Title: Announcement regarding issuance of Disciplinary Board Resolution No. (38/2023) Disciplinary Board - (2,3/2023) Authority and imposition of a fine against each of: 1- Kuwait Real Estate Holding Company (ALAQARIA), 2- Chairman, Vice Chairman, and Members of the Board of Directors of Kuwait Real Estate Holding Company (ALAQARIA) and the company’s CEO, 3- The Auditors of Kuwait Real Estate Holding Company (ALAQARIA) For violating the Listing Rules and the rules of Corporate Governance and Securities activities and Registered Persons of the Executive Bylaws of Law No. 7 of 2010 and their amendments.

Announcement regarding issuance of Disciplinary Board Resolution No. (38/2023) Disciplinary Board - (2,3/2023) Authority and imposition of a fine against each of: 

1- Kuwait Real Estate Holding (ALAQARIA).
2- Chairman, Vice Chairman, and Members of the Board of Directors of Kuwait Real Estate Holding Company (ALAQARIA) and the company’s CEO.
3- The Auditors of Kuwait Real Estate Holding Company (ALAQARIA).
For violating the Listing Rules the rules of Corporate Governance and Securities activities and Registered Persons of the Executive Bylaws of Law No. 7 of 2010 and their amendments.

For the following reasons:

First: Kuwait Real Estate Holding (ALAQARIA):
The Company violated the provision of Article (1-14) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010. It was proven to the CMA that the Company failed to comply with the provision of the mentioned Article (during the years 2019 and 2020) by not implementing the International Accounting Standards.

Second: Chairman, Vice Chairman, and Members of the Board of Directors of Kuwait Real Estate Holding Company (ALAQARIA) violated the following:
1- Provision of Item (13-a) of Article (3-7) 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 they failed to comply with the provision of the mentioned Article (during the years 2019 and 2020) as a result of not performing their role of ensuring that the Company’s executive management has executed the resolution of the Board of Directors No. (1/2/1) held on 18/3/2019 regarding the approval of the portfolio’s contract with other entities on condition that the contract is in accordance with the Islamic Sharia.

2- Provision of Item (18-b) of Article (3-7) of the same Module. The specific on-site inspection conducted on the Company proved to the CMA that there were not any feasibility studies for measuring and facing the risks of the assets of Kuwait Real Estate Holding Company (ALAQARIA) and its subsidiaries, whether its real estate assets or financial assets (such as shares).

Third: The CEO of Kuwait Real Estate Holding Company (ALAQARIA) violated the following:
1- Provision of Item (1) of Article (3-9) 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 executive management of Kuwait Real Estate Holding Company (ALAQARIA) failed to comply with the provision of the Article twice (during the years 2019 and 2020) which contradicts with the Board of Directors’ Resolution No. (1/2/1) held on 18/3/2019.

2- Provision of Item (4) of Article (3-10) of the same Module. It was proven to the CMA that the executive management of Kuwait Real Estate Holding Company (ALAQARIA) failed to comply with the International Accounting Standards during the years 2019 and 2020. This is due to its failure to list the amounts received during the years 2019 and 2020 in its financial statements for the financial year that ended on 31/12/2019 and in its financial statements for the financial year that ended on 31/12/2020. In addition, it failed to clarify and state the mortgage of real estates and shares within the clarifications of the same financial statements.

3- Provision of Item (7) of Article (3-10). The specific on-site inspection conducted on the Company proved to the CMA that there were not any feasibility studies for measuring and facing the risks of the assets of Kuwait Real Estate Holding Company (ALAQARIA) and its subsidiaries, whether its real estate assets or financial assets (such as shares) according to the company’s statement.

Fourth: The Auditors of Kuwait Real Estate Holding Company (ALAQARIA):
The first one:
He violated the provision of Article (3-4-5) of Module Five (Securities activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven to the CMA that, in his capacity as the external auditor of Kuwait Real Estate Holding Company (ALAQARIA), he failed to comply with the International Financial Reporting Standards and the International Auditing Standards according to the following:

a) The auditing procedures of the Company’s Murabaha credit balance. It was proven to the CMA that he did not enter any reservations in his report prepared on auditing the financial statements of Kuwait Real Estate Holding Company (ALAQARIA) for the financial year that ended on 31/12/2019, as the mentioned Company had Murabaha credit balance of approximately 80% of the Company’s liabilities and about 52% of the Company’s assets. His statement proves his non-compliance with International Auditing Standards stipulated in Article (3-4-5) previously mentioned as a result of not implementing the auditing procedures included in International Auditing Standard (500) “Audit Evidence” and International Auditing Standard (505) “External Confirmations”.

b) Failure to list cash inflow and cash outflow in the cash flow statement. It was proven to the CMA that he did not enter any reservations when reviewing the financial statements of Kuwait Real Estate Holding Company (ALAQARIA) for the financial year that ended on 31/12/2019, as the mentioned Company has received an amount of 3 million Kuwaiti Dinars from a company in 2019 without listing it in “The Company’s Financial Cash Inflows” within the “Cash Flow Statement”, and that the Company has paid the same amount to repay part of the Murabaha credit balance it has towards another entity without listing it in “The Company’s Cash Outflows” within the “Cash Flow Statement”. This represents the Company’s non-compliance with the International Accounting Standard 7 (IAS 7) “Statement of Cash Flows”, especially that such amounts are considered material.

c) Failure to list cash inflow (received) and cash outflow (paid) in the cash flow statement. It was proven to the CMA that he did not enter any reservations when reviewing the financial statements of Kuwait Real Estate Holding Company (ALAQARIA) for the financial year that ended on 31/12/2020, as Kuwait Real Estate Holding Company (ALAQARIA) has received an amount from a company in 2020 without listing it in “The Company’s Financial Cash Inflows” within the “Cash Flow Statement”, and that the Company has paid the same amount to repay part of the Murabaha credit balance it has towards another entity without listing the paid amount in “The Company’s Cash Outflows” within the “Cash Flow Statement”. This represents the Company’s non-compliance with the International Accounting Standard 7 (IAS 7) “Statement of Cash Flows”, especially that such amounts are considered material.

The second one:
He violated the provision of Article (3-4-5) of Module Five (Securities activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven to the CMA that, in his capacity as the external auditor of Kuwait Real Estate Holding Company (ALAQARIA) for the year 2021, he failed to comply with the International Financial Reporting Standards and the International Auditing Standards according to the following:

a- Listing cash inflow (received) and cash outflow (paid) in the cash flow statement for the year 2021 in spite of having received and paid such amounts during previous financial years. It was proven to the CMA that he did not enter any reservations in his report prepared on auditing the financial statements of Kuwait Real Estate Holding Company (ALAQARIA) for the financial year that ended on 31/12/2021 as a result of Kuwait Real Estate Holding Company (ALAQARIA)’s listing of a paid Murabaha credit and a third-party financing of the same value in “The Company’s Financial Cash Activities” within the “Cash Flow Statement”, despite the fact that these amounts were paid and received during previous financial years and that the amount forms more than 16% of the Company’s total assets. His statement indicates his non-compliance with the International Auditing Standards and the International Financial Reporting Standards stipulated in Article (3-4-5) previously mentioned, as a result of the failure to implement the International Auditing Standard (500) “Audit Evidence” and the International Auditing Practice Note (IAPN) 1000 “Special Considerations in Auditing Financial Instruments”.

The Resolution included the infliction of the following penalty: -

"First: Levying a fine against Kuwait Real Estate Holding Company (ALAQARIA) an amount of KWD 25,000 (twenty-five thousand Dinars) for the attributed violation.

Second: Levying a fine against each of Chairman, Vice Chairman, and Members of the Board of Directors of Kuwait Real Estate Holding Company (ALAQARIA) as follows:
An amount of KWD 5,000 (five thousand Dinars) on each one of them for the attributed violations.

Third: Levying a fine against the Member of the Board of Directors and CEO of Kuwait Real Estate Holding Company (ALAQARIA) in an amount of 10,000 (ten thousand Dinars) for the attributed violations in his two mentioned capacities due to correlation.

Fourth: Levying a fine against the first and second auditors of Kuwait Real Estate Holding Company (ALAQARIA) in their capacity as the auditors of Kuwait Real Estate Holding Company (ALAQARIA) in an amount of KWD 3000 (three thousand Dinars) on each one of them for the attributed violations.”

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.