CMA to apply Watani Steel’s compensation fund model in future similar cases

It also complements the efforts of legislative and regulatory overhaul seen in the Saudi capital market in recent years, aligning with pillars of CMA’s 2024–2026 strategic plan to make the market more efficient and equitable, and reflects the ongoing evolution of the market’s oversight ecosystem. The goal is to enhance investor protection and bolster trader confidence in the financial market, according to the official.

The CMA earlier announced the completion of compensation payments to investors harmed by violations committed in Watani Steel stock, both before and after its listing, by five convicted individuals who breached the Capital Market Law and Market Conduct Regulations.

This action was the first of its kind in the market’s history, where a “compensation fund” was established to return illicit gains collected from violators, making it the first practical application of compensation funds in the Kingdom.

Al-Dakhil also told Argaam that this model is expected to be applied in future similar cases, as the Authority has developed a standards matrix to assess whether establishing a compensation fund is suitable for each case. “This will allow faster and more effective intervention when actual harm to investors from illegal practices is identified. This step represents a major shift in compensation mechanisms in the Saudi capital market, supporting the principle of swift justice and laying the foundation for a new era of direct, institutional investor protection,” he continued.

He added that the new provisions represent another milestone in the maturity of the Saudi capital market and strengthen the confidence of both local and international investors, especially with the introduction of practical tools that safeguard their rights.

“This also demonstrates CMA’s commitment to forming a sustainable institutional oversight ecosystem, in line with Saudi Vision 2030, which seeks to make the Saudi financial market one of the most efficient and appealing globally, Al-Dakhil said.

He further clarified that compensation funds represent a new form of redress, supplementing existing methods such as class actions and individual lawsuits considered by the Committees for Resolution of Securities Disputes.

CMA carefully studied the mechanisms for implementing compensation funds to ensure a high level of readiness at all levels, thus boosting their effectiveness in achieving their purposes represented in compensating harmed investors in cases where final decisions by dispute resolution committees obligate violators to return illicit gains to the Authority, which then distributes them to rightful claimants without the need for complaints or lawsuits, according to the official.

He also emphasized that the regulator gives high priority to safeguarding the rights of investors and market participants by taking necessary measures to ensure that those harmed by unlawful practices or misconduct by some investors are compensated. These efforts include detecting violations, taking legal action, and ultimately ensuring victims are compensated, based on the statutory powers granted to CMA under the Capital Market Law.

The Watani Steel violations case traces back to a series of transactions carried out by five investors against whom a final ruling was issued by the Appeal Committee for Securities Disputes in April 2024. The violations included increasing their ownership in Watani Steel stock without the required disclosures, as stipulated by law. In addition, one of these investors promoted the stock in private WhatsApp groups to influence its price and then sell it after the price rises to realize gains.

The committee required the convicted individuals to pay over SAR 41.4 million in illicit gains, which were deposited into the compensation fund. This fund subsequently reimbursed investors who, according to technical records, suffered actual harm during the violation period between February 17, 2021, and May 9, 2021.