0%

#

## Welcome

Welcome to the Insider Trading and Market Manipulation Training. This video contains audio and a transcript. To listen to the audio, please use your headphones or adjust your speakers.

Select the Play button to begin.

Transcript

Review the course objectives and tips on how to navigate this course.

Scroll down to continue.

## What You Will Learn

After completing this training, you will be able to:

- Describe the importance of upholding market integrity, emphasizing the bank's commitment to ethical conduct and transparency
- Describe the differences between Insider Trading & Market Manipulation
- Recognize indicators of Insider Trading and Market Manipulation, enabling timely intervention and prevention
- Describe the legal landscape governing Insider Trading and Market Manipulation, both locally and internationally
- Analyze case studies to understand the practical implications and consequences of violations
- Recognize the bank's stance on these issues and the importance of adhering to internal policies and procedures

## Course Navigation Tips

This course is divided into 6 topics and an end-of-course assessment.

The Home button at the end of each topic takes you to the Home page.

The Menu button provides access to the individual topics.

The Resources button provides a list of useful links.

The Switch Language button lets you switch to a different language.

The Close button ends your training session and closes the course window.

## Coming Next

In the next topic, Market Integrity, we’ll address the importance of ethical market practices and compare Insider Trading and Market Manipulation.

## Market Integrity

In this topic, you’ll learn about the importance of market integrity and the different threats it faces.

Scroll down to continue.

## Threats to Market Integrity in Saudi-Listed Companies

In the realm of financial markets, two practices stand out as significant threats to market integrity: Insider Trading and Market Manipulation. Both practices are detrimental to the trust investors place in the market and can distort the true value of securities.

Select each practice to learn more.

The Dangers of Insider Trading

### The Dangers of Insider Trading

The Saudi Stock Exchange (Tadawul) is the heartbeat of the nation's financial sector, with numerous companies listed. These entities are not only economic pillars, but also standard-bearers for market integrity.

Within Tadawul, listed companies are expected to respond promptly to new information. This responsiveness ensures that all market participants operate on a level playing field. However, the misuse of non-public, material information for Insider Trading can shatter this equilibrium.

The Dangers of Market Integrity

### The Dangers of Market Integrity

The swift dissemination of information, while crucial, also poses serious risks. Misleading or false information can lead to Market Manipulation, affecting stock prices and investor confidence.

To safeguard against these practices, Saudi Arabia has implemented the Capital Market Law and the Market Conduct Regulations. These guidelines set the standards for transparency, ensuring that listed companies uphold the highest levels of integrity and are protected against both Insider Trading and Market Manipulation.

## Insider Trading & Market Manipulation

Let’s explore Insider Trading and Market manipulation in more detail, focusing on their definitions and implications for SNB.

Select each image to learn more.

Insider Trading
Market Manipulation

### Insider Trading

- Definition: Insider Trading refers to the act of trading based on material, non-public information related to a specific company. This inside information, if disclosed, would have a significant impact on the company's stock price.
- Implications for SNB: Employees of SNB with access to sensitive, unreleased information (like financial results, business deals, or upcoming mergers) might be tempted to trade SNB's shares to gain an unfair advantage. This not only undermines market integrity but can also lead to legal repercussions for the individuals involved and reputational damage for SNB.

### Market Manipulation

- Definition: This involves trading activities that create a false or misleading impression of the market for a company's securities. The intent is often to artificially influence the price or trading volume of the securities.
- Implications for SNB: A company’s stock price can be affected by such manipulative practices. For instance, if external entities engage in 'wash' trading (buying and selling without changing ownership), it can give a false impression of the company’s stock demand or trading activity.

## Insider Trading and Market Manipulation: Differences and Similarities

The core difference between the two lies in the nature of the information used. Market Manipulation seeks to deceive investors about the general market conditions for a security, while Insider Trading exploits inside information/Material Non-Public Information about the company.

However both practices are similar in that they are prohibited by the Market Conduct Regulations. SNB, as a listed company regulated by the Capital Markets Authority (CMA), has a duty to uphold market integrity. It must ensure that employees are educated about these regulations and the consequences of violations, along with ensuring that sensitive information is securely handled.

You can learn more by reading Articles 3 and 4 of the Market Conduct Regulations.

## Material Non-Public Information (MNPI)

MNPI refers to specific, sensitive information about a company that has not been disclosed to the general public. If this information were to be disclosed, it could significantly impact the company’s stock price or value on Tadawul.

Select each button to learn more.

Key Characteristics of MNPI

### Key Characteristics of MNPI

MNPI has two main characteristics:

- Materiality: The information is so important that a reasonable investor or stakeholder would consider it vital in making decisions related to SNB. This could encompass details like upcoming mergers, financial results, strategic shifts, or other significant corporate events
- Non-Public: The information hasn't been shared with the general public through press releases, regulatory filings, or other official communication channels of SNB

Examples of MNPI

### Examples of MNPI

Common examples of MNPI include:

- Financial Results: Unpublished quarterly or annual earnings results of the company
- Strategic Partnerships: Information about a potential collaboration or partnership before the official announcement (i.e., mergers and acquisitions)
- Regulatory Interactions: Details about the company’s interactions with regulators that haven't been made public
- Major Corporate Developments: Changes in the company’s senior management, significant business decisions, or the introduction of a new service

## Protecting MNPI

If you come across any information that you believe might be MNPI during your work at SNB:

- Treat it as confidential
- Avoid discussing it outside official channels
- Refrain from trading SNB shares based on this information

What are the consequences of misuse?
Misusing MNPI, either by trading based on it or disclosing it without authorization, can lead to severe legal consequences, including penalties and/or imprisonment.

Both your personal reputation and SNB's corporate reputation can be tarnished due to the mishandling of MNPI.

How can we prevent misuse?
The CMA has set strict regulations to prevent the misuse of MNPI. As an employee of SNB, a company listed on Tadawul, you're bound by these regulations. Upholding market integrity by appropriately handling MNPI is not just about adhering to the rules; it's about fostering a culture of transparency, trust, and integrity within SNB.

## Coming Next

Now that you understand market integrity, in the next topic, Insider Trading, we will investigate the different forms of Insider Trading, along with its red flags and indicators.

## Insider Trading

In this topic, you’ll learn about Insider Trading and how to prevent it.

Scroll down to continue.

## Regulatory Framework: Capital Market Law

For SNB employees, understanding the regulatory landscape governing Insider Trading in Saudi Arabia is paramount.

Let’s start by looking at the Capital Market Law, and in particular Article 50, which delineates the responsibilities and prohibitions related to Insider Trading:

- Individuals who have access to inside information are strictly prohibited from both trading based on this information and from disclosing it to unauthorized individuals
- Inside information is described as details not available to the general public. If such information were disclosed, it would significantly impact the price or value of the related security

## Regulatory Framework: CMA's Market Conduct Regulations

The CMA's Market Conduct Regulations provide a more detailed framework on Insider Trading. For SNB employees, adhering to these regulations is not just about compliance. It's about upholding the integrity of the financial market and preserving the trust and reputation of SNB in the financial community.

Select each image to learn more.
Definition of Inside Information

Definition of Inside Information

The regulations define inside information as details that:

- Relate to a security or its orders
- Have not been disclosed to the general public
- Would have a material effect on the price or value of the security if it were made public

Scope of the Regulations

Scope of the Regulations

The regulations apply to all traded securities. The focus is on securities whose price or value would be significantly affected if inside information about them were disclosed.

Identification of Insiders

Identification of Insiders

The regulations identify insiders as:

- Directors, senior executives, or employees of the issuer of a security related to inside information
- Individuals who obtain inside information through family, business, or contractual relationships

## Preventing Insider Trading

Preventing Insider Trading relies on staff being able to identify the warning signs. The following are key red flags and indicators that should raise suspicion and prompt further investigation or action.

Select each button to learn more.

Red Flags

### Red Flags

In the context of Insider Trading prevention, red flags include:

1. Unusual Trading Activity: Sudden spikes in trading volume or price movements without apparent news or events can be indicative of Insider Trading. Such unusual activity often precedes major announcements
2. Timing of Trades: Suspicion arises when employees or clients execute significant trades just before significant public announcements. For example, purchasing a large number of shares right before a positive earnings report can raise concerns
3. Consistent Profits: Employees or clients consistently making profits from trading in securities of the bank's listed corporate clients may indicate access to non-public information
4. Excessive Tips or Rumors: Rumors or tips circulating within the listed companies regarding upcoming corporate client announcements may be cause for concern. Employees should report such information promptly
5. Unexplained Wealth: Employees or clients suddenly displaying unexplained wealth, especially if it aligns with the timing of certain trades or information disclosures, can be a red flag
6. Multiple Accounts: Individuals using multiple accounts, both personal and corporate, for trading can obscure their activities and intentions
7. Insider Relationships: Close and unjustified relationships between employees and listed corporate clients can facilitate the exchange of non-public information. These relationships should be carefully monitored
8. Unusual Investment Vehicles: The use of unusual investment vehicles or complex financial instruments that are not typical for an employee or client may indicate attempts to conceal Insider Trading

Indicators

### Indicators

Indicators include:

1. Unexplained Trading Patterns: Employees who consistently engage in trades that differ from their established trading behavior may raise suspicions. This is relevant because such behavior may indicate access to non-public information, leading to Insider Trading
2. Overwhelming Insider Influence: Situations where certain employees or clients have a disproportionate influence over trading decisions, especially regarding corporate client securities, can indicate Insider Trading activities
3. Abnormal Trading Hours: Trading activities occurring at unusual times, particularly just before important announcements, may be indicative of Insider Trading
4. Inexplicable Trading Correlations: Employees or clients consistently making trades that align closely with subsequent market movements or corporate client developments may be a cause for concern
5. Access to Non-Public Information: Instances where employees have access to sensitive non-public information but engage in securities trading related to that information should be closely monitored
6. Excessive Urgency in Trading: Rapid and high-volume trading by employees or clients without a reasonable explanation, especially involving corporate client securities, could indicate Insider Trading
7. Synchronized Trading: Coordination or synchronization of trading activities among employees or clients, leading to significant market impacts, should be scrutinized
8. Inconsistent Statements or Behavior: Discrepancies between statements made by employees or clients and their trading behavior could be a sign of Insider Trading

## Identifying Insider Trading

Insider Trading involves the misuse of confidential, material information for trading, for personal unethical gain. Let’s explore some scenarios involving Insider Trading and see if you can react accordingly to protect the bank!

## Saleh’s Opportunity

Saleh, who works in the finance department, has stumbled across a confidential report detailing the bank’s upcoming quarterly results. To his surprise, the results are much better than market expectations.

He instantly spots an opportunity; if he was to invest some of his own money in the company’s rising stocks, he would be in for a lucrative windfall once the results are made public. He decides to capitalize on the opportunity and invests a significant portion of his wages in the stocks.

Two weeks later when the company announces its quarterly results, the stock price rises as expected and Saleh sells his stock for a profit.

## What Do You Think?

Did Saleh do the right thing?

Select the best response and then select Submit.

Yes, Salah is entitled to use the document’s information to trade as it is available to the public.
Yes, Salah is entitled to use the document’s information to trade as it is available to the public.
Yes, as an employee of the bank Saleh is entitled to use it to trade, even if it isn’t available to the public.
Yes, as an employee of the bank Saleh is entitled to use it to trade, even if it isn’t available to the public.
No, the information was not available to the public so Saleh should not have used it to trade.
No, the information was not available to the public so Saleh should not have used it to trade.
Submit

That’s not right.

Saad should not have used the information to trade as it is an example of direct trading. Direct trading refers to the act of buying or selling securities based on inside information that an individual possesses due to their position within the company. The Capital Market Law and CMA's Market Conduct Regulations strictly prohibit employees from using such confidential information for personal gain.

That’s not right.

Saad should not have used the information to trade as it is an example of direct trading. Direct trading refers to the act of buying or selling securities based on inside information that an individual possesses due to their position within the company. The Capital Market Law and CMA's Market Conduct Regulations strictly prohibit employees from using such confidential information for personal gain.

That’s right.

Saad should not have used the information to trade as it is an example of direct trading. Direct trading refers to the act of buying or selling securities based on inside information that an individual possesses due to their position within the company. The Capital Market Law and CMA's Market Conduct Regulations strictly prohibit employees from using such confidential information for personal gain.

## Hassan’s Payday

Let’s review another scenario, this time involving trading in the stock of a bank's listed corporate client.

Select the arrow button on the right to learn more.

### Background

Hassan, a client relationship manager who works closely with ABC Ltd. has just learned that they are about to secure a major overseas contract that will generate significant revenue.

He knows that this contract will boost the corporate client's stock, signaling a lucrative payday for the company’s stockholders.

### The Investment

Realizing the potential return on investment Hassan decides to buy SAR 50,000 worth of his client’s stocks.

A week later, ABC Ltd. finalizes the deal and makes it public knowledge. When the news breaks, ABC Ltd.’s stock price surges and Hassan sells his shares for a profit.

### What Did Hassan Do Wrong?

Employees of banks that provide corporate banking services may have access to sensitive information about the major corporate clients that are listed companies. Directly trading on this information, which is not yet public, is a violation of the Capital Market Law and the Market Conduct Regulations.

As a bank employee Hassan should know this, and should not have traded based on the information he received.

## Ameera’s Big Idea

On a busy day in the finance department, news is spreading that the bank will be announcing a new transformative strategic partnership.

Ameera is one of the employees to hear the news. She is well aware that the partnership could have a big impact on the company’s share price, but knows she can’t trade on it due to the announcement not being made public yet.

“What if I was to get my friend Sara to trade the shares on my behalf?” she wonders.

## What Do You Think?

What should Ameera do in this situation?

Select the best response and then select Submit.

Keep the information confidential and choose not to trade the bank’s shares.
Keep the information confidential and choose not to trade the bank’s shares.
Advise Sara to trade on her behalf as she is not a bank employee.
Advise Sara to trade on her behalf as she is not a bank employee.
Trade the bank’s shares herself as the information is not considered MNPI.
Trade the bank’s shares herself as the information is not considered MNPI.
Submit

That’s right.

Indirect trading involves influencing or guiding others to trade on one's behalf based on inside information. While Ameera might not be the one executing the trade, guiding Sara to do so based on confidential information is equally prohibited under the Capital Market Law and the Market Conduct Regulations.

Both Ameera and Sara could face severe punishment if found guilty of indirect trading.

That’s not right.

Indirect trading involves influencing or guiding others to trade on one's behalf based on inside information. While Ameera might not be the one executing the trade, guiding Sara to do so based on confidential information is equally prohibited under the Capital Market Law and the Market Conduct Regulations.

Both Ameera and Sara could face severe punishment if found guilty of indirect trading.

That’s not right.

Indirect trading involves influencing or guiding others to trade on one's behalf based on inside information. While Ameera might not be the one executing the trade, guiding Sara to do so based on confidential information is equally prohibited under the Capital Market Law and the Market Conduct Regulations.

Both Ameera and Sara could face severe punishment if found guilty of indirect trading.

## Salman’s Recommendation

Review this scenario involving indirect trading in the stock of a bank's listed corporate client.

Select each tab to learn more.

Salman’s Tip
Yasmin’s Success
What Did They Do Wrong?

### Salman’s Tip

Salman in the credit risk department has just learned about a listed corporate client's upcoming debt restructuring, which is expected to be favorable for the company.

With a potential windfall at stake, he urges his sister Yasmin to invest in the client's stock, hinting at upcoming positive financial changes.

### Yasmin’s Success

Yasmin buys the shares, and when the debt restructuring is publicly announced, the stock price rises dramatically.

She decides to sell her shares quickly, and cashes in on the tip given to her by Salman, making a considerable profit in the process.

### What Did They Do Wrong?

Indirect trading in the context of a bank's corporate clients that are listed companies involves an employee guiding or influencing someone else to trade the client's stock based on confidential information.

This form of trading, even if not executed directly by the employee, is a violation of the Capital Market Law and a breach of the Market Conduct Regulations.

## Tipping: A Major Acquisition

In a recent board meeting, members were made aware that the acquisition of a major Saudi company is likely in the coming weeks. Laila, who’s on the board, is one of the employees entrusted with the information.

Later that day, Laila is out for lunch with her friends and casually mentions the development.

Her friend Mariam decides to act on this tip and buys shares in the bank. When the acquisition is announced, the stock price jumps, and Mariam benefits directly from the tip.

## What Do You Think?

Did Laila do anything wrong in this situation?

Select the best response and then select Submit.

No, she didn’t knowingly tip Mariam about the acquisition.
No, she didn’t knowingly tip Mariam about the acquisition.
Yes, she tipped Mariam with confidential information that gave her an unfair advantage.
Yes, she tipped Mariam with confidential information that gave her an unfair advantage.
No, she didn’t benefit from the trade directly herself so no laws were broken.
No, she didn’t benefit from the trade directly herself so no laws were broken.
Submit

That’s not right.

Tipping is the act of sharing inside information without personally trading on it. While Laila might not benefit directly from the trade, providing such information gave Mariam an unfair advantage in the market. The Market Conduct Regulations prohibit the disclosure of inside information to unauthorized individuals.

That’s right.

Tipping is the act of sharing inside information without personally trading on it. While Laila might not benefit directly from the trade, providing such information gave Mariam an unfair advantage in the market. The Market Conduct Regulations prohibit the disclosure of inside information to unauthorized individuals.

That’s not right.

Tipping is the act of sharing inside information without personally trading on it. While Laila might not benefit directly from the trade, providing such information gave Mariam an unfair advantage in the market. The Market Conduct Regulations prohibit the disclosure of inside information to unauthorized individuals.

## Tipping: Sami’s Good News

Review the following scenario concerning tipping about a bank's listed corporate client.

Select each image to learn more.

Background
The Tip
What Did They Do Wrong?

### Background

In the corporate banking department, Sami has just left a meeting with his boss where they discussed some exciting news about a client's expansion plans.

Sami is thrilled with the news as it means he could be allocated some new assignments, which will help build his profile in the bank.

### The Tip

Later Sami bumps into his neighbor and shares his big news about the plans, along with its benefits for him. Happy for Sami, the neighbor congratulates him and heads home. However, on the way he begins to think of the potential money he could make out of such a big development.

He decides to invest a large sum in the client’s stocks. When the expansion is publicly announced, the stock price rises as expected, allowing him to cash in on Sami’s tip.

### What Did They Do Wrong?

When a bank employee shares confidential information about a corporate client with someone else, without personally trading on it, it's considered tipping. This act compromises the integrity of the financial markets and is strictly prohibited under the Market Conduct Regulations.

## Coming Next

Now that you can recognize the different forms of Insider Trading, in the next topic, Market Manipulation, we will investigate the different forms of Market Manipulation and the laws that govern them.

## Market Manipulation

In this topic, you will learn about the different types of Market Manipulation along with red flags and indicators.

Scroll down to continue.

## Regulatory Framework: Capital Market Law

As employees of a listed company, it's essential for SNB employees to understand the regulatory framework surrounding Market Manipulation in Saudi Arabia.

Let’s start by looking at Article 49 of the Capital Market Law which contains important provisions regarding Market Manipulation. This article is designed to prevent actions that distort the market, mislead investors, or create unfair advantages.

Select each button to learn more.

Prohibition of Market Manipulation

Article 49 prohibits individuals and entities from engaging in any form of Market Manipulation. Market Manipulation includes actions that:

- Create a false or misleading impression about the market, security prices, or the value of securities
- Influence third parties to buy, sell, subscribe to securities, or refrain from doing so
- Manipulate the exercise or non-exercise of rights associated with securities

Types of Prohibited Manipulation

Article 49 outlines several types of manipulation that are strictly prohibited. These include:

- Creating False Impressions: Engaging in actions that create a false impression of active trading in a security when it doesn't reflect reality. This includes deceptive transactions and orders that don't involve genuine ownership transfers
- Price Influence: Attempting to influence the price of a security or securities through a series of transactions to induce others to buy or sell, leading to price changes
- Stabilization: Conducting a series of transactions, such as buying, selling, or both, in a security to artificially stabilize its price

## Regulatory Framework: CMA's Market Conduct Regulations

The CMA's Market Conduct Regulations further define Market Manipulation and provide guidelines to prevent it. It’s essential for SNB employees to adhere to these regulations to maintain market transparency and ensure fair and equitable treatment of all market participants.

Select each image to learn more.
Definition of Market Manipulation

Definition of Market Manipulation

Market Manipulation is explicitly defined as engaging in activities that create false or misleading impressions, distort supply and demand, or artificially influence security prices.

Prohibited Actions

Prohibited Actions

The regulations explicitly prohibit actions such as spreading false information, engaging in deceptive trading practices, and engaging in transactions that disrupt the normal trading of securities.

Penalties

Penalties

The regulations specify penalties for Market Manipulation, which include fines, suspension from trading, and other measures aimed at preserving market integrity.

## Preventing Market Manipulation

Preventing potential Market Manipulation activities is crucial for maintaining market integrity. Let’s look at the red flags and indicators that should raise suspicion and prompt further investigation.

Select each icon to learn more.

Red Flags

Red flags are specific warning signals that are more direct and immediate than indicators. They are specific actions, behaviors, or situations that strongly indicate the likelihood of Market Manipulation. Red flags include:

- Unusual Trading Activity: Sudden and unexplained spikes in trading volume or price movements that are not aligned with market fundamentals
- Abnormal Order Placement: Placing a large number of orders and then canceling them before execution, contributing to market disorder
- Fake News Dissemination: Spreading false or misleading information about a listed company, leading to abrupt price changes
- Highly Irregular Trading Patterns: Consistently engaging in trading practices that disrupt market equilibrium and security prices
- Excessive Use of Leverage: Employing leverage to magnify trading positions beyond reasonable limits, posing risks to market stability

Indicators

Indicators are broader signs or cues that suggest the possibility of Market Manipulation. They are general characteristics or circumstances that might raise suspicion but do not necessarily confirm the presence of wrongdoing. Indicators include:

- Unexplained Market Volatility: Frequent and unexplained price fluctuations in a security or market segment
- Pattern of Rapid Order Cancellation: Consistently canceling orders shortly after placement without clear reasons
- Inconsistent News Sources: Relying on unverified or questionable news sources for investment decisions
- High Frequency of Unauthorized Transactions: Engaging in a disproportionately high number of transactions without proper authorization
- Suspicious Trading Coordination: Observing multiple traders acting in concert to influence a security's price

## Identifying Market Manipulation

Now that you are familiar with the red flags and indicators, let’s investigate the different forms of Market Manipulation you might need to identify, along with some examples of them in action.

Select each practice to learn more.

Rumors/False Information Dissemination

### Rumors/False Information Dissemination

This involves spreading false or misleading information about a listed company to influence its stock price.

For example, an individual posts fake news online, falsely claiming a listed company is facing financial difficulties. This causes panic selling among investors, leading to a sharp decline in the company's stock price.

Painting the Tape

### Painting the Tape

Painting the tape involves engaging in a large number of trades to create the illusion of increased trading activity and attract other investors.

For instance, a group of traders repeatedly buy and sell a security among themselves at slightly higher prices, creating the impression of high demand. This entices other investors to join in, driving up the stock price.

Wash Trading

### Wash Trading

Wash trading refers to simultaneously buying and selling a security to create fake trading volume and manipulate its price.

Consider this example, an individual buys and sells a stock multiple times with the same trading partner to inflate trading volume, giving the appearance of increased market interest.

Churning

### Churning

Churning involves excessive trading in a client's account to generate commissions for the broker while not benefiting the client.

An example would be a broker excessively trading in a client's account without regard for the client's investment objectives, solely to generate commissions.

Spoofing

### Spoofing

Spoofing refers to the practice of placing orders to buy or sell a security, with the intent to cancel them before execution. Doing so creates a false impression of market interest.

For example, a trader places a large buy order for a security but cancels it before execution to create the illusion of strong demand. Other traders react by buying, causing the stock price to rise.

## Check Your Knowledge

Which of the following statements concerning Market Manipulation are true?

Select all that apply and then select Submit.

Spoofing involves buying and selling a security to create fake trading volume and manipulate its price.
Spoofing involves buying and selling a security to create fake trading volume and manipulate its price.
While Market Manipulation distorts supply and demand, it doesn’t artificially influence security prices.
While Market Manipulation distorts supply and demand, it doesn’t artificially influence security prices.
Indicators might raise suspicion but do not necessarily confirm the presence of wrongdoing.
Indicators might raise suspicion but do not necessarily confirm the presence of wrongdoing.
Suspicious Trading Coordination is when multiple traders act in concert to influence a security's price
Suspicious Trading Coordination is when multiple traders act in concert to influence a security's price
Submit

That’s right.

Wash trading involves buying and selling a security to create fake trading volume and manipulate its price.

Market Manipulation can create a false or misleading impression, distort supply and demand, or artificially influence security prices.

Red flags strongly indicate the likelihood of Market Manipulation while indicators might raise suspicion without confirming any wrongdoing.

Observing multiple traders acting in concert to influence a security's price is referred to as Suspicious Trading Coordination.

That’s partially right.

Wash trading involves buying and selling a security to create fake trading volume and manipulate its price.

Market Manipulation can create a false or misleading impression, distort supply and demand, or artificially influence security prices.

Red flags strongly indicate the likelihood of Market Manipulation while indicators might raise suspicion without confirming any wrongdoing.

Observing multiple traders acting in concert to influence a security's price is referred to as Suspicious Trading Coordination.

That’s not right.

Wash trading involves buying and selling a security to create fake trading volume and manipulate its price.

Market Manipulation can create a false or misleading impression, distort supply and demand, or artificially influence security prices.

Red flags strongly indicate the likelihood of Market Manipulation while indicators might raise suspicion without confirming any wrongdoing.

Observing multiple traders acting in concert to influence a security's price is referred to as Suspicious Trading Coordination.

Incorrect. Please try again.

## Coming Next

Now that you are familiar with Market Manipulation, in the next topic, Case Studies, we will review some notable case studies involving incidents of Insider Trading and Market Manipulation.

## Case Studies

In this topic, you will review some notable case studies involving Insider Trading and Market Manipulation.

Scroll down to continue.

## Case Study 1: Mobily Insider Trading and Market Manipulation

Let’s start by exploring the Mobily Insider Trading and Market Manipulation case of 2014.

Select each tab to learn more.

What Happened?
Effect on Mobily
Stock Price
Was the Law Broken?
Can They be Punished?

### What Happened?

In 2015, significant accounting discrepancies were discovered within Etihad Etisalat, commonly known as Mobily, from 2013 to 2015.

These discrepancies were deliberate manipulations that led to a restatement of 18 months of earnings, causing a sharp decline in the company's profits by SAR 1.43 billion for the year 2013 and the first half of 2014. The revelation had a profound impact on Mobily's stock price, causing it to plummet drastically.

Before these accounting errors were publicly announced, several individuals, including Abdulaziz, the former chairman, and his son, Hisham, began trading shares based on this insider information. Their actions, combined with those of other key players like Mohammed and his son, Faisal, indicated clear Insider Trading activities.

These individuals managed to avoid significant financial losses by acting on this non-public material information, while many unsuspecting investors faced substantial losses due to the sudden drop in stock price.

### Effect on Mobily Stock Price

On the 3rd of November 2014, Mobily publicly disclosed accounting errors affecting its 2013 and 1st half of 2014 financial statements, stemming from revenue recognition mistakes and issues with its fibre-optic network leasing.

Mobily's stock price declined by approximately 26.83% within a week of the announcement.

### Was the Law Broken?

Due to their actions, the men involved were in violation of a number of laws, specifically:

- Article (50) of the Capital Market Law (Insider Trading)
- Articles (5) and (6) of the Market Conduct Regulations
- Specific clauses of the Corporate Governance Regulations and the Listing and Registration Rules
- Article 49 (Market Manipulation due to false financial reporting)

### Can They be Punished?

All of the men involved were brought to justice and received a range of penalties:

- Abdulaziz was fined SAR 100,000 and prohibited from certain financial activities for three years
  - His investment company, Abdulaziz Al-Sughyir for Commercial Investment, was fined SAR 280,948,800
- Hisham Abdulaziz was fined SAR 100,000, with a three-year financial activity ban
- Mohammed was fined SAR 200,000, ordered to pay SAR 30,493,325.75, with a three-year financial activity ban
- Faisal was fined SAR 100,000, with a three-year financial activity ban
- Senior Executives and Board of Directors were fined and prohibited from specific roles

## Check Your Knowledge

Which of the following statements concerning this case are true?

Select all that apply and then select Submit.

The employees engaged in Insider Trading but did not engage in Market Manipulation.
The employees engaged in Insider Trading but did not engage in Market Manipulation.
The timing of the employees trades should've been a major red flag.
The timing of the employees trades should've been a major red flag.
Unexplained wealth would've been a likely factor in the men’s eventual capture and conviction.
Unexplained wealth would've been a likely factor in the men’s eventual capture and conviction.
Submit

That’s right.

The employees in this case were guilty of Insider Trading but not Market Manipulation. They used their Insider Information to time the sale of their stocks just before the value plummeted, while other unsuspecting stock holders made huge losses.

While the employees were able to avoid major losses, they didn’t gain any wealth from the trades, so unexplained wealth would not have been a factor in their conviction.

That’s partially right.

The employees in this case were guilty of Insider Trading but not Market Manipulation. They used their Insider Information to time the sale of their stocks just before the value plummeted, while other unsuspecting stock holders made huge losses.

While the employees were able to avoid major losses, they didn’t gain any wealth from the trades, so unexplained wealth would not have been a factor in their conviction.

That’s not right.

The employees in this case were guilty of Insider Trading but not Market Manipulation. They used their Insider Information to time the sale of their stocks just before the value plummeted, while other unsuspecting stock holders made huge losses.

While the employees were able to avoid major losses, they didn’t gain any wealth from the trades, so unexplained wealth would not have been a factor in their conviction.

Incorrect. Please try again.

## Case Study 2: Walaa Cooperative Insurance Insider Trading Case

Next, we’ll investigate the Insider Trading scandal that took place at Walaa Cooperative Insurance in 2016.

Select each button to learn more.

What Happened?
Effect on Walaa
Stock Price
Was the Law Broken?
Can They be Punished?

### What Happened?

In 2016 Walaa Cooperative Insurance reported a net profit of SAR 20,410,000 for the first quarter. This was in stark contrast to their loss of SAR 8,972,000 in the same quarter of 2015, representing a change rate of 74.59%.

This significant change in financial health indicated a substantial shift in the company's performance. Prior to the public announcement of the financial results Abdulah, a member of the board of directors, had access to non-public information regarding the company's positive financial turnaround.

Acting on this inside information, Najlaa, his sister-in-law, and Maryam, his mother, made trades to capitalize on the forthcoming positive announcement.

### Effect on Walaa Stock Price

On the 18th of April 2016, the company's stock price was SAR 8.42. Following the announcement of the positive financial results on the 1st of May 2016, the stock price soared to SAR 9.78 by the end of the same day. This represented an increase of approximately 16.15%.

The stock continued to experience volatility in the subsequent days, reflecting the market's reaction to the announcement.

### Was the Law Broken?

The parties involved violated Article (50) of the Capital Market Law and Articles (5) and (6) of the Market Conduct Regulations.

### Can They be Punished?

The parties involved were brought to justice and faced a range of penalties:

- Abdullah:
  - Fined SAR 100,000
  - Prohibited from buying shares of listed companies for three years, with exceptions for trading through licensed investment funds
  - Prohibited from working in companies with traded shares in the market for two years
- Najlaa:
  - Fined SAR 50,000
  - Prohibited from buying shares of listed companies for one year, with exceptions for trading through licensed investment funds
  - Obligated to pay SAR 639,636.75, representing the illicit gains from violating trades
- Maryam:
  - Fined SAR 50,000
  - Prohibited from buying shares of listed companies for one year, with exceptions for trading through licensed investment funds
  - Obligated to pay SAR 1,901,643.45, representing the illicit gains from violating trades

## Check Your Knowledge

Which of the following statements concerning this case are true?

Select all that apply and then select Submit.

Abdullah used indirect trading to turn his knowledge into profit.
Abdullah used indirect trading to turn his knowledge into profit.
While complicit in the case, Najlaa and Maryam are not considered “insiders”.
While complicit in the case, Najlaa and Maryam are not considered “insiders”.
The individuals involved used their privileged positions to gain an unfair advantage in the stock market.
The individuals involved used their privileged positions to gain an unfair advantage in the stock market.
The company's financial turnaround was not significant enough to warrant the punishments.
The company's financial turnaround was not significant enough to warrant the punishments.
Submit

That’s right.

Insider Trading is considered unethical and illegal because it undermines the principle of a level playing field in the stock market. Those with access to material non-public information have an unfair advantage over other investors who do not have access to such information. This disrupts the integrity of the market and erodes trust in the financial system.

Abdullah, Naijlaa and Maryam were all insiders in this case who used indirect trading to gain an unfair advantage.

That’s partially right.

Insider Trading is considered unethical and illegal because it undermines the principle of a level playing field in the stock market. Those with access to material non-public information have an unfair advantage over other investors who do not have access to such information. This disrupts the integrity of the market and erodes trust in the financial system.

Abdullah, Naijlaa and Maryam were all insiders in this case who used indirect trading to gain an unfair advantage.

That’s not right.

Insider Trading is considered unethical and illegal because it undermines the principle of a level playing field in the stock market. Those with access to material non-public information have an unfair advantage over other investors who do not have access to such information. This disrupts the integrity of the market and erodes trust in the financial system.

Abdullah, Naijlaa and Maryam were all insiders in this case who used indirect trading to gain an unfair advantage.

Incorrect. Please try again.

## Case Study 3: Weqaya Takaful Insider Trading Case

Let’s finish up this section by reviewing the Weqaya Takaful Insider Trading Case of 2014.

Select each tab to learn more.

What Happened?
Effect on Weqaya
Takaful Stock Price
Was the Law Broken?
Can They be Punished?

### What Happened?

During a board meeting on May 26th, 2014, Weqaya Takaful announced a substantial SAR 44,000,000 decrease in financial claims for the year ending December 31st, 2014, indicating a probable shift in the company's financial health.

Privy to this inside information, board members Ahmad and Ali acted swiftly, selling large portions of their company shares before the information was disclosed to the public. Specifically:

- Ahmad sold a total of 369,407 shares out of his 400,000 shares between 26th of May and 1st of June 2014, resulting in avoided losses of SAR 8,436,949.92
- Ali sold 49,000 shares out of his 50,000 shares on the 28th of May, 2014, resulting in avoided losses of SAR 1,134,110.30

### Effect on Weqaya Takaful Stock Price

On the 3rd of June 2014, the Saudi Arabian Monetary Agency (SAMA) announced that Weqaya Takaful had accumulated losses of 97% of its share capital. The revelation caused an immediate 2.37% drop in the stock price.

The situation worsened as trading of Weqaya Takaful's shares was suspended indefinitely on 4th of June 2014, creating significant uncertainty among investors.

### Was the Law Broken?

Both men received convictions for violating:

- Paragraph (a) of Article (50) of the Capital Market Law
- Paragraph (a) of Article (6) of the Market Conduct Regulations

They both used insider information gained from their membership of the board of directors, to trade Weqaya Takaful’s stock.

### Can They be Punished?

For their roles in the illegal trading both men were punished:

- Ahmad: Fined SAR 100,000, prohibited from certain financial activities for three years, and obliged to pay SAR 8,436,949.92 for the avoided losses
- Ali: Fined SAR 100,000, prohibited from certain financial activities for three years, and obliged to pay SAR 1,134,110.30 for the avoided losses

## Check Your Knowledge

In the Weqaya Takaful Insider Trading Case, the MNPI discussed during the Board meeting included a significant reduction in financial claims. What makes this information MNPI?

Select the correct answer and then select Submit.

It was disclosed to the public through official channels.
It was disclosed to the public through official channels.
It was based on mere speculation without concrete evidence.
It was based on mere speculation without concrete evidence.
It had the potential to influence investors' decisions and significantly impact the company's stock price.
It had the potential to influence investors' decisions and significantly impact the company's stock price.
It was unrelated to the company's financial health.
It was unrelated to the company's financial health.
Submit

That’s not right.

MNPI is characterized by its potential to influence investors' decisions and impact stock prices significantly. In this case, the information about a substantial reduction in financial claims was not disclosed to the public and, if revealed, had the potential to cause a significant market reaction.

Therefore, it qualifies as MNPI due to its relevance and potential market impact.

That’s not right.

MNPI is characterized by its potential to influence investors' decisions and impact stock prices significantly. In this case, the information about a substantial reduction in financial claims was not disclosed to the public and, if revealed, had the potential to cause a significant market reaction.

Therefore, it qualifies as MNPI due to its relevance and potential market impact.

That’s right.

MNPI is characterized by its potential to influence investors' decisions and impact stock prices significantly. In this case, the information about a substantial reduction in financial claims was not disclosed to the public and, if revealed, had the potential to cause a significant market reaction.

Therefore, it qualifies as MNPI due to its relevance and potential market impact.

That’s not right.

MNPI is characterized by its potential to influence investors' decisions and impact stock prices significantly. In this case, the information about a substantial reduction in financial claims was not disclosed to the public and, if revealed, had the potential to cause a significant market reaction.

Therefore, it qualifies as MNPI due to its relevance and potential market impact.

## Coming Next

In the next topic, you will recap on the key learning points in this course along with your responsibilities in handling MNPI here at the bank.

## Conclusion

In this topic you will recap on the courses key learning points.

Scroll down to continue.

## Recap

Let’s review the key takeaways from this training.

Select each topic to learn more.

Market Integrity

### Market Integrity

The two main threats to Market Integrity are Insider Trading and Market Manipulation.

To prevent and safeguard against these threats, the Capital Market Law and Market Conduct Regulations have been put in place.

You can also promote integrity by ensuring proper handling of MNPI to prevent sensitive information being misused and damaging the integrity of the market.

Insider Trading

### Insider Trading

We all have a duty to prevent Insider Trading.

This means we must avoid trading based on inside information and disclosing it to unauthorized individuals.

Doing so can impact the price or value of certain securities.

Recognizing the red flags and warning signs early on, can ensure Insider Trading is caught before it's too late.

Market Manipulation

### Market Manipulation

It's crucial that we are all proactive in stopping Market Manipulation.

We must avoid spreading false information, engaging in deceptive trading practices, and engaging in transactions that disrupt the normal trading of securities.

Not doing so can lead to false or misleading impressions, distorted supply and demand, or artificially influenced security prices.

Recognize the red flags and warning signs, and make sure you are familiar with everyday examples of manipulation in action.

## Coming Next

In the next topic, the Assessment, it’s time to check your understanding of the content by completing a short assessment. As mentioned at the start of this training, you must score 70% or higher on the assessment to receive credit for this course.

Good luck!

## Assessment

##

Which of the following best describes Insider Trading?

Select the correct answer and then select submit.

Trading based on public knowledge.
Trading based on public knowledge.
Trading based on confidential, non-public information.
Trading based on confidential, non-public information.
Trading based on a company's annual report.
Trading based on a company's annual report.
Trading based on general market trends.
Trading based on general market trends.
Submit

That's correct

Insider Trading is defined as “Trading based on confidential, non-public information.”

Not quite.

Insider Trading is defined as “Trading based on confidential, non-public information.”

Not quite.

Insider Trading is defined as “Trading based on confidential, non-public information.”

That is correct.

That is not correct.

That is not correct.

##

Which of the following best describes MNPI?

Select the correct answer and then select submit.

Information that is readily available to the public.
Information that is readily available to the public.
Information that lacks significance to influence market prices.
Information that lacks significance to influence market prices.
Confidential information that can impact stock prices if disclosed.
Confidential information that can impact stock prices if disclosed.
Information that is based on mere speculations.
Information that is based on mere speculations.
Submit

MNPI is confidential information that can impact stock prices if disclosed.

Not quite.

MNPI is confidential information that can impact stock prices if disclosed.

Not quite.

MNPI is confidential information that can impact stock prices if disclosed.

That is correct.

That is not correct.

That is not correct.

##

Which of the following scenarios is a potential violation of the Capital Market Law and the Market Conduct Regulations?

Select the correct answer and then select submit.

An employee discussing a company's public earnings report with a colleague.
An employee discussing a company's public earnings report with a colleague.
An employee trading stocks after a public announcement from a corporate client.
An employee trading stocks after a public announcement from a corporate client.
An employee buying stocks based on a tip from a friend without any concrete information.
An employee buying stocks based on a tip from a friend without any concrete information.
An employee buying shares after learning that a listed corporate client is about to secure a significant overseas contract.
An employee buying shares after learning that a listed corporate client is about to secure a significant overseas contract.
Submit

An employee buying shares after learning that a listed corporate client is about to secure a significant overseas contract would be considered a violation of Capital Market Law and the Market Conduct Regulations.

Not quite.

An employee buying shares after learning that a listed corporate client is about to secure a significant overseas contract would be considered a violation of Capital Market Law and the Market Conduct Regulations.

Not quite.

An employee buying shares after learning that a listed corporate client is about to secure a significant overseas contract would be considered a violation of Capital Market Law and the Market Conduct Regulations.

That is correct.

That is not correct.

That is not correct.

##

Which of the following is NOT a general sign of concern (indicator) for Insider Trading?

Select the correct answer and then select submit.

Employees who consistently engage in substantial trades that differ from their established trading behavior.
Employees who consistently engage in substantial trades that differ from their established trading behavior.
Situations where certain employees seem to have a disproportionate influence over trading decisions.
Situations where certain employees seem to have a disproportionate influence over trading decisions.
Employees discussing stock market trends with friends.
Employees discussing stock market trends with friends.
Use of unusual investment vehicles or complex financial instruments.
Use of unusual investment vehicles or complex financial instruments.
Submit

Indicators for Insider Trading include:

- Employees who consistently engage in substantial trades that differ from their established trading behavior
- Situations where certain employees seem to have a disproportionate influence over trading decisions
- Use of unusual investment vehicles or complex financial instruments

Not quite.

Indicators for Insider Trading include:

- Employees who consistently engage in substantial trades that differ from their established trading behavior
- Situations where certain employees seem to have a disproportionate influence over trading decisions
- Use of unusual investment vehicles or complex financial instruments

Not quite.

Indicators for Insider Trading include:

- Employees who consistently engage in substantial trades that differ from their established trading behavior
- Situations where certain employees seem to have a disproportionate influence over trading decisions
- Use of unusual investment vehicles or complex financial instruments

That is correct.

That is not correct.

That is not correct.

##

Which of the following scenarios can be considered legal?

Select the correct answer and then select submit.

An executive buys shares of their company after learning about a soon-to-be-announced lucrative deal.
An executive buys shares of their company after learning about a soon-to-be-announced lucrative deal.
A trader buys shares based on a public earnings announcement.
A trader buys shares based on a public earnings announcement.
A board member sells shares after a private board meeting discussing a potential financial crisis.
A board member sells shares after a private board meeting discussing a potential financial crisis.
An employee buys shares after overhearing a non-public merger discussion.
An employee buys shares after overhearing a non-public merger discussion.
Submit

It’s perfectly legal for a trader to buys shares based on any information that’s been publicly announced.

Not quite.

It’s perfectly legal for a trader to buys shares based on any information that’s been publicly announced.

Not quite.

It’s perfectly legal for a trader to buys shares based on any information that’s been publicly announced.

That is correct.

That is not correct.

That is not correct.

##

Which of the following best describes the term "tipping" in the context of Insider Trading?

Select the correct answer and then select submit.

Sharing material non-public information with someone who then trades on that information.
Sharing material non-public information with someone who then trades on that information.
Providing a hint or suggestion about a potential stock investment based on a hunch.
Providing a hint or suggestion about a potential stock investment based on a hunch.
The act of turning in an insider trader to the authorities.
The act of turning in an insider trader to the authorities.
Submit

Tipping is defined as “sharing material non-public information with someone who then trades on that information.”

Not quite.

Tipping is defined as “sharing material non-public information with someone who then trades on that information.”

Not quite.

Tipping is defined as “sharing material non-public information with someone who then trades on that information.”

That is correct.

That is not correct.

That is not correct.

##

According to the Capital Market Law, which of the following individuals would be considered an "insider"?

Select all that apply and then select Submit.

A company's auditor.
A company's auditor.
A journalist who has no non-public information.
A journalist who has no non-public information.
A board member's spouse who has material non-public information.
A board member's spouse who has material non-public information.
An employee who has access to the company's financials.
An employee who has access to the company's financials.
Submit

The journalist would not be considered an insider as they do not have access to any non-public information.

Not quite.

The journalist would not be considered an insider as they do not have access to any non-public information.

Not quite.

The journalist would not be considered an insider as they do not have access to any non-public information.

That is correct.

That is not correct.

That is not correct.

##

Which of the following are considered immediate warning signals of potential Insider Trading?

Select all that apply and then select Submit.

Consistent profits from trading.
Consistent profits from trading.
Sudden spikes in trading volume without apparent news or events.
Sudden spikes in trading volume without apparent news or events.
Employees having a disproportionate influence over trading decisions.
Employees having a disproportionate influence over trading decisions.
Use of unusual investment vehicles.
Use of unusual investment vehicles.
Submit

These are all considered immediate warning signs of Insider Trading.

Not quite.

These are all considered immediate warning signs of Insider Trading.

Not quite.

These are all considered immediate warning signs of Insider Trading.

That is correct.

That is not correct.

That is not correct.

##

If two employees synchronize their trading activities, especially before significant corporate announcements, this could be indicative of:

Select the correct answer and then select submit.

A joint investment strategy.
A joint investment strategy.
A shared financial advisor.
A shared financial advisor.
Coordinated Insider Trading.
Coordinated Insider Trading.
A response to general market trends.
A response to general market trends.
Submit

Synchronize trading activities before significant corporate announcements is a sign of coordinated Insider Trading based on non-public information.

Not quite.

Synchronize trading activities before significant corporate announcements is a sign of coordinated Insider Trading based on non-public information.

Not quite.

Synchronize trading activities before significant corporate announcements is a sign of coordinated Insider Trading based on non-public information.

That is correct.

That is not correct.

That is not correct.

##

An employee who has a close relationship with a listed corporate client and frequently trades in that client's securities, especially before major announcements, is most likely:

Select the correct answer and then select submit.

Showing loyalty to the client.
Showing loyalty to the client.
Following the client's public financial reports closely.
Following the client's public financial reports closely.
Engaging in potential Insider Trading.
Engaging in potential Insider Trading.
Diversifying their investment portfolio.
Diversifying their investment portfolio.
Submit

An employee trading in the stock of a client they have a close relationship with is most likely engaging in Insider Trading. This especially applies if the trading is done before public announcements.

Not quite.

An employee trading in the stock of a client they have a close relationship with is most likely engaging in Insider Trading. This especially applies if the trading is done before public announcements.

Not quite.

An employee trading in the stock of a client they have a close relationship with is most likely engaging in Insider Trading. This especially applies if the trading is done before public announcements.

That is correct.

That is not correct.

That is not correct.

##

An employee who has never traded in stocks suddenly starts trading in stock of the company that they work for, especially before public announcements on Tadawul. The trades are made through multiple brokerage accounts. This is concerning because:

Select the correct answer and then select submit.

Options are high-risk instruments.
Options are high-risk instruments.
The employee is diversifying their portfolio.
The employee is diversifying their portfolio.
The employee might be trying to mask Insider Trading activities.
The employee might be trying to mask Insider Trading activities.
The employee is following public financial news.
The employee is following public financial news.
Submit

The employees behaviour should raise suspicion of Insider Trading. Trading through multiple brokerage accounts makes it appear as though the employee is trying to hide the Insider Trading.

Not quite.

The employees behaviour should raise suspicion of Insider Trading. Trading through multiple brokerage accounts makes it appear as though the employee is trying to hide the Insider Trading.

Not quite.

The employees behaviour should raise suspicion of Insider Trading. Trading through multiple brokerage accounts makes it appear as though the employee is trying to hide the Insider Trading.

That is correct.

That is not correct.

That is not correct.

##

An executive employee learns about a potential acquisition that could increase the company's stock price. They then purchase a significant amount of stock before the public announcement. This action is:

Select the correct answer and then select submit.

A smart investment decision.
A smart investment decision.
A violation of Insider Trading regulations.
A violation of Insider Trading regulations.
Permissible if the executive informs the board.
Permissible if the executive informs the board.
Allowed if the executive does not sell the stock immediately after the announcement.
Allowed if the executive does not sell the stock immediately after the announcement.
Submit

Purchasing any stock with information that’s not yet been made public is a violation of Insider Trading regulations.

Not quite.

Purchasing any stock with information that’s not yet been made public is a violation of Insider Trading regulations.

Not quite.

Purchasing any stock with information that’s not yet been made public is a violation of Insider Trading regulations.

That is correct.

That is not correct.

That is not correct.

##

Which of the following actions is a proper way to handle MNPI?

Select the correct answer and then select submit.

Disclosing it to family members.
Disclosing it to family members.
Trading based on the information.
Trading based on the information.
Keeping the information confidential until it's publicly disclosed.
Keeping the information confidential until it's publicly disclosed.
Sharing it first with close colleagues for advice.
Sharing it first with close colleagues for advice.
Submit

MNPI should always be kept confidential until it's publicly disclosed.

Not quite.

MNPI should always be kept confidential until it's publicly disclosed.

Not quite.

MNPI should always be kept confidential until it's publicly disclosed.

That is correct.

That is not correct.

That is not correct.

## Test Results

Retake Assessment
Retake Course
Home Page
Home
Section One

Introduction
Market Integrity
Insider Trading
Market Manipulation
Case Studies
Conclusion
Assessment