What is a mandatory corporate action?

A mandatory corporate action is an event initiated by a company that affects all shareholders and requires no active decision from the investor (e.g., a stock split).

What is a voluntary corporate action?

A voluntary corporate action requires the shareholder to make a choice or take action (e.g., a rights issue or a tender offer).

Why is reconciliation important in securities operations?

Reconciliation compares the firm's internal records with external custodian records so discrepancies can be investigated. It is a useful securities-operations control, but the current CME-1B outline does not list corporate actions or reconciliation as a separate exam chapter.

What is the key distinction between Dealing as principal and Dealing as agent?

Dealing as principal is on own account; Dealing as agent is on behalf of another

Dealing as principal is executing only; Dealing as agent includes advice

Dealing as principal is for retail clients; Dealing as agent is for institutional clients

Dealing as principal involves debt instruments; Dealing as agent involves equities

A person who is not a Capital Market Institution wants to communicate a securities advertisement in the Kingdom. No Article 20 exclusion applies. Who must approve the content under Article 17?

Any foreign financial institution

An individual buys and sells ordinary shares for a personal portfolio, without holding themselves out as a securities dealer or regularly soliciting the public. Under Article 13(a), this dealing is:

Excluded from dealing requiring authorisation under these stated conditions

Conducting Managing and must be authorised

Conducting Dealing as principal and must be authorised

An exempt person under the supranational exemption

What is the minimum paid-up capital required for a Capital Market Institution authorised to conduct Dealing?

Capital covering expected expenses for 1 year

What is the minimum capital requirement for a firm authorised ONLY for Arranging and Advising activities?

Capital covering expected expenses for 1 year

Which principle dictates that a Capital Market Institution cannot use customer assets or information for its own profit without explicit customer approval?

The financial prudence principle

Which of the following lists represents mandatory registrable functions within a Capital Market Institution?

CEO, Finance Manager, Compliance Officer, Money Laundering Reporting Officer (MLRO)

Compliance Officer, Lead Portfolio Manager, Head Analyst, HR Director

CEO, Head of HR, Head of IT, Internal Auditor

Chairman, External Auditor, IT Director, Head of Marketing

When can a Capital Market Institution disclose confidential customer information?

In the specified regulatory exceptions, including client consent, an authorised request, service necessity, or when the information is no longer confidential

When requested by an external marketing agency

If the client's account balance falls below a threshold

At any time if it benefits the firm

Which requirement applies to a Capital Market Institution's compliance arrangements?

Procedures must cover reporting compliance matters to the governing body

The compliance officer must also perform a client function

Compliance records must be withheld from the Authority

The compliance manual must never be amended

Which approach follows Article 66(a) of the Capital Market Institutions Regulations on business continuity?

They should be appropriate to the business and be documented, regularly updated and tested

A BCP is only required for retail brokers

A BCP is required only during a crisis

A client asks a Capital Market Institution to assist in trading insurance policies on the secondary market, assuming they are regulated like shares. Are insurance policies considered securities under the Capital Market Law?

No, they are explicitly excluded from the definition of securities.

Yes, they are considered profit participation rights.

Yes, provided they are issued by a listed company.

No, unless they are convertible into company shares.

What constitutes 'securities business' under CMA rules?

Dealing, managing, advising, arranging, and custody of securities — all activities requiring CMA authorisation.

What is required for CMA authorisation?

Meeting minimum capital requirements, demonstrating fitness and propriety, having adequate systems/controls, qualified staff, and a viable business plan.

What are the five main regulated activities?

Dealing in securities, managing securities, advising on securities, arranging, and custody — each has specific requirements.

What is Customer Due Diligence (CDD)?

Verifying identity, understanding the business relationship, identifying beneficial owners, and conducting ongoing monitoring of transactions.

What is insider trading under CMA rules?

An insider may not trade directly or indirectly on inside information, or disclose it to another person when expecting that person to trade on it.

What is the client money requirement?

Client money must be segregated in separate designated accounts, never co-mingled with the firm's own funds.

What systems and controls must a CMI maintain?

Systems and controls appropriate to the nature, scale and complexity of its business, the diversity of operations, transaction volume and value, and associated risks.

GSCMR CME-1B: Corporate Actions and Reconciliations Explained

Table of Contents

• Understanding Corporate Actions
- 1. Mandatory Corporate Actions
- 2. Voluntary Corporate Actions
- 3. Mandatory with Options
• The Importance of Reconciliations
• Conclusion

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CME-1B: Saudi Capital Market Rules and Regulations – General

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GSCMR CME-1B: Corporate Actions and Reconciliations Explained

Corporate actions and reconciliations are useful securities-operations concepts, but CME-1B is Saudi Capital Market Rules and Regulations (General), not the CISI Global Securities Operations exam. The current Financial Academy outline assigns CME-1B to eight regulatory chapters and does not identify corporate actions or reconciliations as a heavily tested chapter.

Errors in event processing can lead to missed entitlements or incorrect client records. In Saudi custody arrangements, CMIR Article 88 requires the custody terms to cover income and entitlements, corporate actions and client instructions. The agreement matters alongside the event announcement.

Understanding Corporate Actions

A corporate action is an event initiated by a public company that brings a material change to its securities. Operations teams commonly classify these events into three main groups:

1. Mandatory Corporate Actions

These happen automatically. Participation does not require an election by the shareholder. The operations team checks eligibility, the record date, the payment or effective date and the announced terms before posting the entitlement.

Examples: Cash Dividends, Stock Splits, Bonus Issues (Scrip Issues).

2. Voluntary Corporate Actions

These require the shareholder to make an active decision. The event terms specify what happens if no valid instruction is received. A custodian may set an earlier instruction deadline than the issuer or market deadline.

Examples: Tender Offers (Buybacks), Rights Issues (where the shareholder has the choice to buy more shares, sell the rights, or let them lapse).

3. Mandatory with Options

A hybrid category where the event affects an eligible holding, but the shareholder can choose how to receive the entitlement. The announced default applies if no valid election is received.

Examples: Scrip Dividends (the choice to receive a dividend in cash OR in additional shares).

The preview below samples the broader CME-1B regulatory course; it is not a corporate-actions-only test.

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Free CME-1B: Saudi Capital Market Rules and Regulations – General Practice Questions & Exam Preview

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Securities Business and Capital Market Institutions

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Which of the following lists correctly identifies the five types of securities business activities?

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Flashcards

Card 1 of 10Introduction to the CMA

Question

What is the Capital Market Authority (CMA)?

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Focus Learn

Key Examinable Areas8

Capital Market Law establishment: Royal Decree M/30 dated 2/6/1424H (31 July 2003).
CMA independence and direct reporting line to the Prime Minister.
Definitions of securities (4 types) vs. non-securities (7 excluded instruments).
CMA trading suspension powers: 1 day independent, >1 day requires Minister of Finance approval.
Committee for Resolution of Securities Disputes: composition, appointment, and jurisdiction.
Dispute timeline: 90-day filing wait, 14-day consideration start, 30-day appeal window.
Securities Depository Center: sole registration entity, preliminary registration in doubtful cases.
Evidence admissibility in all forms including electronic, recordings, fax, and email.

Common Pitfalls to Avoid4

Exam Traps5

Key Numbers8

Chapter 1: Introduction to the Capital Market Authority

The Saudi Arabian Capital Markets have informally operated since 1950, but the Capital Market Law (the Law) was formally introduced pursuant to Royal Decree M/30 dated 2/6/1424H (31 July 2003) to create a transparent, fair, and regulated market. The Law established the Capital Market Authority (CMA) as a fully independent government organisation that reports directly to the Prime Minister — not to SAMA or any ministry. The CMA's four core objectives are: creating an appropriate investment environment, boosting confidence, reinforcing transparency and disclosure standards, and protecting investors and dealers from illegal acts. Securities under the Law include: (a) convertible and tradeable company shares, (b) tradeable debt instruments issued by companies, government, or public institution…

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Open every chapter’s key areas, pitfalls, exam traps and key numbers.

The Importance of Reconciliations

Reconciliations compare records so that missing, duplicated or incorrectly posted trades and corporate-action entitlements can be investigated. Daily checks may be appropriate for an active operation, but they are not a universal statement of the Saudi client-asset rule.

For example, if the firm’s records show 10,000 client shares and the custodian statement shows 9,500, the 500-share difference is a break to investigate. Check both records at the same date and reconcile settlement timing and event postings; a difference alone does not identify its cause.

Under CMIR Article 90, the institution must reconcile client assets it does not physically hold as often as necessary and at least every seven days, using the relevant depository, custodian or entitlement-record statements. For assets physically held, it must count and reconcile as often as necessary and at least every six months, including the holdings and location records. Reconciliations must be performed within ten days of the date to which they relate.

Article 90 also requires discrepancies to be corrected within three days, shortfalls to be made good within three days, and a discrepancy unresolved within seven days to be reported to the CMA. Keep the frequency, completion deadline and discrepancy deadlines separate when revising this rule.

Conclusion

These mechanics are useful for back-office operations work. For CME-1B, prioritise the eight published chapters, especially regulatory requirements, the Saudi capital-market framework, prohibited conduct, AML/CFT and supervisory systems, and treat this article as supporting operations context rather than an exam weighting guide.

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GSCMR CME-1B: Corporate Actions and Reconciliations Explained