Title: Announcement Regarding Issuance of Disciplinary Board Resolution on Violation No. (65/2017 Disciplinary Board) (150/2017 Authority)

The Capital Markets Authority announces issuance of a Disciplinary Board Resolution passed in its meeting held on Wednesday 29/11/2017 on violation No. (65/2017 Disciplinary Board) (150/2017 Authority) filed against:
 
1) Mushrif Trading and Contracting Company ( Mushrif ) 
2) Saud Hamad Abdullah Al-Humaidi (Baker Tilly Kuwait)
3) Waleed Abdullah Al-Osaimi (Al-Aiban, Al-Osaimi & Partners-Ernst & Young)
 
A. Mushrif Trading and Contracting Company:

First: The Company shall pay a total of KWD 2,000 for each of the first, second, third, fifth, sixth, and seventh violations, for violating the rules of disclosing material information and corporate governance according to the specified reasons.

Second: The Company shall pay a total of KWD 50,000 for the fourth violation (A)  for failure to keep the books and records accurate according to international accounting standards and transfer costs between projects according to the specified reasons.

B. Saud Hamad Abdullah Al-Humaidi and Waleed Abdullah Al-Osaimi:

First: the company shall pay a total of KWD 2,000 each for the first violation in the second section for not reporting the effectiveness and appropriate internal surveillance systems according to the specified reasons.  

Second: The Company shall pay a total of KWD 30,000 each for the second violation of (A) for not auditing and surveillance of the financial statements for the first complainant company as required and what is equivalent of cost transfer between projects and forging documents contrary to the law and international accounting standards according to the specified reasons.
The punishment is due to violating the following:

First: Mushrif Trading and Contracting Company:

1- Violating the provisions of Article (1-3-3) in Chapter One (Scope of Application and General Provisions) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010, for holding three Board of Director’s meetings during trading period in the Exchange.
2- Violating the provisions of item (14) of Article (4-1-1) of Chapter Four (Disclosure of Material Information) of Module Ten (Disclosure and Transparency) of the Executive Bylaws for not disclosing the two lawsuits filed against the resolutions of The Ministry of Public Works for withdrawing projects No. (H.T./238) and (H.T./222) of the company.
3- Violating the provisions of Article (4-2-1) of Chapter Four (Disclosure of Material Information) of Module Ten (Disclosure & Transparency) of the Executive Bylaws of Law No. 7 of 2010. It did not promptly disclose a number of material information issued on 26/01/2017, 15/2/2017, 19/04/2017, 20/6/2017.
4- Violating the provisions of Article (1-8) in Chapter One (Scope of Application and General Provisions) of Module Twelve (Listing Rules) of the Executive Bylaws by two sides:
• Violation of International Accounting Standards (11/Construction Contracts), which requires each project to bear all its costs at the end of the financial period from profit and loss, on transferred costs between the Company's projects during the years 2012 to 2016.
5- Violating the provisions of Article (6-1) of Chapter Six Rule V: Apply Sound Systems of Risk Management and Internal Audit of Module Fifteen (Corporate Governance) of the Executive Bylaws for not applying an effective internal system of risk management and monitoring in its acknowledgment to the Authority for not having a clear system by the Board of Directors to accumulate losses of 26.7 million dinars. 
6- Violating the provisions of Article (6-3) in Chapter Six Rule V: Apply Sound Systems of Risk Management and Internal Audit of Module Fifteen (Corporate Governance) of the Executive Bylaws for not establishing an independent risk management department or unit. 
7- Violating the provisions of Article (6-7) in Chapter Six Rule V: Apply Sound Systems of Risk Management and Internal Audit of Module Fifteen (Corporate Governance) of the Executive Bylaws for not establishing an independent department for internal audit.
 
 Second:  Mr. Saud Hamad Al-Humaidi -Baker Tilly Kuwait and Waleed Abdullah Al-Osaimi (Al-Aiban, Al-Osaimi & Partners-Ernst & Young)

1- Violating the provision of item (4) and (6/a) of Article (3-4-6) of Module Five (Securities Activities and Registered Persons (of the Executive Bylaws for not meeting periodically with Mushrif Trading and Contracting Company and not notifying the company’s Board of Directors that the internal audit system is not appropriate or efficient, whereby it does not have an internal audit or risk management unit.
 
2-Violating the provision of Article (3-4-7) of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws in two ways:
• Lack of ascertaining that Mushrif Trading and Contracting Company has moved and transferred costs between its construction projects in order to extinguish its losses during the fiscal years from 2012 until 2016, and thereby violating the International Accounting Standards No. (11/Construction Contracts), which requires that each project to load all its costs at the end of the fiscal period to make sure it has achieved profit or loss. 

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 rules 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.