CMA LAW: Announcement regarding issuance of Disciplinary Board Resolution No. (131/2022 Disciplinary Board) (136/2022 Authority) and imposition of a fine against each of: 1- Securities Group Company, 2- Marwan Ahmad Salamah – Chairman of the Audit Committee at Securities Group Company, 3- Fawaz Othman Al-Ayyar – Member of the Audit Committee of Securities Group Company, 4- Atef Amarah Hejazi – Member of the Audit Committee of Securities Group Company for violating the rules of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments and the rules of Corporate Governance

Announcement regarding issuance of Disciplinary Board Resolution No. (131/2022 Disciplinary Board) (136/2022 Authority) and imposition of a fine against each of:

1- Securities Group Company.
2- Marwan Ahmad Salamah – Chairman of the Audit Committee at Securities Group Company.
3- Fawaz Othman Al-Ayyar – Member of the Audit Committee of Securities Group Company.
4- Atef Amarah Hejazi – Member of the Audit Committee of Securities Group Company.

For violating the rules of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments and the rules of Corporate Governance.

For the following reasons:

First: Securities Group Company violated the following provisions:

1- Item (6) of Article (2-3) of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The company did not provide evidence for applying what was stipulated in the study of risk assessment on its clients when evaluating their risks. In addition, the Company failed to set and prepare some particular procedures, as no evaluation was made on any of the Company’s clients in accordance with the factors stipulated in (c and d) of Item (6) of the aforementioned Article, and it was proven that incorrect information was found in the client’s risk assessment profile.

2- Item (1) of Article (3-8) of the same Module:
The Company did not verify the civil identification of one of its clients as well as the civil identifications and commercial license of the beneficial owners within the main client of one of the corporate clients, and it did not verify the signature form of some clients.

3- Article (3-16) of the same Module, as the policies and procedures did not include the risk factors used for the types of clients and activities that are to be considered as high risk.

4- Item (2) of Article (3-19) of the same Module. The Company did not take one of the procedures of enhanced due diligence which is obtaining additional information related to the source of funds.

5- Article (3-20) of the same Module. The Company did not comply with the system of identifying whether a client, potential client, or beneficial owner is a PEP.

6- Article (3-38) of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The Company failed to provide the inspection team with the report of the large or unusual patterns of transactions to study it and provide the opinion thereon.

7- Article (4-1) of the same Module. The Company failed to update the civil identification and commercial license of some clients.

8- Article (4-7) of the same Module. The Company failed to keep some CDD records of some clients within the period stipulated in the mentioned Article (five years after the account is closed).

9- Article (6-1) of the same Module. The Company did not set adequate policies and procedures to ensure the implementation of all the obligations mentioned in aforementioned Article.

10- Article (7-6) of the same Module. It was proven to the CMA after reviewing each of the report of the internal auditor on the year 2019, which included the period from April 2019 to September 2019, and the report of the following internal auditor, which included the period from January 2020 to December 2020, that the internal audit functions of the Company were irregular, as the Company did not include the period between the two mentioned reports.

11- Article (7-8) of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments. The Company failed to ensure that one of the senior executives, managers and some of the employees received the necessary training during 2021.

Second: Each of the following:

1- Marwan Ahmad Salamah – Chairman of the Audit Committee at Securities Group Company.
2- Fawaz Othman Al-Ayyar – Member of the Audit Committee of Securities Group Company.
3- Atef Amarah Hejazi – Member of the Audit Committee of Securities Group Company.

They violated the provision of Item (11) of Article (5-7) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven to the CMA that the Chairman and members of the internal audit committee of the Company did not review the results of the regulatory reports and take the necessary procedures thereon, as the Company violated the following:

1. The Company repeated its noncompliance with the provision of Item (1) of Article (3-8) of Module Sixteen of the Executive Bylaws of Law No. 7 of 2010 and their amendments, as it did not verify the civil identification of one of its clients as well as the civil identifications and commercial license of the beneficial owners within the main client of one of the corporate clients, and it did not verify the signature form of some clients.

2. The Company repeated its noncompliance with the provision of Item (2) of Article (3-19) of the same Module, as it did not take one of the procedures of enhanced due diligence which is obtaining additional information related to the source of funds.

3. The Company repeated its noncompliance with the provision of Article (3-38) of the same Module, as it failed to provide the inspection team with the report of the large or unusual patterns of transactions.

4. The Company repeated its noncompliance with Article the provision of (4-1) of the same Module, as it failed to update the civil identification and commercial license of some clients.

5. The Company repeated its noncompliance with the provision of Article (6-1) of the same Module, as it did not set adequate policies and procedures to ensure the implementation of all the obligations mentioned in aforementioned Article as determined below:

a. The Company failed to verify the beneficial owners within the main client of the corporate clients.
b. The Company failed to verify the lists in a continuous manner for clients and beneficial owners within the main client.
c. The Company failed to verify and compare the names of its clients and beneficial owners within the main client within the names listed in the national when opening the account.

6. The Company repeated its noncompliance with the provision of Article (7-8) of the same Module, as it failed to ensure that one of the senior executives, managers and some of the employees received the necessary training during 2021.
Provided that these violations are procedural and not substantive.

The Resolution included the infliction of the following penalty: -

"First: - Levying a fine against Securities Group Company in an amount of KWD 25000 (twenty-five thousand Dinars) for all the attributed violations due to correlation.

Second: - Levying a fine against each of:
1- Marwan Ahmad Salamah – Chairman of the Audit Committee at Securities Group Company.
2- Fawaz Othman Al-Ayyar – Member of the Audit Committee of Securities Group Company.
3- Atef Amarah Hejazi – Member of the Audit Committee of Securities Group Company.
in an amount of KWD 3000 (three thousand Dinars) on each one of them for the attributed violations due to correlation.”

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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