CMA to adopt Watani Steel compensation fund model in future cases

Ali Aldakheel, General Director for Communication and Investor Protection at the Capital Market Authority (CMA), said the establishment of a compensation fund for those affected by violations in the case of Watani Iron Steel Co. was carried out in line with the provisions of the Capital Market Law.

 

He told Argaam that the move reflects the Authority’s strategic approach to facilitating compensation mechanisms for harmed investors while strengthening confidence among market participants.

 

It also complements recent legislative and regulatory reforms in the Saudi capital market, aligning with the CMA’s 2024–2026 strategic plan to make the market more efficient and equitable. Aldakheel said the initiative reflects the ongoing evolution of the market’s oversight ecosystem, with the aim of enhancing investor protection and boosting trader confidence.

 

The CMA earlier announced the completion of compensation payments to investors harmed by violations committed in Watani Steel stock, both before and after its listing, by five individuals convicted of breaching the Capital Market Law and Market Conduct Regulations.

 

This was the first action of its kind in the market’s history, in which a “compensation fund” was established to return illicit gains collected from violators, marking the first practical application of compensation funds in the Kingdom.

 

Aldakheel told Argaam that this model is expected to be applied in similar future cases. The Authority has developed a standards matrix to assess whether establishing a compensation fund is appropriate for each case.

 

“This will allow faster and more effective intervention when actual harm to investors from illegal practices is identified. This step represents a major shift in compensation mechanisms in the Saudi capital market, supporting the principle of swift justice and laying the foundation for a new era of direct, institutional investor protection,” he said.

 

He added that the new provisions mark another milestone in the maturity of the Saudi capital market and strengthen the confidence of both local and international investors, particularly with the introduction of practical tools to safeguard their rights.

 

“This also demonstrates CMA’s commitment to building a sustainable institutional oversight ecosystem in line with Saudi Vision 2030, which seeks to make the Saudi financial market one of the most efficient and attractive globally,” Aldakheel said.

 

He explained that compensation funds represent a new form of redress, supplementing existing methods such as class actions and individual lawsuits reviewed by the Committees for Resolution of Securities Disputes.

 

CMA carefully studied the mechanisms for implementing compensation funds to ensure a high level of readiness at all levels, enhancing their effectiveness in compensating harmed investors. This applies in cases where final decisions by dispute resolution committees require violators to return illicit gains to the Authority, which then distributes the amounts to rightful claimants without the need for complaints or lawsuits, he added.

 

Aldakheel emphasized that the regulator gives high priority to safeguarding investor rights by taking necessary measures to ensure compensation for those harmed by unlawful practices or misconduct. These measures include detecting violations, pursuing legal action, and ensuring victims are compensated under the statutory powers granted to the CMA by the Capital Market Law.

 

The Watani Steel case dates back to a series of transactions carried out by five investors, against whom a final ruling was issued by the Appeal Committee for Securities Disputes in April 2024. The violations included increasing their ownership in Watani Steel stock without the required disclosures, as stipulated by law. In addition, one investor promoted the stock in private WhatsApp groups to influence its price and then sold it after the price rose to realize gains.

 

The committee ordered the individuals to pay more than SAR 41.4 million in illicit gains, which were deposited into the compensation fund. The fund subsequently reimbursed investors who, according to technical records, suffered actual harm during the violation period between Feb. 17, 2021, and May 9, 2021.