CMA LAW: Announcement regarding issuance of Disciplinary Board Resolution No. (41/2023) Disciplinary Board - (16/2023) Authority and imposition of a fine against each of: 1- NCM Investment Company, 2- The External Auditors of NCM Investment Company, for violating the Securities Activities and Registered Persons, and Policies & Procedures of Licensed Persons, and Clients’ Funds and Clients’ Assets of the Executive Bylaws of Law No. 7 of 2010 and their Amendments.

Announcement regarding issuance of Disciplinary Board Resolution No. (41/2023) Disciplinary Board - (16/2023) Authority and imposition of a fine against each of:

1- NCM Investment Company.

2- The External Auditors of NCM Investment Company.

for violating the Securities Activities and Registered Persons, and Policies & Procedures of Licensed Persons, and Clients’ Funds and Clients’ Assets of the Executive Bylaws of Law No. 7 of 2010 and their amendments.

For the following reasons:

First: NCM Investment Company:

1) Provision of Article (3-2-5) of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The Company failed to register with the Authority persons occupying registered positions and employment positions (Representative of An Investment Portfolio Manager) while receiving clients orders to buy and sell their securities and dealing on their own accounts.

2) Provision of Item No. (12) of Article (2-1) of Module Six (Policies and Procedures of Licensed Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The Company failed to follow the procedures for the documentary cycle to complete operations related to the activity of the investment portfolio manager, the documentary cycle did not include procedures for transferring clients’ funds to external parties for the purpose of fulfilling clients’ obligations arising from their dealings in securities.

3) Provision of Article (2-1) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven beyond doubt that the Company transferred funds from the bank account of client’s portfolios account to the Company’s bank account, without any document proving its entitlement to those funds.

4) Provision of Article (2-3) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The Company failed to conduct reconciliations between the records of external parties, which are financial brokerage companies, where the Company owns accounts for executing clients’ transactions in securities, with the Company’s internal records during the time period extending from 1/1/2022 until 30/11/2022.

5) Provision of Article (2-4) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The Company’s failure to reconcile the records and accounts of clients with the Company, as the amounts in the clients’ bank accounts and those in the accounts of external parties for executing clients’ orders (financial brokerage companies) exceeds the amounts in the Company’s internal records, in addition to the Company’s failure to process reconciliation in correcting the discrepancy.

6) Provision of Item (5) of Article (5-1-7) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven to the Authority, through reviewing the contract for establishing an investment portfolio managed by a client, that the item in the investment portfolio contract conflicted with Item No. (5), the subject of the violation.

7) Provision of Item (2) of Article (5-2-3) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven to the Authority that the Company did not comply with Clause (2) of the mentioned article, due to the Company allowing access of unauthorized employees to deal with the clients’ accounts within the location at which investment portfolios are managed.

Second: The External Auditors of NCM Investment Company, it was proven the violation of the provision of Article (2-5) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

As it was proven to the Authority, through reviewing the report prepared by him regarding the Company’s compliance with the provisions of Module Seven (Clients’ Funds and Clients’ Assets) for the financial year ending 31/12/2021, that the report did not include the observations that were monitored on the Company, represented by not complying with Item No. ( 5) From Article No. (5 - 1 - 7) of Module Seven (Clients’ Funds and Assets), which is represented by the conflict of Item No. (11.2/b) of the contract for establishing the investment portfolio with Clause No. (5) the subject of the observation.

The Resolution included the infliction of the following penalty: -

“First: Levying a penalty on NCM Investment Company as the following:

1- A fine in an amount of KWD of 1,000 (one thousand Dinars) for the first violation.

2- A fine in an amount of KWD of 2,000 (two thousand Dinars) for the third and seventh violation.

3- A fine in an amount of KWD of 3,000 (three thousand Dinars) for the fourth and fifth violation for correlation.

4-A warning for each of the second and sixth violation, and considering its non-repetition in the future

Second: Levying a warning on the external auditors of NCM Investment Company for the attributed violation and considering its non-repetition in the future.”

In this regard, the CMA emphasizes the implementation of CMA Law and its Executive Bylaws on all persons dealing in securities activities, and urges them to comply with these Laws in order to promote investors' confidence, create a sound investment environment, and implement the Law according to the principles of fairness, transparency, and integrity in line with the best international practice.

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