Many thorny issues face the kingdom's nascent capital market, not least who regulates it. 'One of the big stumbling blocks is the confusion between the different authorities, the Commerce & Industry Ministry, SAMA [the Saudi Arabian Monetary Agency - central bank] and the Capital Market Authority [CMA],' says one Riyadh-based lawyer. 'This is not unique to Saudi Arabia. But we need more time to clarify the rules - for example, bits of the old companies law formerly administered by the Commerce Ministry are now under the remit of the CMA.' A memorandum of understanding (MoU) was signed earlier in the year designed to clarify the relationship between SAMA and the ministry, but essentially set out the areas where the two were allowed to disagree.

Three key issues face the CMA: disclosure requirements for IPOs; ongoing disclosure regulations; and rules on market manipulation.

'Even the concept of an offering document is quite new. In the past, disclosure would fit on half a page of a newspaper. The offering of shares in Saudi Telecom in 2002 was the first to conform to proper international standards, as was asked for by the government, so this and the draft CML laws created a precedent even before the official CMA listing rules,' says the lawyer.

'With each new offering, you get the sense that the bar is being raised. The Almarai Company IPO set the benchmark in many ways, but the main factor was that it was the first syndicated underwriting transaction and the first firm to convert to a public joint stock company, although actually when the ministry and the CMA subsequently issued rules on converting to a public shareholding company, the Almarai model wasn't used. The way the system works is that new guidelines are released as issues arise.'

Ongoing disclosure is also being improved: 'Some companies going public think that they have to disclose information on a one-off basis and then can return to normal,' says a lawyer. 'But under the CML, financials have to be reported quarterly, directors must disclose their shareholdings and produce a far more comprehensive report - before it was about half a page-long, now it's very detailed, 24 items have to be covered and all the directors must sign it.' Similarly, investors now have meaningful form of redress to executives. 'The concept of securities litigation has not yet arisen but under the CML the framework is now in place. Directors must give their blessing to the share prospectus, so can be held liable.'

Steady trickle

Numerous IPOs are in the pipeline - with the largest planned in petrochemicals project companies Yanbu National Petrochemicals Company (YanSab) and Saudi International Petrochemical Company (Sipchem), Saudi Arabian Mining Company (Maaden) and The National Commercial Bank (NCB). But few are considered imminent. 'The slowness of IPOs is no bad thing - we don't want to be like the UAE,' says a lawyer. 'And it's not a CMA problem. The reason for the slowness is that many of these companies are not ready to be taken public. We don't want to take just any company public, and banks and lawyers are involved with the firms from six-12 months before they even get to the stage of officially applying to the CMA.'

With massive oversubscription to many recent IPOs - that of new mobile telecoms operator Ettihad Etisalat being a case in p