Four Saudis fined in metal firm trading scam

Saudi brokers and investor charged for 2006 stock price manipulation

The case is near-identical to a ruling in November 2009.
The case is near-identical to a ruling in November 2009.

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Three traders and an investor in Saudi Arabia have been charged with securities fraud relating to nearly a month of unlawful trading of shares in National Metal Manufacturing and Casting Company four years ago.

Brokers Jar Allah bin Mohammad Al Jar Allah, Saeed bin Mohammad Al Jar Allah and Fayez bin Saleh bin Abdullah Bin Mahfouz have been found guilty of market manipulation and deception in collusion with Fayez bin Saleh bin Abdullah Bin Mahfouz, an outside investor, who has also been found guilty.

The Capital Markets Authority, Saudi Arabia’s chief financial regulator, announced the final decision by the Appeal Committee for the Resolution of Securities Conflicts yesterday in a series of notifications to the Tadawul, the stock exchange.

The charges relate to the violation of article 49 of Capital Market Law and articles 2 and 3 of the Tadawul’s Market Conduct Regulations that cover the prohibition of market manipulation.

These laws relate to the ‘misleading impression of trading activity or interest in the purchase or sale of the security’ – and manipulative acts that can include making fictitious trades, trades that do not lead to a change in the stocks’ ownership, or posting trades at successively higher or lower prices so as to significantly affect the closing price.

Jar Allah bin Mohammad Al Jar Allah has been ordered to pay SAR 56.63 million, the total revenue accrued by the scam, which occurred between 17th June and 15th July 2006, along with a fine of SAR 100,000. Saeed bin Mohammad Al Jar Allah and Fayez bin Saleh bin Abdullah Bin Mahfouz have also been fined SAR 100,000. All three have been banned from trading shares and working in financial firms that trade shares for five years.

The ruling comes almost a year after four stock brokers and an investor were found guilty of violating the Kingdom’s trading laws, a near-identical case overseen by the CMA’s Committee for the Resolution of Securities Disputes involving violation of the same articles of the Capital Markets Law – which was enacted in 2003 – and the Market Conduct Regulations.

National Metal Manufacturing & Casting Company – also known as Maadaniyah - galvanises and treats second stage steel products that include different types of wire as well bolts, screws and nails. Maadaniyah's ferrous wire is used in the production of electrical cables, upholstery, and furniture, and in construction.

During the trading period specified by the case, Maadaniyah’s shares leaped from SAR 58.24 to SAR 118.40, a rise of more than 103%, by far its highest position in four years since. Yesterday the shares closed down 0.64% to SAR 28.6.
 

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