Saudi Arabia vs. the United States: A Comparative Look at Capital Market Regulation

Executive Summary: Saudi Arabia and the United States both regulate capital markets with the shared goals of transparency, fairness, and investor protection, but they take very different paths. Saudi Arabia’s Capital Market Authority (CMA) is a centralized regulator with sweeping discretion such as licensing exchanges and brokers, approving offerings, and adjudicating disputes through its own committees, all of which creating a top-down, stability-focused system. The U.S., by contrast, relies on the Securities and Exchange Commission (SEC) alongside self-regulatory organizations and courts, with extensive statutory disclosure requirements and heavy reliance on private lawsuits and judicial precedent. These differences appear in every area: Saudi Arabia requires CMA-approved prospectuses and sets high capital thresholds for brokers, while U.S. issuers follow standardized filings such as 10-K and brokers operate under a tiered licensing system. Insider trading and market manipulation are banned in both jurisdictions, but Saudi Arabia codifies violations directly, whereas U.S. law evolves through landmark cases like Howey, Texas Gulf Sulphur, and O’Hagan. In short, Saudi Arabia emphasizes administrative control and market stability, while the U.S. system leans on legal precedent, private enforcement, and market competition.

When you put the Saudi and American capital markets side by side, you see two systems that are both robust but built on very different philosophies. Each has the same goals, which are to protect investors, ensure transparency, and keep markets fair, but the way they go about it is shaped by their legal traditions and policy priorities.

One Regulator vs. Many

In Saudi Arabia, the Capital Market Authority (CMA) is the heart of the system. Created by Royal Decree, the CMA answers directly to the President of the Council of Ministers and has sweeping powers: licensing exchanges and brokers, approving securities offerings, policing disclosure, and even resolving disputes through its own specialized committees.

The United States, by contrast, doesn’t put everything in one regulator’s hands. The Securities and Exchange Commission (SEC) is the main authority, but it shares the field with self-regulatory organizations like FINRA, and with state regulators who also keep watch. On top of that, the Commodity Futures Trading Commission (CFTC) oversees derivatives. In practice, this means U.S. firms juggle multiple oversight bodies, while Saudi firms answer almost exclusively to the CMA.

What Counts as a “Security”

Definitions matter, especially when they determine who falls under the law. Saudi law casts a wide net including shares, bonds, fund units, and participation rights all count as securities, and the CMA has discretion to expand or contract the list when necessary.

The United States, however, relies less on regulatory discretion and more on courts. Thanks to the famous Howey case, U.S. law defines an “investment contract” and thus a security as any arrangement where investors put in money with an expectation of profit from someone else’s efforts. That’s why American courts were able to treat certain cryptocurrencies as securities, as in SEC v. Kik Interactive (2020). In Saudi Arabia, the CMA could have reached the same conclusion, but by administrative designation rather than litigation.

Market Infrastructure: One Exchange vs. Multiple

Saudi Tadawul Group sets up three official institutions: the Tadawul Exchange, the Depository Center (Edaa), and the Securities Clearing Center (Muqassa), all of which create a centralized, state-supervised ecosystem.

The U.S. model is more fragmented than that of Saudi. Exchanges compete such as NYSE, NASDAQ, and CBOE, while clearing and settlement runs through DTCC, a private-sector giant. This difference became visible during the GameStop saga in 2021: U.S. retail brokers restricted trading when clearinghouses demanded higher collateral. In Saudi Arabia, the CMA could have stepped in directly and suspended trading to restore order.

Types of Offers: Structured vs. Flexible

One of the biggest differences revealed in the new Saudi rules is the range of offer categories. The CMA distinguishes between:

• Exempt offers (e.g., government securities, or offers to affiliates and select institutions).

• Private placements, limited to Institutional and Qualified investors.

• Public offers, requiring a full prospectus and CMA approval.

• Parallel market (Nomu) offers, a lighter listing framework designed for smaller or fast-growing companies.

By contrast, U.S. securities law essentially distinguishes between public offerings (requiring SEC registration) and private offerings (exempt under Regulation D, S, or A). The Saudi framework is more segmented, with clear categories and investor eligibility thresholds.

Investor Qualifications

Saudi Arabia spells out who can take part in private placements. For example, Institutional clients include government bodies and companies with net assets above SAR 50 million, while qualified clients may be individuals with SAR 5 million in assets, income above SAR 600,000, or at least 10 large transactions per quarter.

The U.S. has its own concept of the “accredited investor”, net worth over USD 1 million or income above USD 200,000. Both systems gatekeep riskier deals, but Saudi Arabia ties thresholds closely to domestic wealth levels and professional certifications, including local securities qualifications.

Disclosure: Who Decides What Gets Revealed?

Both systems care deeply about disclosure, but they handle it differently.

In Saudi Arabia, no company can offer securities without a CMA-approved prospectus. That document must spell out the issuer’s business, finances, and risks, and issuers are then required to file quarterly and annual reports. On top of that, issuers have continuing obligations: disclosures must be “complete, clear, accurate, and not misleading,” and material developments must be reported immediately. The CMA can grant waivers if disclosure would be harmful, but it can also compel disclosure to quash rumors.

The U.S. is less flexible and more rule-driven. The SEC mandates standardized filings such as the S-1 for offerings, the 10-K for annual reports, the 10-Q for quarterly results, and the 8-K for material events. After the Enron and WorldCom scandals, Sarbanes-Oxley added further requirements, like CEO certifications and internal control audits.

The contrast shows up in enforcement: WorldCom’s collapse in the early 2000s was prosecuted by the SEC in court. In Saudi Arabia, a similar scandal would likely be handled by the CMA through the Committee for the Resolution of Securities Disputes.

Investor Protection and Enforcement

Fraud, insider trading, and market manipulation are outlawed everywhere, but again, the paths differ.

In Saudi Arabia, the CMA investigates violations and takes cases to its dispute committees. Those committees, staffed by legally trained members appointed by Royal Order, have power to subpoena witnesses, impose fines, and even award damages. There are also statutory lock-ups: for example, substantial shareholders cannot sell shares for six months after an IPO (extended to 12 months on the Nomu, parallel, market).

In the United States, the SEC investigates, but private investors can also sue. Class actions are a powerful tool: the Basic v. Levinson case in 1988 established that investors can rely on the “fraud-on-the-market” presumption, making it easier to sue for securities fraud. On top of that, the Department of Justice can bring criminal cases, as it did against Martha Stewart for insider trading in 2004.

Saudi Arabia doesn’t use juries or private class actions in this area; enforcement is concentrated in regulatory hands.

Brokers and Gatekeepers

Saudi brokers face a high barrier to entry. They must be joint-stock companies with minimum capital of 50 million riyals (~USD 13 million). By design, this ensures only large, well-capitalized players enter the market.

In the U.S., requirements are lighter. Broker-dealers must register with the SEC and FINRA and comply with net capital rules, but they don’t need to incorporate in a particular form. That flexibility explains why you see everything from giant investment banks to boutique advisory shops operating in the U.S. market.

IPO Price Stabilization

Saudi rules also provide detailed mechanisms for IPO price stabilization, allowing underwriters to borrow and sell extra shares (over-allotments of up to 15%), use purchase options, and conduct limited short sales, but only for a 30-day period after listing. These measures are meant to support orderly trading without turning into long-term manipulation.

The U.S. equivalent is the “greenshoe option,” widely used in IPOs, but governed under Regulation M. Both systems seek to smooth volatility, but the Saudi version is tightly codified and supervised by the CMA.

Special Purpose Entities (SPEs)

Saudi Arabia also licenses Special Purpose Entities (SPEs) for sukuk and debt issuance. SPEs can issue asset-backed, asset-linked, or debt-based recourse instruments, but must have a trustee, custodian, and auditor in place, all under CMA supervision. The rules are designed to protect investors from sponsor insolvency and to ensure proper governance.

In the U.S., SPEs (or SPVs) are common in securitizations, but they are generally structured under state corporate law and subject to SEC disclosure rules, without needing direct regulatory licensing. The Saudi model gives the CMA more control over how structured products reach the market.

Mergers and Acquisitions (M&A)

Saudi M&A regulations apply when any acquisition results in more than 10% ownership of a listed company. Directors of target companies must provide equal information to all shareholders, avoid conflicts of interest, and not take frustrating actions against legitimate offers.

In the U.S., M&A oversight flows from the Williams Act of 1968 (governing tender offers), SEC proxy rules, and state fiduciary duty law (Delaware being the most influential). Here again, the Saudi regime is more codified and centralized, while the U.S. relies heavily on litigation to test the limits of directors’ duties.

Insider Trading and Market Manipulation

Here the similarities are striking, but the methods diverge.

Saudi law explicitly bans creating “false or misleading impressions” of trading activity, a definition that covers wash trades, matched orders, and coordinated price manipulation. Insider trading is defined broadly to include family, business, or contractual insiders who trade on nonpublic, price-sensitive information.

The U.S. takes a case-law route. The Texas Gulf Sulphur case in 1968 laid down the principle that insiders must “disclose or abstain” from trading. Later, Dirks v. SEC clarified tippee liability, and U.S. v. O’Hagan introduced the misappropriation theory, extending liability to outsiders who misuse confidential information.

In practice, the Saudi approach is clearer because it is codified, while the U.S. approach evolves with each new court case.

Policy DNA: Stability vs. Litigation

Finally, there’s the cultural DNA of each system. Saudi Arabia’s framework reflects its policy of careful liberalization: centralized oversight, strong licensing rules, and gradual opening to foreign investors, all designed to ensure stability and align with broader economic reforms.

The United States’ framework, on the other hand, reflects a long tradition of litigation, private enforcement, and a belief that competition between exchanges and firms drives efficiency.

Closing Thoughts

Both systems work. The Saudi market has grown rapidly under the CMA’s centralized model, giving investors confidence through clear oversight. The U.S. market thrives on its diversity of exchanges, deep disclosure culture, and the deterrent power of private lawsuits.

For companies and investors straddling both jurisdictions, the lesson is simple: in Saudi Arabia, your key relationship is with the CMA; in the United States, your risks lie as much in the courtroom as with the SEC.

Sources:

• Capital market related documents from CMA and SEC.

Note: LLM is used to conduct capital market analysis between the two countries after uploading multiple capital market-related analysis. The final write-up is done by the author, Yazed Alsuhebany.