The Saudi CMA announced today (30 January 2010) that the Appeals Committee for Disputes in Securities had issued its final judgment upholding the levying of penalties and fines in the aggregate amount of SAR278,122,905 (US$74,166,108) against several individuals for trading in the shares of Tihama Advertising and Public Relations Company (Tadawul #4070) during the period 23 July 2006 through 19 August 2006. The penalties are composed both fines and return of illegal gains on the trades. Of the two amounts, as you might expect, the disgorged profits are more substantial - 99.8% of the total to be precise.
These are I believe record penalties imposed by the CMA.
The Appeals Committee upheld the following earlier findings and penalties:
First, that Muhammad Bin Nasir Bin Jarallah Al Jarallah violated Paragraph "و" ('waw") of Article 30 of the Saudi Capital Market Authority's Listing and Trading Rules and the imposition of a fine of SAR100,000. (US$26,666.67). (This Article requires that anyone with 10% or more of the shares in a company may not trade them without CMA approval. The standard is not only direct ownership but also an interest in the shares. Debt securities or debts capable to be transformed into voting shares are also subject to this Article.)
Second, the trading violations of each of Jarallah Bin Muhammad Bin Nasir Bin Jarallah Al Jarallah, Said Bin Muhammad bin Nasir Al Jarallah, Fa'iz Bin Salih Bin Abdullah Bin Mahfuz (Mahfuth) as agents for the portfolios of Muhammad Bin Nasir Bin Jarallah Al Jarallah and to return illegal gains in the amount of SAR90,142198.89 (US$24,037,919.17) to the CMA.
Third, confirmation of the violation of each of the three individuals mentioned in #2 (Jarallah, Said and Fai'z) with contravention of Article 49 of the Capital Markets Law and Articles 2 and 3 of the Rules of Market Conduct. (All of the regulations cited deal with market manipulation, false trades etc. Article 49 also deals with insider trading). The following are the consequential regulatory actions:
- Jarallah Bin Muhammad Bin Nasir Bin Jarallah Al Jarallah to pay SAR142,844,770.38 (US$38,091,938.79) in illegal gains to the CMA.
- Said Bin Muhammad bin Nasir Al Jarallah to pay SAR26,088,174.83 (US$6,956,846.62) of illegal gains to the CMA.
- Each of Jarallah Bin Muhammad Bin Nasir Bin Jarallah Al Jarallah, Said Bin Muhammad bin Nasir Al Jarallah, Fa'iz Bin Salih Bin Abdullah Bin Mahfuz (Mahfuth) to pay a fine of SAR100,000. A total of SAR300,000 (US$80,000).
- Each of Jarallah Bin Muhammad Bin Nasir Bin Jarallah Al Jarallah, Said Bin Muhammad bin Nasir Al Jarallah, Fa'iz Bin Salih Bin Abdullah Bin Mahfuz (Mahfuth) prohibited from (a) trading in shares listed in the Saudi Stock Market (Tadawul) and (b) working in companies whose shares are traded in the Tadawul for three years.
Fourth, that Abdul Rahman Bin Abdul Muhsin Al-Muajil assisted Fa'iz Bin Salih Bin Abdullah Bin Mahfuz (Mahfuth) the violations. He is subject to the same three year ban on trading and working as described immediately above. As well as a SAR100,000 (US$26,666.67) fine.
Fifth, that Jarallah Bin Muhammad Bin Nasir Bin Jarallah Al Jarallah engaged in illegal activity with the portfolios of Nasir Bin Muhammad Bin Nasir Al Jarallah and that he pay SAR18,547,761 (US$4,946,069.60) to the CMA.
As mentioned above, not only is this I believe a record fine for the CMA but the scope of the profits made in roughly one month is truly remarkable. If you go to the Tadawul website to Tihama's page and look at historical data (hopefully this link will work) you'll see a Burj Khalifah like spike in trading volume in the latter half of 2006 just around the time the individuals named above were allegedly engaged in their manipulation. For those who don't read Arabic, the scale on the left hand side of the chart is millions of shares. The scale on the right hand side the price per share in SAR. SAR3.75 = US$1.00
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