB 22,500,000 25,000 0.11% EIC 729,000 20,000 2.74%
The table below shows the total offer value for companies that listed during the period 2010 to 2014
Tadawul fees
Tadawul charges annual listing fees based on the paid up capital of the company which covers costs associated with providing the share registry related services. The table outlines the various fee brackets.
Annual registry fee (SR)
Capital (million) Cost
Up to 100 180,000 +100 – 200 220,000 +200 – 500 300,000 +500 – 2,000 400,000 +2,000 – 5,000 500,000 +5,000 – 10,000 600,000 +10,000 700,000
Effective Corporate Governance
As the MENA region integrates more into the global economy, the importance of effective corporate governance becomes more significant than ever as it helps to improve competitiveness, transparency, domestic and foreign investor attractiveness and social accountability.
The CMA regulations define corporate governance as a mechanism to control and direct all the company’s activities to protect the rights of the shareholders and other stakeholders (such as employees, customers and suppliers). The governance framework constitutes a coherent set of procedures and organizational arrangements that govern the relationship between the shareholders, board of directors and executive management that are aimed at achieving the company’s long-term strategic objectives.
Corporate Governance Regulations also specify the rules and standards governing the companies’ management listed in the exchange. The regulation constitutes as guiding principles in applying some of its articles but must disclose the provisions that have been implemented and the provisions that have not been implemented.
To view the mandatory articles in the regulation, check http://www.cma.org.sa/En/Pages/Implementing_ Regulations.aspx
Responsibilities of a publically listed company
Improves transparency and disclosures Secures rights of
shareholders
Imposes accountability and improves performance Ensures effective internal controls Advantages Of Corporate Governance Encourages investment
The CMA Corporate Governance Framework
In order to ensure compliance with the best corporate governance practices, CMA has set out a clear corporate governance framwork covering 3 main areas:
\ The rights of shareholders – covering general rights, meeting,voting and distribution rights
\ Disclosure and transparence – setting out policies and procedures for information disclosure and disclosure in board reports
\ Board structure and responsibilities – setting out the basic functions of the board, its responsibilities and composition, and the role and responsibility of other committees such as the audit and remuneration committee.
Good corporate governance ensure fairness in the work environment and transparency and the accountability of those responsible for their actions. The following chart shows number of points about the importance of corporate governance.
\ Corporate Governance booklet – which summarizes the importance of governance and covers, for example, but not limited to: the core functions of Board of Directors, the classification of its members and its key functions, it also provides simplified explanation about board committees.
\ A Guide for the Shareholder in General Assemblies of Listed Companies in the Saudi Capital Market – which aims to activate the role of shareholders in the General Assemblies and to increase their awareness of the principles of corporate governance for listed companies and other related requirements.
\ How to read the listed company board Directors report – which demonstrates the importance of Board of Directors report, where it’s considered to be one of the important sources of data and information needed by investors. \ Guidelines for Corporate Governance regulation – which aims
to clarify the requirements of the Corporate Governance Regulations.
In Capital Market Authority (CMA) there is a specialized unit (Corporate governance practices unit) under the corporate governance department which supports and stimulates companies to apply the best practices in corporate governance and to contact the unit on this matter: [email protected]. The above-mentioned aspects relating to establishing and
maintaining an effective corporate governance framework are an important on-going responsibility of a listed company. For the capital market authority to ensure better practices, it offers presentations for newly listed companies to introduce corporate governance and disclosure requirements explaining all the related aspects. The Authority also continuously issues awareness booklets designed to raise investment awareness. Number of booklets were issued related to corporate governance:
Secures rights of shareholders
The CMA regulations define the rights which can be exercised by the shareholders. Shareholders’ awareness of their rights is a key factor in terms of engaging with them to actively participate in the oversight of a company’s growth and its performance.
Improves transparency and disclosures
Holding the board of directors accountable for timely disclosure of information to the shareholders helps enhance transparency and has a positive effect on shareholder confidence.
Ensures effective internal controls
The board is responsible for formulating the appropriate internal control policy framework and ensuring its effective implementation thus identifying any areas requiring improvement. This enhances the reliability of the information shared with the shareholders and other stakeholders.
Imposes accountability and improves performance
With increased focus on management’s accountability, and poor performance reflecting inefficiency, management is motivated to extend its best efforts for improvement throughout the company.
Encourages investment
Established norms and effective monitoring of compliance by the regulatory body helps to win the confidence of investors and thereby enhances the scope for additional investment. Good corporate governance can reduce the risk premium investors place on each company which can have the effect of increasing the valuation of the company’s shares.
Enhanced governance culture
Monitoring implementation of effective governance requires major changes in the management structure of private companies which can make the process of implementation difficult at the initial stage.
Mechanism for selecting board members
Corporate governance specifies the required skills to be possessed by members of the board and the various board committees. Finding appropriate board members, including independent directors, can be a challenging task.
The company must have clear policies and procedures for the membership of the board of directors.
Improving process of internal controls
Defining the elements and extent of controls which could be considered as effective may vary from person to person and be dependent upon each person’s experience. Therefore, ensuring the effectiveness of internal controls can be difficult and requires to be kept under regular review.
Effective work by committees
Corporate governance requires the formation of various board committees to ensure the effectiveness of internal controls and adequacy of appropriate skills on the board. The effectiveness of such committees depends upon the membership of and the persons appointed to chair such committees.
For more information, please visit www.cma.org.sa Mechanism for selecting
board members Enhanced governance culture Effective work by committees Improving process of internal control Challenges Of Corporate Governance
Obligation to disclose
Obligations and disclosures material developments
disclosures Miscellaneous fi nan cial in fo rm at io n Discl osur e of re la te d t o s ec uritie s D isc lo
sure Obligations And Disclosures
Obligations And Disclosures
With the company’s listed entity status, comes a new set of responsibilities. Once a company is listed, the interest of various stakeholders is directly dependent upon its decisions and performance so it becomes obligatory for the company to keep its stakeholders informed about decisions being taken and its ongoing operational and financial performance. This helps investors to make an informed decision regarding the continuity of their investments.
Some of the key obligations of a listed entity and disclosures to be made by its board are categorized below.
Obligation to disclose material developments
Transactions, events or announcements are considered to be a material development if any such activity is of a nature that would influence investment decisions by current or prospective stakeholders.
Possible material developments are:
\ Purchase or sale of assets at a price equal to or greater than 10% of net assets
\ Raising debt equal to or greater than 10% of net assets \ Losses equal to or greater than 10% of net assets \ Significant change in a company’s production
environment
\ Any changes in the composition of the board of directors or to CEO’s position of the issuer
\ Legal proceedings involving value equal to or greater than 5% of net assets. Movement of 10% or more in net assets base or gross profit
\ Related party transactions
\ Unexpected termination of a customer agreement involving at least 5% of gross revenue
\ Any interuption in the princple activities of the issuer or its subsidiaries.
Disclosure of financial information
Keeping investors periodically updated with the financial performance and financial position of the company is critical from an investor’s point of view. Therefore, it is mandatory for
listed companies to provide certain information as highlighted below:
\ Prior to publication the interim and annual financial statements of an issuer must be approved by the directors and signed by a director, CEO and CFO. The board of director’s report must be filed with the Authority immediately upon approval by the directors \ The issuer shall announce to the exchange through the
electronic applications its interim and annual financial statements prior to being published to the shareholders or third parties
\ Provision of interim financials to the CMA and
announcement to public not later than 15 days after the end of the interim financial period
\ Provision of annual financials to the CMA and
announcement to public not later than 40 days after the end of annual financial period
\ Submission of external auditor’s annual report along with confirmation of their compliance with auditor’s independence , as per the rules and regulations of Saudi Organization for Certified Public Accountants (SOCPA).
Disclosure related to securities
The issuer of securities is required to disclose the following events without any delay to the CMA and the public: \ Change in persons holding more than 5% of the issued
shares or convertible debt instruments of the company or of any significant changes in the holdings of such persons
\ Proposed change in the capital of the company \ Decision to pay/declare or not to pay/declare dividend \ Alteration in rights to shareholders or debt holders \ Decision to buy back securities along with the
recommended price
\ Any decision not to make payment in respect of debt instruments or convertible debt instruments.
Miscellaneous disclosures
Certain transactions or events which cannot be classified in the above categories but are essential to be disclosed as per the Listing Rules:
\ Alteration in the articles of association, location of office or auditor of the company
\ Convening a general assembly and its agenda \ Resolution to dissolve the company
\ Any judgment having a negative impact on access to or utilization of more than 5% of the net assets of the company
and for all disclosure requirements see
http://www.cma.org.sa/Ar/FormsSite/Pages/ Disclosure.aspx
Public and investor relations
Investor relations is an ongoing activity of a company through which it communicates with its investment community. Usually, communications that listed companies undertake are a mix of regulatory and other activities. Investor relations is essentially the part of stock market life that sees companies interacting with existing shareholders, potential investors, analysts, and journalists.
As it serves as a function to inform and update the investment community, investor relations activity is very much seen as a regular ongoing responsibility rather than an occasional one. The main activities of public and investor relations include: \ Shareholders and investor communications – enabling
good decision making by information disclosure, resolving issues, building communications by social partnership and thereby strengthening shareholder loyalty
\ Shareholders register
\ Calling shareholders meetings
\ Constituent, ordinary and extraordinary assembly \ Resolutions at shareholders meetings
\ Releasing results to shareholders
\ Replying to queries raised by shareholders
\ Maintaining investor relations information on websites \ Rights and obligations
Investor relations activity is not only required to create an awareness and understanding of the company amongst the investment community, it also facilitates access to capital, thus helping to maintain liquidity in and a fair valuation of the company’s shares.
The success of an investor relations function often depends on the following:
\ The ease with which a listed company obtains access to new capital. Often investor relations activities help to develops relationships with the investor community over time so that participants become aware of the company and its investment
\ Liquidity achieved by the company’s shares. Regular updates to the investment community help create a higher profile forthe company. Depending on the availability of shares, this can attract pools of buyers and sellers and increase the potential for higher frequency trading in the company’s shares.
\ Fair valuation of the company’s shares. Communication with the investment community enables a company to record its performance and its strategy using publicly disclosed information. It also helps a company to understand how it is being evaluated and whether the market’s expectations are in line with its own
\ Availability of information for market ranking in terms of size, profitability, growth, etc. can help in peer benchmarking by investors. Investor relations will not automatically guarantee a company a heightened profile, easy access to capital, liquidity in its shares or a fair share price. There are other external factors in addition to a company’s own performance, including economic factors, confidence in the management and the competition for investors’ money which can have an impact on how a company is perceived by the investor community
Investor relations
Re turn Result Investor community \Institutional investors \Private investors \Analysts \Media Company Output – Information through investor relationsFair valuation
Flow of regulatory functions
Role of the Capital Market Authority (CMA)
\ Prudential Rules
\ The Resolution of Securities Disputes Proceedings Regulations
\ Anti-Money Laundering and Counter-Terrorist Financing Rules
\ Merger and Acquisition Regulations
\ Investment Funds Regulations
\ Corporate Governance Regulations
\ Real Estate Investment Funds Regulations
\ Securities Business Regulations
\ Authorised Persons Regulations
\ Market Conduct Regulations
\ Offers of Securities Regulations
\ Listing Rules Formation of the Capital Market Law Formation of the Capital Market
Introduction to CMA
The Capital Market Law was promulgated through Royal decree No. M/30 issued on 1424H/2003G. Article 4 of the Capital Market Law officially established the Capital Market Authority with the objective of formulating regulations to ensure an appropriate investment environment and the protection of investors in the Saudi Arabian capital market.
Functions and responsibilities of CMA
CMA’s functions are to regulate and develop the Saudi Arabian capital market by issuing the rules and regulations required to implement the provisions of the Capital Market Law. The basic objectives are to create an appropriate investment environment, boost investor confidence, reinforce transparency and disclosure standards across all the listed companies and protect investors and dealers from illegal acts in the market.
Duties of CMA
CMA is broadly 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 and the public from unfair and
unsound practices involving fraud, deceit, cheating, manipulation, and inside information trading \ Maintain fairness, efficiency, and transparency in
transactions of securities
\ Develop appropriate measures to reduce risks pertaining to transactions of securities
\ Develop, regulate, and monitor the issuance of securities and under-trading transactions
\ Regulate and monitor the activities of entities working under CMA
\ Regulate and monitor full disclosure of information related to securities and issuers.
Market Conduct Regulations
Market Conduct Regulations define the standard code of conduct for all participants to ensure the smooth functioning of the market and provide various rules to be followed by all market participants.
Some of the provisions and contents of the market conduct regulations from a broader perspective are:
Prohibition of manipulation and deceptive acts or practices
1. Any person or organization is prohibited from engaging in any activity relating to manipulation of the market or any acts of deception in connection with an order placed or transaction in a security.
2. No person or company shall directly or indirectly place an order or execute a transaction to give a false or misleading impression of trading activities or influence the market to create an artificial bid, price or trade price for any security.
3. Any action, including making a fictitious trade or effecting a trade in a security that involves no change in its beneficial ownership, will be considered as manipulative or deceptive.
4. Entering an order(s) for the sale/purchase of a security with the prior knowledge that an order(s) of substantially the same size, time and price for the sale/purchase of that security, has or will be entered is prohibited. 5. Purchasing or making offers to purchase/sell a security in
a pattern of successively higher or lower prices.
6. Entering an order(s) for the sale/purchase of a security to predetermine the sale, ask or bid price.
Insider trading
What is Insider trading?
Insider trading is the buying or selling of any company’s shares or other security listed on the stock exchange, by an individual or a group of individuals, who have access to non-public information about the company and take advantage of such information for vested interests.
Who is classified as an Insider?
An individual who is a key member of the management of the company or who has any family relationship with the management of the company or a business or contractual relationship with the management of the company would be considered an insider. An insider is also someone who has access to non-public information. <
