MMG founders list ‘top five flaws’ in CRSD ruling
The founders of Saudi Arabia’s Mohammad Al-Mojil Group have issued a statement containing what they consider to be the “top five flaws” in the CRSD ruling
The founders of Mohammad Al-Mojil Group (MMG) have listed what they consider to be the “top five flaws” in the Committee for the Resolution of Securities Disputes’ (CRSD) recent ruling.
On 16 June, 2016, the CRSD, part of Saudi Arabia’s Capital Market Authority (CMA), imposed prison sentences on three MMG executives. Founder, Mohammad Al-Mojil, and his son, Adel Al-Mojil, were each sentenced to five years’ imprisonment for misrepresenting the contractor’s value.
In their latest statement, MMG’s founders expressed their “deep anxiety” over the state of the Saudi Stock Exchange, Tadawul. “The CRSD ruling is a bleak warning for all market participants, and, in particular, companies that face trading losses in turbulent market conditions,” they noted.
MMG’s founders went on to list the following “obvious flaws” in the CRSD ruling:
“1. The CRSD has never allowed the defendants to receive complete copies of the evidence submitted by the CMA and ultimately used to penalise them. The defendants were seriously prejudiced in their ability to defend themselves against the charges; essentially, we are the subjects of serious injustice.
“2. Remarkably, the CRSD refused to accept the defence evidence submitted by 13 different defendants over 18 months, including by one [of] the ‘big four’ accountancy firms, Deloitte & Touche.
“3. The CRSD stated that there were fundamental and irreparable flaws in the CMA’s allegations, in that the CMA failed to identify who committed the violations and to demonstrate their financial impact on the share price. Having reached this conclusion, the CRSD proceeded to impose disproportionate penalties that take no account of the rejection of a substantial number of allegations.
“4. The selling shareholder, Mr Mohammad Al-Mojil, had no role in setting the IPO [initial public offering] price. It was determined by a market auction in the normal course and approved by the CMA, which closely supervised MMG’s IPO process from its inception in 2006.
“5. The CRSD misled the defendants by accepting their evidence submitted in the course of proceedings, only to disregard it at a very late stage because it allegedly came “from unknown sources” and was produced in a form of scanned copies. The CRSD reached this conclusion even though it has power to contact all Saudi banks and obtain relevant confirmation (if it indeed had any doubts regarding the veracity of the evidence). It deliberately and quite extraordinarily chose not to exercise this power.”
The MMG founders also reiterated criticisms contained in a previous statement regarding a report produced by Protiviti Member Firm (Middle East) on behalf of Saudi Arabia’s CMA.
Their latest statement concludes: “Saudi Arabia wishes to encourage inward investment and promote the success of its stock market. Against the background of the injustices visited upon MMG, would-be entrants need to tread carefully as they too could fall victims to the regulator that appears one-sided and appears to operate in any way that creates a considerable disincentive to the rules of fair and equal procedure, which foreign investment is accustomed to.”