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8 people convicted of violating Saudi financial market laws ordered to pay $80 million

RIYADH: Eight investors convicted of breaking Saudi Arabia’s Capital Market Law have been fined SR9.6 million ($2.559 million) and ordered to pay back SR292.8 million of illicit gains from their own investment portfolios and three belonging to the young children of one of those found guilty.

The Capital Market Authority said that in a final ruling, the Appeal Committee for the Resolution of Securities Disputes had convicted Abdulaziz bin Abdullah bin Issa Albanyan, four of his sons, Faisal, Sultan, Abdullah and Fahad, and two of his daughters, Reem and Nouf, and Hind bint Mohammed bin Abdulrahman bin Asaker.

They were found to have violated Capital Market Law and Market Conduct Regulations in their trading of shares in two companies listed on Tadawul, the Saudi stock exchange: Al-Kathiri Holding and Anaam International Holding Group. Their activities included concurrent increases in ownership percentages and the coordinated selling of stocks, primarily during 2020.

The ACRSD ordered the precautionary seizure of all movable and immovable assets of the guilty parties, including bank and investment accounts, until the penalties imposed upon them have been paid.

The investigation found the origins of the illegal activity could be traced to June 7, 2020, when Sultan bought 225,000 shares in Al-Kathiri Holding from a senior company official. This took place 19 days after the company announced it had submitted a request to the CMA for permission to increase its capital by offering priority rights shares.

On June 11, Fahad transferred 225,000 of the company’s shares to a portfolio in the name of his daughter, a minor, before purchasing a similar amount on Aug. 23 from a senior company official in a private deal.

From then until Oct. 5 of the same year, the convicted individuals continued to purchase shares and carried out transactions related to share-price speculation. They increased their combined ownership stake in the company to 24 percent without disclosing this or their family connections to Tadawul.

During this period, the share price increased by more than SR54. On Oct. 5, Fahad, using his children’s portfolios, placed purchase orders in a closing auction to achieve a high closing price.

The investigation also discovered transfers of shares between the brothers’ portfolios through simultaneous sell and buy orders with the same quantities, timing and prices.

Fahad was found to have transferred about SR4.7 million to Abdullah to provide liquidity for the latter to purchase shares in the same company. Abdullah bought 100,000 shares in the company sold by Fahad.

In the case of Anaam International Holding Group, on Feb. 9, 2020, the board of directors recommended that the company’s capital be increased by offering priority rights shares in the amount of SR75 million. Fahad subsequently transferred 74,900 shares to his minor son’s portfolio.

Three days later he purchased the same quantity of shares. Some of the purchases affected the share price. The next day he transferred the same quantity to the portfolio of his daughter, also a minor, before purchasing a total of 73,910 shares between May 19 and June 1.

On Oct. 6, 2020, the company invited shareholders to an extraordinary general assembly meeting that discussed plans for an increase in the company’s capital. The next day, and for more than 20 consecutive days, the convicted individuals were found to have engaged in speculative activities and collectively increased their stake in the company to 27 percent, again without disclosing this to Tadawul despite their family ties. During this time the share price increased by about SR115.

However, CMA monitoring systems had detected the suspicious activities, including private deals and share transfers carried out with the aim of acquiring large stakes in both companies without disclosing to Tadawul the full details of the individuals’ connections to each other.

“Such acts resulted in misguiding the investors in the exchange and created a false and misleading impression regarding the securities of the two mentioned companies,” the CMA said.

The final ruling by the ACRSD was the result of joint efforts by several authorities and a lawsuit filed by the Public Prosecution, it added.

Maintaining the confidence of investors in the capital market is important for growth and prosperity, the authority said, and so identifying those who break the rules and taking the appropriate action to hold them accountable, including imposing penalties as a deterrent to such activity, is key to creating a safe and fair investment environment.

Any investor adversely affected by illegal activity such as that involved in this case is entitled to file a compensation claim, as an individual or as part of a class action, with the Committee for Resolution of Securities Disputes for losses they suffered, provided that such a claim is preceded by a complaint filed with the CMA.

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