CMA: Convicting (8) Investors of Violating the Capital Market Law and its Implementing Regulations and Obligating them to Pay (302) Million Saudi Riyals

​The Capital Market Authority (CMA) announced that the Appeal Committee for Resolution of Securities Disputes (ACRSD) convicted eight investors of violating the Capital Market Law and its implementing regulations, fined them (9.6) million Saudi Riyals, and obligated them to pay (292.8) million Saudi Riyals due to the illicit gains achieved in their investment portfolios, in addition to three other portfolios belonging to minor children of one of the convicted individuals.

According to the CMA, the ACRSD issued its final decision convicting: Abdulaziz bin Abdullah bin Issa Albanyan and four of his sons; Faisal, Sultan, Abdullah and Fahad, and two of his daughters; Reem and Nouf, along with Hind bint Muhammad bin Abdulrahman bin Asaker. They were found guilty of violating Article (49) of the Capital Market Law and Article (2) of the Market Conduct Regulations.

The violation was evidenced by the synchronicity in their trading of shares in two companies listed on the Saudi Exchange; Al Kathiri Holding Co. and Anaam International Holding Group. This included a concurrent increase in their ownership percentage and a coordinated exit from these companies' stocks at various times, primarily in the year 2020. The ACRSD ruled for the imposition of a precautionary seizure on all movable and immovable property of the convicted individuals, including bank and investment accounts, until the sums awarded are collected.

The investigation revealed that the scheme's inception dated back to June 7, 2020, when Sultan bin Abdulaziz bin Abdullah Albanyan purchased (225 thousand shares) in Al Kathiri Holding Co. from a senior company official. This transaction occurred 19 days after the Company announced that it had submitted to the CMA a file requesting an increase in its capital by offering priority rights shares. On the 11th day of the same month, Fahad bin Abdulaziz bin Abdullah Albanyan transferred (225 thousand shares) in the same Company to the portfolio of his minor daughter, before purchasing a similar amount on the 23rd of August, 2020, from one of the Company's senior officials in a private deal. One day later, and until the 5th of October of the same year, the convicted individuals carried out purchase transactions and some speculation transactions on the share price, which resulted in an increase in their combined ownership percentage to (24%) without disclosing to the Saudi Stock Exchange Company “Tadawul" about their ownership of such percentage despite the familial ties that connected them.  This period also saw an increase in the share price by more than 54 riyals. On October 5, Fahd bin Abdulaziz Al-Bunyan, through his minor children's portfolios, placed buy orders in the closing auction to achieve a high closing price, coinciding with the extraordinary general assembly's meeting to vote on capital increase, the price of which was to be determined based on the closing price of that day. The following day, the company announced the results of the extraordinary general assembly meeting, which included approval for the capital increase.

During the period from the 8th of October to the 15th of November of 2020, the convicted individuals sold part of the rights deposited for them and subscribed using part of it, before selling the shares and exiting from the Company's share on the 16th day of the same month.

Investigations also revealed the existence of share transfers between the brothers' portfolios through simultaneous sell and buy orders for the same quantity, timing, and price. Fahd bin Abdulaziz Al-Bunyan transferred approximately 4.7 million riyals to Abdullah to provide liquidity for purchasing shares in the same company and bought 100,000 shares in the same company previously owned by Fahd, following the latter's desire to sell them.

Regarding violations related to the share of Anaam International Holding Group, the Company announced on the 9th of February 2020 the recommendation of the Board of Directors to increase the Company's capital by offering priority rights shares in the amount of (75 million Saudi Riyals), so Fahad bin Abdulaziz bin Abdullah Albanyan transferred (74,900 shares) to his minor son's portfolio. After three days, he purchased the same quantity again, as some of the purchase transactions had an impact on the share price. The next day, he transferred the same quantity to the portfolio of his minor daughter, before making purchase transactions of the share in amounts that reached (73,910 shares) during the period from 19th of May to 1st of June, 2020.

On the 6th day of October of the same year, the Company invited its shareholders to attend the extraordinary general assembly meeting that included an increase in the Company's capital. Starting the next day, over 20 consecutive days, the convicts engaged in speculative activities, collectively increasing their ownership to 27% without disclosing this to Tadawul, despite their familial ties. This period witnessed a share price rise of approximately 115 riyals. On the 27th of the same month, Sultan bin Abdulaziz bin Abdullah Albanyan, and Fahad bin Abdulaziz bin Abdullah Albanyan, through the portfolio of his minor daughter, entered purchase orders in the closing bid with the aim of achieving a high closing price as being the day set for the extraordinary general assembly to be held to vote on the capital increase, in which the price of the rights issue will be determined based on the closing price for the same day, before the Company announces the next day the results of its meeting, which included approving an increase in the Company's capital.

This announcement was exploited by the convicted individuals from the day of its occurrence, being the 28th of October until the 15th of November 2020, to begin selling their shares and exiting from the share, after they, during close periods at times and simultaneous at other times during the period from December 2019 to December 2020, entered orders with the aim of influencing the price of the shares, in addition to entering purchase orders in the closing bid with the aim of achieving a high closing price.

The monitoring system at the CMA detected the violations committed by the convicted individuals, and the existence of private deals and share transfer transactions to transfer ownership of these shares, as well as their trading in the shares of the two companies based on prior coordination and agreement between them, and with the aim of owning a large percentage of the shares of the two companies without disclosing this to the Saudi Stock Exchange Company “Tadawul", in order to avoid announcing this on the “Tadawul" website to the public, especially in light of their combined ownership of Al Kathiri Holding Co. share reaching approximately (24%), and (27%) in Anaam International Holding Group share, as such is considered a violation of the Law that requires anyone who owns, directly or for him, or has interest in a percentage of (5%) or more of any class of the issuer's shares entitled to vote, or the issuer's convertible debt instruments, must be disclosed within a period not exceeding the end of the third trading day following the execution of the deal or the occurrence of the event that led to the realization of this ownership or interest. The notification disclosure must include a list of persons who have an interest in the shares or transferable debt instruments that they own or control, whether they are relatives, or a company controlled by the same person who owns that interest, or other persons acting in agreement with him to obtain an interest or exercise rights of voting in the issuer's shares or convertible debt instruments.

The CMA explained that the final decision of the 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 a number of violators of the Capital Market Law and its implementing regulations.

The CMA stresses the importance of investors' confidence in the capital market for its growth and prosperity. The CMA continuously monitors any violations of the Capital Market Law, its implementing regulations, and the regulations that the CMA is responsible for implementing, identifies the perpetrators, and process the necessary procedures to impose deterrent penalties against them, in order to enhance the CMA's efforts aimed at creating an attractive investment environment to all categories of investors and safe from unfair or unsound practices or that involve fraud, cheating, deception or manipulation. The CMA also calls on all traders in the exchange that illegal practices that involve fraud, cheating, deception and manipulation are crime offenses, and exposes their perpetrators to legal accountability and the imposition of sanctions stipulated in the Capital Market Law.

The CMA also stresses that it will not hesitate to pursue manipulators in the capital market by monitoring their transactions based on its powers in accordance with the Capital Market Law, and using the advanced technical means it possesses that enable it to monitor all transactions, detect suspicious cases, and take the necessary legal measures in accordance with the rules and regulations. In addition to that, the CMA coordinates with the relevant concerned authorities, each according to their jurisdiction, to track down anyone who attempts to commit fraud or manipulation in the capital market. This comes in fulfillment of the CMA's objectives towards enhancing the efficiency of the capital market, protecting its dealers, and ensuring that they are not exposed to deception or manipulation.

Furthermore, any person affected by these violations in this case is entitled to file a compensation claim (as individual or class action) with the Committee for Resolution of Securities Disputes (CRSD) for the damage he/she suffered from due to these violations, provided that such claim is preceded by a complaint filed with the CMA on this regard, via the following link: (File Complaint). It is worth noting that the General Secretariat of 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 penalties were proven and the final decision was issued by the ACRSD against everyone who violated the capital market laws and implementing regulations. It can be viewed through the following link:

Announcement of GS-CRSD, click here

To view the trading history and the security subject to the violation, click here