Investors convicted for violating Capital Market Law in trading Al Kathiri, Anaam Holding shares; fined SAR 302M

Logo of General Secretariat of the Committees for Resolution of Securities Disputes (GS-CRSD)

Eight investors were convicted of violating the Capital Market Law and Market Conduct Regulations, fined them SAR 9.6 million, and obligated to pay SAR 292.8 million 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. 

The conviction was made by the Appeal Committee for Resolution of Securities Disputes (ACRSD). 

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, the Capital Market Authority (CMA) said in a statement. 

The investors were convicted for synchronized trading on shares Tadawul-listed Al Kathiri Holding Co. and Anaam International Holding Group. Simultaneously, they increased their ownership and coordinated exit from these stocks at various times, primarily in 2020. 

The ACRSD ruled for the imposition of a precautionary seizure on all movable and immovable assets of the convicted individuals, including bank and investment accounts, until the swindled sums are redeemed. 

The investigation revealed that this illegal scheme dates back to June 7, 2020, when Sultan Albanyan purchased 225,000 shares in Al Kathiri from a senior company official through a negotiated deal. This transaction occurred 19 days after the company announced that it had filed for a capital hike via a rights issue with CMA. 

On June 11 of the same year, Fahad Albanyan transferred 225,000 shares of Al Kathiri to his daughter’s portfolio, before purchasing a similar amount on Aug. 23, 2020, from one of the company's senior officials in a negotiated deal. From Aug. 24 to Oct. 5, 2020, the convicted carried out buy orders and some speculations on the stock price, which resulted in an increase in their combined ownership to 24%. They did not notify the Saudi Exchange (Tadawul) of this transaction, despite kinship ties.

Accordingly, the company’s stock price rallied more than SAR 54. On Oct. 5, Fahad Albanyan, through his minor children's portfolios, placed buy orders in the closing auction to achieve a high closing price, coinciding with the company’s extraordinary general meeting (EGM) to vote on the capital increase. The rights issue price was supposed to be determined based on the said closing price. The following day, the company announced shareholders’ approval on the capital top-up. 

From Oct. 8 to Nov. 15, 2020, the convicted sold part of the rights deposited for them to subscribe, before selling the shares and exiting the company on Nov. 16. 

Investigations also revealed the existence of share transfers between the brothers' portfolios through simultaneous sell and buy orders on the same volume, timing, and price. Fahad Albanyan transferred approximately SAR 4.7 million to his brother Abdullah to provide liquidity for purchasing shares in Al Kathiri and bought 100,000 shares in the same company previously owned by Fahad, following the latter's desire to sell them. 

Regarding violations related to the share of Anaam International, the company announced on Feb. 9, 2020, the board’s recommendation to raise capital via a SAR 75 million rights offering. Fahad Albanyan transferred 74,900 shares to his minor son's portfolio. After three days, he repurchased the same number of shares, impacting the stock price. The next day, he transferred the same quantity to the portfolio of his minor daughter, before making buy orders on 73,910 shares of Anaam from May 19 to June 1, 2020. 

On Oct. 6, 2020, the company invited its shareholders to hold and EGM and vote on a capital hike. Starting from Oct. 7, and through the 20 consecutive days, the convicts engaged in speculative activities, collectively increasing their ownership to 27% without disclosing this to Tadawul, despite their kinship ties. The stock surged approximately SAR 115. 

On the 27th of the same month, Sultan Albanyan and Fahad Albanyan, through the portfolio of his minor daughter, placed buy orders in the closing auction to achieve a high closing price on the EGM date. On the next day, Anaam shareholders showed noobjection to the move. 

From Oct. 28 to Nov. 15, 2020, the convicted started selling their shares and exiting the stock. This followed the buy orders simultaneously placed by them from Dec. 2019-2020, to impact the stock price. Other buy orders were placed in the closing auction to achieve a high closing price. 

These violations were detected by CMA, along with the said negotiated  deals and ownership transfers, as well as trading in the shares of Al Kathiri and Anaam based on prior coordination. The convicted aimed at owning a large percentage of the shares of the two companies without disclosing this to Tadawul. Their combined ownership reached approximately 24% in Al Kathiri, and 27% in Anaam International. 

Accordingly, these actions are 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 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 decision included the imposition of a number of penalties upon the defendents, as follows:

The ACRSD fined Faisal bin Abdulaziz bin Abdullah Albanyan SAR 200,000, obliging him to pay to the CMA an amount of SAR 27,190, against the illegal gains achieved in his portfolios. 

Sultan bin Abdulaziz bin Abdullah Albanyan was fined SAR 600,000, and was ordered to pay to the CMA SAR 33,487,269.10, against the illegal gains achieved in his portfolios. 

Hind bint Muhammad bin Abdulrahman bin Asaker was slammed with a fine of SAR 400,000. She was obliged to pay to the CMA SAR 39.20 million, against the illegal gains achieved in her portfolios. 

Abdullah bin Abdulaziz bin Abdullah Albanyan was fined SAR 600,000, and was ordered to pay to the CMA SAR 11.43 million, against the illegal gains achieved in his portfolios.

Reem bint Abdulaziz bin Abdullah Albanyan was fined SAR 200,000 and was ordered to pay to the CMA SAR 73.57 million, against the illegal gains achieved in her portfolios. 

Fahad bin Abdulaziz bin Abdullah Albanyan was fined SAR 7,200,000 and was obliged to pay to the CMA SAR 207.56 million, against the illegal gains achieved in his portfolios and the portfolios of his minor sons. 

Nouf bint Abdulaziz bin Abdullah Albanyan was fined SAR 200,000 and was ordered to pay to the CMA SAR 147.81 million, against the illegal gains achieved in her portfolios. 

Abdulaziz bin Abdullah bin Issa Albanyan was fined SAR 200,000 was ordered to pay to the CMA SAR 883,237, against the illegal gains achieved in his portfolios. 

Sultan Albanyan, Hind bint Asaker, Abdullah Albanyan, and Fahad Albanyan were banned from trading through purchase of shares in Tadawul-listed companies for a period ranging from one to five years, except trading through investment funds with financial institute.