Investors affected by violations in Watani Steel shares compensated: CMA

Logo of Watani Iron Steel Co.

The Capital Market Authority (CMA) completed the compensation for investors affected by the violations committed in the shares of Watani Iron Steel Co., which occurred before and after the company's direct listing on the Nomu-Parallel Market.

These violations were committed by five individuals convicted under the decision issued by the Appeal Committee for Resolution of Securities Disputes (ACRSD), published on the websites of the CMA and the GS-CRSD on April 4, 2024. The decision, resulting from the penal lawsuit filed by the Public Prosecution and referred by the Capital Market Authority, obligated them to pay SAR 41.4 million in illegal gains resulting from these violations, the regulator said, in a statement.

The compensations were deposited into the accounts of the affected investors through the Compensation Fund, which was established pursuant to a resolution of the CMA's board to compensate affected parties in accordance with the distribution plan approved by the CRSD. This facilitates the compensation process and ensures that entitlements are delivered to their rightful owners with minimal effort.

Since the publication of the ACRSD's decision, the CMA has worked on assessing the appropriateness of activating Article (59) of the Capital Market Law, which grants the CMA the power to organize compensation procedures for individuals affected by violations and to establish dedicated compensation funds sourced from illegal obtained gains.

Compensation for affected individuals is carried out in accordance with a distribution plan approved by the Committee. This led to the establishment of this fund to compensate eligible parties under a distribution plan approved by a decision of the CRSD, in line with the rules, procedures, and legal provisions to enhance the efficiency of these funds, according to the statement.

The approved distribution plan was designed in proportion to the scale of the violations committed, the value of the illegal gains realized from those violations, and the extent of harm suffered by investors who traded the company's shares during the violation period. Compensation amounts for some investors reached more than SAR 1 million, representing the highest compensation approved by the CRSD.

The CMA also affirmed that the distribution plan approved by the CRSD included all individuals proven to have suffered harm, based on the technical records. This does not preclude the right of any individual who believes they have been harmed but was not included in the distribution plan to file an individual claim with the CRSD to seek compensation.

In April, 2024, ACRSD convicted five investors of violating the Capital Market Law and its implementing regulations, imposing fines of SAR 3.5 million on them. Four investors and a local company were ordered to pay SAR 41.4 million due to the illegal gains achieved in their investment portfolios, including the portfolio of a company owned by one of the violators.