"Financial market": Compensating more than 2,500 people affected by Sahm violations "Al-Kathiri"

Appeal Committee Decision

Since the date of publication of the Appeal Committee decision, the Authority has worked to evaluate the possibility of applying Article (59) of the Financial Market Law, which grants the Authority the authority to regulate compensation procedures for persons harmed as a result of committed violations, and the appropriateness of establishing dedicated funds for compensation whose source is from the illegal gains obtained, which resulted in the establishment of this fund to compensate those entitled to it according to a distribution plan that was approved by a decision of the Adjudication Committee. Securities disputes, in accordance with the necessary rules and procedures and the regulatory requirements to enhance the efficiency of these funds.

This is the third fund of its kind to compensate those affected by violations committed in the financial market within less than six months, after the first fund that was announced last July, to constitute the first actual application of the concept of compensation funds in the Kingdom, and the first activation of the powers granted to the authority under the financial market system, while the second fund was announced last September, in which the distribution work was completed. For those affected by it less than four months ago.

The violations committed

The approved distribution plan was proportionate to the size of the violations committed, the value of the illegal gains achieved as a result of those violations, and the extent of the damage inflicted on investors who traded in the company’s shares during the period of the violation, as the value of compensation for some investors reached more than three million riyals and was approved by the Committee for Resolution of Securities Disputes.

The Authority confirms in this context that the distribution plan that It was approved by the Adjudication Committee and included all those who were proven to have been harmed, based on what was shown by the technical records. This is not without the right of everyone who believes that harm has occurred to him and was not included in the distribution plan to submit his individual claim to the Securities Disputes Settlement Committee to demand this after submitting a complaint to the Authority in this regard.

Compensation Funds

Compensation funds are complementary to the mechanisms for facilitating ways to compensate those affected by violations committed in the financial market, to be added to the mechanisms available for compensation for damages, Such as individual lawsuits and collective lawsuits, as the Authority adopts a number of standards through which it determines the suitability of forming a compensation fund from the illegal gains collected from violators whenever the facts and circumstances of the case show the presence of those actually harmed by these violations. The Authority considered that forming a compensation fund would be more effective and productive in practical terms than other means of compensation.

The Authority explained that it adopts a set of analytical tools to arrive at a systematic assessment regarding the suitability of establishing a compensation fund. Those affected by illegal gains obtained pursuant to final decisions issued by the Committee for Resolution of Securities Disputes, 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 lawsuits to demand compensation.

Implementation and collection processes

These standards include aspects related to the implementation and collection processes of those gains, and the nature, number, and impact of the violations committed. In addition to the extent to which adjudication committees adopt the principle of compensation and its application to the violation and those affected by it.

The Authority confirms that, in the context of enhancing compensation opportunities, it has been keen to study the best international practices applied in the financial markets, and has adopted what is appropriate to the nature of the Saudi financial market, in a way that contributes to raising the efficiency of compensation mechanisms, enhancing investors’ confidence in the market and protecting their rights.

These efforts come within a package of strategic initiatives launched by the Capital Market Authority to complete the building of a more developed, competitive and more financial system. Efficiency in achieving justice.