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07/11/2024

Capital Market Authority: Convicting Three Al-Khodari Co. Employees for Violating the Capital Market Law, Its Implementing Regulations, and the Companies Law, with Fines of SAR 3.95 Million and Imprisonment for One of Them

The Capital Market Authority (CMA) announces the issuance of the final decision by the Appeal Committee for the Resolution of Securities Disputes (ACRSD), convicting three employees of Abdullah A. M. Al-Khodari Sons Co. for violating Article (49/a) of the Capital Market Law, Article 7 of the Market Conduct Regulations, and Article (211/a) of the Companies Law, issued by Royal Decree No. (M/3), dated 28/01/1437H. The convicted individuals have been ordered to pay a sum of SR 3.95 million, with one of them sentenced to imprisonment.
According to the ACRSD, the final decision was issued convicting Sohail Sa'eed Mohammed Sa'eed, as Director of the Financial Department at Abdullah A. M. Al-Khodari Sons Co., Kailash Nath Sadangi, as Chief Financial Officer of the Company, and Fawaz bin Abdullah bin Abdulmohsen Alkhodari, as Chief Executive Officer of the Company, for violating Article (49/a) of the Capital Market Law, and Article (7) of the Market Conduct Regulations, for performing acts that inflated the revenues of (4) construction projects in the Company's financial statements during the period from the fiscal year ending on 31/12/2010 until the fiscal year ending on 31/12/2017, through manipulating the application of the (Revenue Standard) and (Accounting Standard for Construction and Service Contracts) approved by the Saudi Organization for Certified Public Accountants (SOCPA), and the International Financial Reporting Standard (15) – (Revenue from Contracts with Customers), as it was found that the costs used in calculating the percentage of project completion differ from the actual costs registered in the Company's records, hence showing the annual financial statements for the periods in question contrary to reality, thus creating a false and misleading impression regarding the value of the Company's security.
The ACRSD's final decision also included the conviction of Fawaz bin Abdullah bin Abdulmohsen Alkhudari, as Chief Executive Officer of the Company, for violating Article (211/a) of the Companies Law, issued by Royal Decree No. (M/3) dated 28/01/1437 H., for the failure to prove the losses related to (6) construction projects withdrawn from the Company in the financial statements of the fiscal year ending on 31/12/2017, with the intent of concealing the Company's financial position, in violation of the International Financial Reporting Standard (Financial Instruments) and the International Accounting Standard (Provisions, Contingent Liabilities, and Contingent Assets).
According to the decision, Fawaz bin Abdullah bin Abdulmohsen Alkhudari was sentenced to six months in prison and fined twice: SAR 3.25 million for violating the Companies Law and SAR 400K for violating the Capital Market Law and its implementing regulations. Additionally, Sohail Sa'eed Mohammed Sa'eed was fined SAR 100K, and Kailash Nath Sadangi was fined SAR 200K. Furthermore, all three convicted individuals were banned from working in companies whose shares are traded in the Saudi Exchange for a period of three years.
The CMA stresses the importance of investors' confidence in the capital market for its growth and prosperity. The CMA continuously monitors any violating behaviors of the Capital Market Law, its Implementing Regulations, and the regulations enforced by the CMA, identifies the perpetrators, and processes the necessary procedures to impose deterrent penalties against them, in order to enhance the CMA's efforts aimed at creating an attractive investment environment to all categories of investors and safe from unfair or unsound practices or that involve fraud, cheating, deception or manipulation.
Furthermore, any person affected by these violations, in this case, is entitled to file a compensation claim (as individual or class action) against those convicted persons with the Committee for Resolution of Securities Disputes (CRSD) for the damage he/she suffered from these violations, provided that such claim is preceded by a complaint filed with the CMA on this regard, via the following link: (File Complaint). The General Secretariat of the Committee for Resolution of Securities Disputes (GS-CRSD) will announce to the public on its website in case of registering any class action in order to enable the rest of investors affected by such violations to apply to the CRSD to join the class action.
For further announcement's details, kindly visit the official website of General Secretariat of the Committees for Resolutions of Securities Disputes, via the following link:
Announcement from the General Secretariat of the Committees for Resolution of Securities Disputes Click Here

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