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CMA fines former official of Saudi Telecom $1.8mn

Ex-board member of state-controlled Saudi Telecom fined $1.8million on charges of insider trading in 2004.

May 31, 2010 9:34 by

The Saudi Capital Authority’s (CMA’s) Appeals Committee for Disputes on Securities has ordered a former board member of state-controlled Saudi Telecom Company (STC) to pay over SR7 million in fines for insider trading in 2004. The CMA said in a statement on Tadawul’s website on Sunday that former STC board member Saleh bin Mohammed bin Saleh Al-Hajjaj misused his inside knowledge in trading in the shares of the company and earned huge profits.

He was ordered to pay back about SR7.3 million in profits and fined SR100,000 separately.

The committee also issued a three-year ban on Al-Hajjaj working in companies whose shares are traded on the stock market.

CMA described the ruling as being final.

The CMA has become more active in recent years in dealing with violations as it tries to polish the image of an opaque bourse gradually opening up to foreign investors.

Commenting on the CMA decision, John Sfakianakis, chief economist at Banque Saudi Fransi, said: “The CMA is every day changing the way publicly traded companies are handling themselves, being more accountable and transparent. Old taboos are being broken and new ground rules created and implemented for all to follow. The wrongdoers are being ring-fenced and fined until full compliance is applied at a systemic level,”

Faisal Alsayrafi, managing director and CEO of the Financial Transaction House (FTH), said: “The CMA is doing a great job to bring back the investor confidence after the stock market was dogged by allegations of being opaque and subject to manipulation of stock prices.” He said the CMA action showed that it was serious about making the market more transparent.

STC is 83.6-percent owned by three government funds and is the Kingdom’s leading operator.

Despite CMA’s tough action, the Tadawul All-Share Index (TASI) dropped 1.44 percent to 6,087.28 on Sunday. The STC shares fell 0.83 percent to close at SR36.

Over the past three years, CMA has stepped up efforts to clamp down on irregularities and imposed hefty fines and one jail term on investors and executives found guilty of manipulation, and on firms violating corporate governance and disclosure regulations.

The Saudi bourse is gradually opening up to direct foreign ownership amid tough competition from regional bourses. In 2008, CMA allowed nonresident foreign investors to sign swap agreements with Saudi intermediaries, permitting indirect ownership of shares, in one of the Kingdom’s boldest moves yet to open up its exchange to foreigners.

Last week the CMA fined some companies SR300,000 for violating its regulations related to registration and listing, including disclosure of vital information to the media. In January this year, the regulator ordered six investors to pay a total of SR278.1 million for trading violations.


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