The Capital Market Authority (CMA) announces the issuance of three final decisions by the Appeal Committee for Resolution of Securities Disputes (ACRSD) against six investors and two investment companies for violating the Capital Market Law, the Market Conduct Regulations, and the Securities Business Regulations. The convicted individuals and entities were fined around SAR 14.5 million for these violations.
According to the first final decision, the ACRSD convicted Majed bin Rafe' bin Ibrahim Alghamdi, Diyar Altamlik Real Estate Company and Abdulrahman bin Rafe' bin Ibrahim Alghamdi. The decision concluded that they violated Article (31) of the Capital Market Law as well as Article (5) and Article (17) of the Securities Business Regulations, when practicing a securities business, represented in the activity of “Managing", by establishing and operating real estate investment funds from 27/02/2023 until 16/11/2023, and advertising such practice via the social media account (diyar_altamlik) in Snapchat and Instagram as well as on the Company's website (diyartaltamlik.com) in exchange for a percentage of the invested funds, without obtaining a license from the CMA. Each was fined SAR 50,000 for violating Article (31) of the Capital Market Law and Article (5) of the Securities Business Regulations, and a further SAR 50,000 each for violating Article (17) of the Securities Business Regulations.
In the second final decision, the ACRSD convicted the Middle East Financial Investment Company, Ibrahim bin Abdullah bin Rashid Alhudaithi, and Turki bin Abdullah bin Abdulrahman Alfawzan of violating Article (49) of the Capital Market Law and Article (7) of the Market Conduct Regulations, due to the act of the Middle East Financial Investment Company, in association with Ibrahim bin Abdullah bin Rashid Alhudaithi and Turki bin Abdullah bin Abdulrahman Alfawzan, when neglecting to disclose the material development related to the financial position of MEFIC REIT Fund, represented in the occurrence of a change in the financial position of the Fund upon its listing on 13/11/2018, compared to the financial position disclosed in the Terms and Conditions Memorandum dated 26/03/2018, made available to the public during the Fund's initial offering period from 04/04/2018 to 15/05/2018, which was lawfully required to be disclosed pursuant to the Instructions of the Traded Real Estate Funds issued by the CMA Board. Such change is represented in a decrease in the Fund`s unit book value upon its listing compared with the assumed value stated in the Terms and Conditions Memorandum by a percentage of (27.81%). As a result, each of the three convicted individuals and entity were fined SAR 81,250 and both Ibrahim bin Abdullah bin Rashid Alhudaithi and Turki bin Abdullah bin Abdulrahman Alfawzan were banned from brokerage business, managing portfolios or working as an investment advisor for two years.
In the third final decision, the ACRSD convicted Mohsen bin Muteb bin Mutlaq Alotaibi and Abdulrahman bin Abdullah bin Abdulrahman Alabdulkarim of violating Article (49.a) of the Capital Market Law as well as Article (7) of the Market Conduct Regulations, by jointly providing a false statement in the share registration document of Rawasi Albina Investment Company, to avoid complying with liquidity and listing requirements in the Parallel Market (Nomu); as they declared in the Company's share registration document that the public ownership percentage reached (40.14%) of its total shares, while the actual public ownership did not exceed (6.77%) of the total Company's shares. This led to the Company being listed in the Nomu Market while (93.23%) of its shares remained in the ownership of individuals excluded from the public. The Company's share registration document included fictional number of ownership of several shareholders for its shares in order to increase the public allocation percentage so that the Company would be qualified for listing. This act created a false and misleading impression in the Company's share registration document. The decision imposed a financial penalty of SAR 6 million on Mohsen bin Muteb bin Mutlaq Alotaibi and SAR 8 million on Abdulrahman bin Abdullah bin Abdulrahman Alabdulkarim, and both were banned from working in entities under the supervision of the CMA for three years.
The CMA explained that the final decisions of ACRSD came as a result of joint coordination and cooperation between the CMA and relevant concerned authorities, and in light of the public penal lawsuit filed by the Public Prosecution, referred to it by the CMA, against the investors for violating the Capital Market Law.
The CMA stresses the importance of investors' confidence in the capital market for its growth and prosperity. The CMA continuously monitors any violating behaviors, identifies the perpetrators, and processes the necessary procedures to impose deterrent penalties against them, in order to enhance the CMA's efforts aimed at creating an attractive investment environment for all categories of investors and safe from unfair or unsound practices or that involve fraud, cheating, misleading, deception or manipulation.
The General Secretariat of the Committee for Resolution of Securities Disputes (GS-CRSD) announced that any person who has entered into an agreement or contract with the convicted persons and entity in relation to the violation addressed in the first final decision is entitled to file a claim (as individual or class action) with the CRSD to request the rescission of the agreement or contract and the recovery of any money or other property paid or transferred under the agreement or contract, as per Article (60/b) of the Capital Market Law. It also stated that any person affected by these violations addressed in the second and third decisions is entitled to file a compensation claim (as individual or class action) against the convicted persons with the CRSD for the damage he/she suffered due to these violations. It should be noted that, in all three decisions, a complaint must first be submitted to the CMA through the following link (File Complaint). Furthermore, the GS-CRSD will announce to the public on its website in case of registering any class action in order to enable the rest of investors affected by such violations to apply to the CRSD to join the class action.
The CMA indicated that the GS-CRSD announced to the public on its website the identity of the violators after the violations and sanctions were proven and the final decisions were issued by ACRSD. The said decisions can be viewed through the following links:
Announcement of the GS-CRSD (First Final Decision) – Click here
Announcement of the GS-CRSD (Second Final Decision) – Click here
Announcement of the GS-CRSD (Third Final Decision) – Click here