Compensating those affected by violations on the arrow of “national iron”

The Capital Market Authority announced the completion of compensation for those affected by the violations committed on the share of a national iron and steel company (national iron).
The authority said: The compensation for the violations that took place before and after the company was brought up directly in the parallel market (growth), and what resulted from the violations made by 5 of the convicts, who were issued against them the decision of the Appeals Committee in the disputes of the publication on the sites of the Authority and the General Secretariat of the Secretariat for Securities Disputes on the fourth of April of 2024 AD.
The decision came, following the lawsuit filed by the Public Prosecution and referred to it by the Capital Market Authority, and that it obligates them to pay 41.4 million riyals for the illegal gains achieved by these violations.

Deposit compensation in the accounts of the affected

The commission was deposited in compensation in the accounts of the affected people through the compensation fund, which was established under the decision of the Council of the Authority to compensate the affected people in accordance with the distribution plan approved by the Securities Dispute Committee, in a way that contributes to facilitating compensation procedures and delivering rights to their owners with the least possible effort.
Since the date of publishing the decision of the Appeals Committee, the authority has worked to assess the appropriateness of activating Article (59) of the financial market system, which gives the authority the authority to organize the procedures for compensating the affected persons as a result of the violations committed.

Customd boxes for compensation

The authority worked to create compensation funds for compensation, whose supplier is from the illegal gains collected.
The affected persons will be compensated in accordance with a distribution plan issued by a decision of the committee, which resulted in the establishment of this fund to compensate the beneficiaries in accordance with a distribution plan that was approved by a decision of the Committee to Chapter in Securities Disputes, in accordance with the necessary rules and procedures and the regular requirement to enhance the efficiency of these funds.
The approved distribution plan came in proportion to the size of the violations committed and the value of the illegal gains made by these violations, and the size of the damage to investors who traded the company’s shares during the violation period.

The value of compensation

The value of compensation for some investors has reached more than a million riyals as the highest compensation value approved by the Securities Dispute Committee.
The commission stated that the distribution plan adopted by the separation committees included all those who were proven to be exposed to material damage, based on what the technical records showed, and this is not prejudiced by everyone who sees damage to it and did not include the distribution plan in submitting his individual claims to the separation committees in securities disputes to demand this.
Compensation funds are complementary to the facilitation of ways to compensate those affected by the violations committed in the financial market, to be added to the available mechanisms to compensate for damage, such as individual claims and collective lawsuits.

Compensation standards

The commission adopts a number of criteria through which it determines the appropriateness of the formation of a compensation fund from the illegal gains collected from violators whenever the facts and circumstances of the case show the presence of actually affected by these violations.
The authority considered that the formation of the compensation fund will be effective and practically produced more than other means of compensation for the damage to dealers in the financial market as a result of business and behaviors committed by those who violate the financial market system and its executive regulations.

Analytical tools

The commission indicated that it adopts a set of analytical tools to reach a systematic evaluation on the appropriateness of the establishment of a fund to compensate the affected people from the illegal gains collected under final decisions issued by the dismissal committees in securities disputes.
She stated that this comes based on a number of criteria that contribute to determining the most appropriate compensation mechanism, whether through direct compensation through these funds or through collective claims to demand compensation.
These criteria include aspects related to implementation and collection of these gains, the nature of the violations committed, their multiplicity and their impact. In addition to the extent to which the separation committees can be adopted for the principle of compensation and the possibility of applying it in practice to all the affected people in the case of evaluation.

Global practices

The authority pointed out that in the context of enhancing compensation opportunities, it has been keen to study the best global practices applied in the financial markets, and adopted what is appropriate for the nature of the Saudi financial market, which contributes to raising the efficiency of compensation mechanisms, enhancing investor confidence in the market and protecting their rights.
These efforts are part of a strategic initiative package launched by the Capital Market Authority to complete the building of a more advanced and competitive financial system.