RIYADH — The Saudi Capital Market Authority (CMA) issued a statement on Wednesday stating that the CMA board has issued its resolution to approve the Class Action Suit Regulations and to amend the Resolution of Securities Disputes Proceedings Regulations accordingly. A class action suit can be defined as "a suit filed by a group of plaintiffs against one or more defendants, where the group of plaintiffs' suit share the same legal bases, merits and the subject matter of the requests. Any decision made on the case shall affect all of its parties".

The Chairman of the Board of the CMA Mohammed bin Abdullah Al-Quwaiz said that the Authority, through enabling and regulating the Class Action in securities disputes, aims at protecting investors and facilitating the procedures of litigation for the participants in the capital market, especially in cases where the plaintiff is a large group of persons, who share the same legal bases, merits and the subject matter of the requests, which is appropriate to the nature of the listed companies and the size of their shareholders.

Al-Quweiz added that the regulation of the Class Action would bring about a qualitative leap in securities disputes in the Kingdom, which in turn would enhance the attractiveness of the capital market and reduce the risk of investing in it, in addition to reducing the time required to resolve investors compensation cases and reducing litigation costs in this type of cases.

Al-Quwaiz stressed that this project comes within the framework of the Authority's numerous initiatives aimed at protecting investors, such as the "Investor Protection Department", which was recently established within the Authority, and the electronic system for receiving and resolving reported violations of the Capital Market Law and its Implementing Regulations, In addition to mandating listed companies to make electronic voting available for shareholders in the general assemblies of such companies.

Bader Bin Mohammed Balghonaim, Deputy of Legal Affairs and Enforcement, said during the drafting of the Class Action Regulations, the Authority has taken into account the best relevant international practices, in accordance with the nature of the Saudi capital market and in conformity with the applicable and established rules of litigation in the Kingdom, where relevant legislations has been examined and studied in many developed markets such as the United States, the United Kingdom, Germany and Hong Kong. Balghonaim pointed out that the Authority, in line with its interest to communicate and consult with investors and government and private entities about the draft regulations prior to its issuance, has published earlier the draft of the Class Action Regulation for public consultation, praising the magnitude of interest that the project of Class Action Regulations received from the public, and appreciating all opinions, observations and suggestions received from various parties and individuals, all of which have been taken into account.

Balghonaim added that the Authority intends to organize workshops on the Class Action Regulations in securities disputes, directed to legal advisors and interested parties in order to discuss the Class Action's provisions, mechanisms and objectives and, and the locations and times of these workshops will be announced at a later date.

The regulations included several detailed provisions that were meant to clarify the mechanisms and procedures of the class actions and the rights of its parties. For example, it included the provisions of registering a class action suit, the conditions for accepting a request to register a claim as a class action suit, the addition of new plaintiffs after the suit was registered, the regulation of the representation of the plaintiffs and restrictions on them, the rights of the parties of the claim, the criteria for selecting the lead plaintiff and the lead appellant, in addition to regulating the procedures of withdrawing and settlement, and the role of the "Committee Resolution of Securities Disputes" in the management of the class action.

In regards of the selection of the lead plaintiff, the regulation sets forth the criteria on which the members of the group of plaintiffs select the lead plaintiff, including the plaintiff's suitability to take actions related to the proceedings of the class action while taking into account the interests of the members of the group of plaintiffs, stating that the lead plaintiff shall be able to perform these functions at all stages of the proceedings, to adequately understand his obligations toward the group of plaintiffs and to be fully aware of the all details of the case and the facts relating thereto. The regulation also paid attention to regulating the relationship among members of the group of plaintiffs and toward each other by a written agreement between them that shall identify many relevant aspects, determining the lead plaintiff's obligations toward the suit and the group of plaintiffs, including the level of power vested in the lead plaintiff as whether to appoint a lawyer to follow up with class action suit, in addition to determining the compensations of the lead plaintiff and the lawyer (if any), and any other terms, restrictions or obligations that the group of plaintiffs deems fit. – SG