Insider Disclosures and Insider Trading Rules

Identifying Insiders, Trading Restrictions, and Disclosure Obligations

First: Introduction

Insiders — board members, senior executives, and others with access to material non-public information — occupy a unique position in capital markets. They have information advantages over other investors, and that asymmetry must be carefully managed to maintain market fairness. The Saudi regulatory framework addresses this through two complementary mechanisms: disclosure requirements (transparency of insider trades) and trading restrictions (preventing trading on inside information). Together, these mechanisms protect market integrity while allowing insiders to invest in their own companies.

This article examines the full insider trading framework: who qualifies as an insider, what restrictions apply, when disclosure is required, what blackout periods exist, and what penalties await violators. The Saudi framework is part of the Market Conduct Regulations, OSCO, and the Capital Market Law, with active CMA enforcement that has resulted in significant penalties in recent years. Understanding this framework is essential for board members, executives, compliance officers, and the professionals who advise them.

💡  Key Insight Insider trading is not a victimless crime — it transfers wealth from uninformed investors to insiders, undermining the basic fairness of the market. Beyond the regulatory risk, it damages the social contract between companies and their investors. Companies with strong insider compliance cultures don’t just avoid violations — they signal to the market that they take fairness seriously. This signal is increasingly valuable in attracting institutional investment.

Second: Defining Insiders

1. Categories of Insiders

1.1 Statutory Insiders

By position:

• Board members of the issuer.
• Executive management.
• Audit committee members.
• Other senior officers.

1.2 Employees with Access

• Those with access to material non-public information.
• By virtue of their role.
• In departments handling material info.
• Finance, M&A, strategy, legal.

1.3 First-Degree Relatives

Of statutory insiders:

• Spouse.
• Parents.
• Children.
• Trading attributed to insider.

1.4 Temporary Insiders

• External advisors.
• Auditors.
• Lawyers.
• Bankers (during transactions).
• With confidentiality agreements.

2. Insider Lists

2.1 The Requirement

• Listed companies maintain insider lists.
• Of all persons with access to material info.
• Updated continuously.
• For compliance and investigation.

2.2 Content

• Name.
• Position/role.
• Date of access.
• Reason for access.
• Date of cessation.

2.3 Confidentiality Agreements

• With all listed persons.
• Acknowledging obligations.
• Trading restrictions.
• Disclosure requirements.

3. The Information Standard

3.1 Material Non-Public Information

What qualifies:

• Not publicly disclosed.
• Would affect investor decisions if known.
• Or significantly affect share price.
• Same standard as material disclosure.

3.2 Examples

• Unreleased earnings.
• M&A discussions.
• Major contract wins/losses.
• Senior executive changes.
• Significant operational issues.

Third: Disclosure of Insider Trades

1. The Obligation

1.1 Personal Disclosure

Every trade by an insider:

• Must be disclosed.
• Through IFSAH.
• By the insider.
• Or company on insider’s behalf.

1.2 Timing

• Within 5 business days.
• From the date of transaction.
• Strict deadline.
• Common violation when missed.

1.3 Coverage

• All trades in company securities.
• Shares, bonds, derivatives.
• Direct trades.
• Trades through entities they control.
• Trades by first-degree relatives.

2. Required Information

2.1 Insider Identification

• Name.
• Position with the company.
• Relationship (if first-degree relative).

2.2 Transaction Details

• Date of transaction.
• Type (buy/sell).
• Number of shares.
• Price per share.
• Total value.

2.3 Holdings After Transaction

• Total shares held after.
• Percentage of share capital.
• Direct and indirect breakdown.

3. The Disclosure Process

3.1 Setup

• Insider account on IFSAH.
• Set up by company.
• With insider’s information.
• With authentication.

3.2 Submission

• By insider personally.
• Or through company representative.
• Following IFSAH template.
• With required information.

3.3 Verification

• Cross-check with broker confirmations.
• Verify accuracy.
• Document trail.
• Archive.

4. Disclosure About Insiders (Annual)

4.1 In Annual Report

Per CGR Article 90:

• List of insiders’ transactions during the year.
• Aggregate holdings.
• Changes over the year.
• Total at year end.

4.2 Quality

• Accurate and complete.
• Consistent with IFSAH disclosures.
• Reconciled.
• Audited.

Fourth: Trading Restrictions

1. Insider Trading Prohibition

1.1 The Core Rule

Per Market Conduct Regulations:

• No trading on material non-public information.
• By insiders.
• Or those who receive insider information.
• Strict liability for violations.

1.2 “Trading”

• Buying or selling.
• Direct trades.
• Through entities.
• Through relatives.
• Through derivatives.

1.3 “On Material Non-Public Information”

• Trading while possessing the information.
• Even if not the primary motive.
• Possession test (not motivation test).
• Stricter standard.

2. Blackout Periods

2.1 Pre-Announcement Blackouts

Before scheduled disclosures:

• Approximately 30 days.
• Before quarterly results.
• Before annual results.
• No trading by insiders.

2.2 Event-Driven Blackouts

• During pending material events.
• M&A discussions.
• Major transactions.
• Until disclosed and absorbed.

2.3 Window Periods

• Allowed trading periods.
• Outside blackouts.
• Typically after results released.
• And market has absorbed.

3. Tipping

3.1 The Prohibition

• Sharing inside information.
• With persons who may trade.
• Whether for compensation or not.
• Strict prohibition.

3.2 Liability

• Tipper liable.
• Tippee liable if traded.
• Chain of tippers/tippees.
• All in the chain at risk.

4. Pre-Cleared Trading

4.1 Concept

• Insiders submit trades for pre-clearance.
• Before executing.
• To company compliance.
• Allowed only in window periods.

4.2 Trading Plans (10b5-1 Type)

• Pre-arranged trading plans.
• Adopted when not in possession of material info.
• Provide affirmative defense.
• Increasing global adoption.

⚠️  Caution Many people assume that if they don’t actually use the inside information in their decision, they’re safe. This is wrong. The Saudi framework — and most major markets — use a “possession” test, not a “use” test. If you possess material non-public information and you trade, you violate the prohibition, regardless of whether the information motivated the trade. The safest practice: don’t trade when you possess material non-public information.

Fifth: Market Manipulation

1. The Prohibition

1.1 Per Market Conduct Regulations

• Prohibition on manipulating securities prices.
• By insiders or others.
• Through various means.
• Criminal offense.

1.2 Types of Manipulation

1.3 Trade-Based

• Wash trades (fake trades).
• Matched orders.
• Marking the close.
• Pump and dump.

1.4 Information-Based

• False or misleading information.
• Spreading rumors.
• Failing to correct misinformation.
• Creating false impressions.

1.5 Volume-Based

• Creating artificial volume.
• Cornering markets.
• Squeezing.
• Market dominance abuse.

2. Untrue Statements

2.1 Prohibition

• Making untrue statements about securities.
• That induce trading.
• Whether intentional or reckless.
• Strict regulatory approach.

2.2 Coverage

• Company statements.
• Individual statements.
• Media communications.
• Social media.

Sixth: Insider Compliance Programs

1. Compliance Framework

1.1 Insider Policy

• Comprehensive written policy.
• Approved by the Board.
• Regularly updated.
• Distributed to all insiders.

1.2 Key Elements

• Definitions and scope.
• Trading restrictions.
• Blackout periods.
• Pre-clearance procedures.
• Disclosure obligations.
• Consequences of violations.

2. Training

2.1 Initial Training

• For new insiders.
• Upon appointment.
• Comprehensive overview.
• With written acknowledgment.

2.2 Ongoing Training

• Annual refreshers.
• On regulatory updates.
• On case studies.
• On best practices.

2.3 For Family Members

• First-degree relatives.
• Of policy obligations.
• Of trading restrictions.
• Awareness.

3. Monitoring

3.1 Pre-Trade

• Pre-clearance system.
• Review by compliance.
• Check against blackouts.
• Check against insider lists.

3.2 Post-Trade

• Verification of disclosure.
• Reconciliation with broker.
• Audit trail.
• Reports.

3.3 Periodic Reviews

• Audit committee reviews.
• Internal audit reviews.
• External reviews.
• Continuous improvement.

4. Reporting

4.1 Internal

• To Audit Committee.
• To Board.
• To CEO.
• Compliance violations.

4.2 External

• To CMA.
• If required by regulations.
• For investigations.
• For cooperation.

Seventh: Enforcement and Penalties

1. CMA Authority

1.1 Investigation

• CMA actively investigates.
• Based on patterns.
• Trade-based surveillance.
• Complaints.

1.2 Tools

• Subpoena power.
• Trading records access.
• Communications review.
• Witness interviews.

2. Penalties for Insider Trading

2.1 Civil Penalties

• Disgorgement of profits.
• Plus penalties (often multiples).
• Large fines.
• Up to SAR 5 million and beyond.

2.2 Criminal Penalties

• Imprisonment.
• For serious offenses.
• Years in some cases.
• Criminal record.

2.3 Other Sanctions

• Ban from market activities.
• Ban from board positions.
• Permanent in serious cases.
• Professional consequences.

3. Penalties for Disclosure Violations

3.1 Late Disclosure

• Fines based on delay.
• Per disclosure violated.
• Repeated offenses higher.

3.2 Non-Disclosure

• More serious.
• Higher fines.
• Possible suspension.

3.3 False Disclosure

• Even higher penalties.
• Possible criminal referral.
• Major issue.

4. Recent Enforcement Trends

4.1 Increased Activity

• CMA more active.
• More cases pursued.
• Higher penalties.
• Public deterrence.

4.2 Publicized Cases

• CMA publishes violations.
• With names.
• Significant reputation impact.
• Deterrent effect.

Eighth: Common Pitfalls

1. Failure to Disclose Promptly

1.1 Causes

• Insider unaware of timeline.
• Delegation issues.
• Technical problems.
• Travel/absence.

1.2 Prevention

• Insider awareness training.
• Automatic reminders.
• Backup procedures.
• Company support.

2. Trading During Blackouts

2.1 Causes

• Confusion about dates.
• Family member trades.
• Automatic plans.
• Misunderstanding.

2.2 Prevention

• Clear calendar.
• Pre-clearance required.
• Family member awareness.
• Plans review.

3. Family Member Issues

3.1 The Issue

• Trades attributed to insider.
• Family member unaware.
• Significant violations possible.

3.2 Prevention

• Education of family members.
• Pre-clearance for them too.
• Monitoring of their accounts.
• Communication.

4. Inadvertent Information Sharing

4.1 The Issue

• Casual conversations.
• Social settings.
• Tipping without realizing.

4.2 Prevention

• Awareness of risks.
• Training on what to avoid.
• Conservative behavior.
• When in doubt, silent.

Ninth: International Comparisons

1. SEC (USA)

1.1 Rule 10b-5

• Foundational insider trading rule.
• Broad anti-fraud provision.
• Significant case law.
• Strong enforcement.

1.2 Section 16

• Insider disclosure requirements.
• Forms 3, 4, 5.
• Short-swing profit rules.
• Specific framework.

2. EU Market Abuse Regulation (MAR)

2.1 Coverage

• Comprehensive framework.
• Insider trading.
• Market manipulation.
• Disclosure requirements.

2.2 Enforcement

• Active across EU.
• Coordinated.
• Significant penalties.
• Harmonization.

3. UK FCA

3.1 Framework

• Comprehensive insider rules.
• Strong enforcement.
• Civil and criminal.
• Active oversight.

4. Global Trends

• Convergence of standards.
• Stronger enforcement.
• Higher penalties.
• Cross-border cooperation.
• Saudi alignment.

Tenth: Insider Best Practices

1. Personal Compliance

1.1 Understanding Status

• Know you’re an insider.
• Understand the scope.
• Stay updated on regulations.
• Ask questions when unclear.

1.2 Following Procedures

• Pre-clear all trades.
• Respect blackout periods.
• Disclose promptly.
• Document everything.

1.3 Confidentiality

• Protect insider information.
• Don’t share casually.
• Even with family.
• Even hypothetically.

2. Family Education

• First-degree relatives aware.
• Their trades attributed.
• Pre-clearance for them.
• Coordinated approach.

3. Documentation

• Keep records of clearances.
• Communications about trading.
• Decisions and reasoning.
• Defense if challenged.

4. When in Doubt

• Don’t trade.
• Consult compliance.
• Consult legal counsel.
• Better safe than sorry.

Eleventh: Company Best Practices

1. Robust Compliance Program

1.1 Foundation

• Comprehensive policy.
• Senior commitment.
• Adequate resources.
• Strong culture.

1.2 Operation

• Pre-clearance system.
• Insider list management.
• Blackout calendar.
• Monitoring tools.

2. Training

• Regular and thorough.
• For all insiders.
• Family member sessions.
• Continuous awareness.

3. Technology

• Compliance systems.
• Trade monitoring.
• Insider list automation.
• Reporting tools.

4. Culture

• Tone from the top.
• Consistent message.
• Zero tolerance for violations.
• Open communication.

Twelfth: Best Practices Summary

1. For Insiders

• Know your status: clearly.
• Follow procedures: always.
• Disclose promptly: every time.
• Protect information: rigorously.

2. For Companies

• Strong policies: comprehensive.
• Active monitoring: continuous.
• Education: ongoing.
• Culture: of compliance.

3. For Compliance Teams

• Pre-clearance discipline: strict.
• Insider list rigor: accurate.
• Investigation capability: ready.
• Cooperation with CMA: professional.

4. For Boards

• Oversight: active.
• Reporting: transparent.
• Tone: from the top.
• Standards: high.

Conclusion

Insider disclosures and trading rules are among the most consequential elements of capital market regulation. They protect market integrity, ensure fair access to information, and maintain investor confidence. The Saudi framework, anchored in Market Conduct Regulations, OSCO, and Capital Market Law, is comprehensive and increasingly enforced. Violations result in significant penalties — financial, criminal, professional, and reputational.

For insiders, compliance is both an obligation and an opportunity. Following the rules — strict adherence to blackout periods, timely disclosure, professional handling of inside information — protects the individual and supports the market. For companies, building strong insider compliance programs is essential infrastructure. As the Saudi market continues to develop and attract international investment, the quality of insider compliance becomes increasingly visible to institutional investors. Companies that excel in this area gain trust; those that fail face increasingly serious consequences.

🎯  Essential Points to Remember (1) Insiders include statutory positions, employees with access, first-degree relatives, and temporary insiders. (2) Insider lists must be maintained continuously by listed companies. (3) Disclosure of trades within 5 business days through IFSAH. (4) Insider trading prohibition: no trading while possessing material non-public information. (5) Blackout periods (~30 days) before financial announcements. (6) Tipping prohibition extends liability to the chain. (7) Pre-clearance systems are best practice. (8) Penalties: fines (up to SAR 5M+), imprisonment, bans, reputation damage. (9) Common pitfalls: late disclosures, blackout violations, family member trades, inadvertent tipping. (10) Strong compliance programs require policies, training, monitoring, and culture.

Contact Us

FAQS

Who qualifies as an insider under the Saudi regulatory framework?

Four categories: statutory insiders by position (board members, executive management, audit committee members), employees with access to material non-public information through their role in departments like finance or strategy, first-degree relatives of statutory insiders (spouse, parents, children) whose trades are attributed to the insider, and temporary insiders such as external auditors, lawyers, and bankers during transactions.

What is the insider trading prohibition and what standard does Saudi Arabia apply?

The Market Conduct Regulations prohibit trading while in possession of material non-public information, and Saudi Arabia applies a possession test rather than a use test, meaning that if an insider possesses material non-public information and trades, a violation occurs regardless of whether the information actually motivated the trading decision.

What are blackout periods and how long do they typically last?

Blackout periods are restricted trading windows during which insiders may not trade in company securities, typically lasting approximately 30 days before the announcement of quarterly or annual financial results, and they also apply during pending material events such as M&A discussions or major transactions until they are publicly disclosed and the market has absorbed the information.

References and Sources

• Market Conduct Regulations — CMA.
• OSCO — Insider Trading and Disclosure Provisions.
• Capital Market Law (Royal Decree M/30).
• Corporate Governance Regulations.
• Tadawul Listing Rules.
• SEC Rule 10b-5 and Section 16 (reference).
• EU Market Abuse Regulation (reference).
• UK FCA Market Conduct Rules (reference).
• IOSCO Principles on Insider Trading.
• PwC, KPMG, EY, Deloitte — Insider Compliance Guides.