Class action lawsuits against Sanam and Sports Address to protect investors' rights

In a significant legal development reflecting regulatory advancements in the Saudi financial market, the General Secretariat of the Committees for the Resolution of Securities Disputes announced the issuance of two rulings by the Committee approving two class-action lawsuits filed by investors against Sanam Business Trading Holding Company andUnwan Al-Riyadh Business Services Holding Company. These rulings stem from accusations that the two companies conducted marketing campaigns to offer shares without adhering to the regulatory procedures stipulated in the rules governing the offering of securities and ongoing obligations.

Details of approved lawsuits

The first lawsuit was filed against Sanam Business Company after it marketed shares in its subsidiary, Sanam Growth Business Services Holding Company, in a manner that violated regulatory procedures. The plaintiff, who subscribed to the shares through that campaign, requested that the lawsuit be registered as a class action, the agreement with the company be rescinded, and the company be obligated to refund all the amounts he paid.

Similarly, the second lawsuit against “Address Sports” was adopted for the same reasons, as the company offered its shares and promoted investment in them without following the regulatory rules, which prompted one of the investors to file a similar lawsuit demanding the termination of the subscription agreement and the return of his money.

General context and importance of class action lawsuits

The activation of the class action lawsuit mechanism in Saudi Arabia is a key outcome of the Financial Sector Development Program, a core component of Saudi Vision 2030.This legal framework aims to enhance investor protection, particularly for small investors, by providing an effective and cost-efficient means for them to collectively claim their rights when they suffer damages resulting from similar violations. The Capital Market Authority and the Securities Disputes Resolution Committees play a pivotal role in regulating and overseeing these lawsuits, ensuring fairness and transparency in the market.

Expected impact on the financial market

These decisions send a strong message to all listed and prospective companies on the stock market about the absolute necessity of adhering to regulations. This step is expected to have a multifaceted positive impact:

• At the local level: Enhancing the confidence of local investors in the regulatory and legislative environment of the market, and confirming the effectiveness of oversight and litigation mechanisms in protecting their rights.
• At the regional and international levels: consolidating the position of the Saudi financial market as one of the most mature and attractive markets in the region, as these measures are in line with global best practices in corporate governance and investor protection, which encourages the flow of foreign investments.

Next steps for affected investors

The General Secretariat clarified that the two cases were approved after the number of applications sharing the same legal grounds and alleged facts reached the required threshold. It noted that the Capital Market Authority (CMA) had facilitated the application process for joining these cases. The CMA also emphasized that any individual who has not previously applied to join the cases has the right to file an individual complaint through the CMA's official website to protect their rights.