Asharq Al Awsat, London – Dr. Mohammed al Marzouqi, chairman of the Committee for the Resolution of Securities Disputes (CRSD) in Saudi Arabia revealed to Asharq Al Awsat that the committee has issued rulings that favor investors in the stock market against banks which unreasonably liquidated their portfolios, went through with related proceedings without prior permission from their holders, and violated client directives when implementing deals, or were not prompt in allocating deals and announcing how much they were worth.
Al Marzouqi pointed out that the largest liquidated portfolio over which a ruling was awarded in favor of the customer over the bank was worth 22 million Saudi Riyals (SR) (US $5.8 million), indicating that there were several criteria to be considered when awarding compensation in accordance with each case. He did not specify whether these portfolios were liquidated after last February’s crash in the Saudi stock market, or during the sharp decline that followed Eid-ul-Fitr last October. He did, however, confirm that the CRSD was hearing approximately 220 cases, the majority of which were filed by stock investors, ranging from civil suits against banks to administrative suits against the Capital Market Authority (CMA), in addition to criminal suits filed by the CMA against those in violation of the law.
Furthermore, al Marzouqi added that the CRSD has also issued rulings in favor of those who had incurred damages from the CMA due to faulty procedures, obligating the latter to rectify the situation. He revealed that no rulings demanded financial compensation from the CMA by virtue of the fact that claimants did not request monetary compensation, however he did not rule out the possibility of hearing cases of that nature against the CMA – should there be proof of abuses in authority.
Al Marzouqi affirmed that 70 cases have been resolved, which averages to four cases a month, revealing that the figure exceeds SR 400 million (US $106.6 million) between fines and the recovery of funds as a result of violations and indemnity rulings issued against ‘bank’ brokers who disregarded their commitments to their client investors in the stock market. He said that indemnities in civil cases filed by customers against banks ranged from a minimum of SR 50 (US $13) to a maximum of SR 29 million (US $7.7 million), in accordance with the filed case and the damages incurred by the ‘client’.
The largest declared amount in fines and recoveries reached SR 146.6 million ($39 millions) in a penal suit ruling awarded by the CRSD against an investor, which came as a result of two cases. Last January, the CMA announced on its official website that the three stock market traders would pay a total of SR 169.1 million (US $45 millions) in fines and recoveries. The second one was ordered to pay SR 17.1 million while the third had to pay SR 5.3 million (US $4.5 and $1.4 million, respectively) because they were convicted of violating article 49 and article 3 of the CMA regulations.
Al Marzouqi, who also chairs the committee for resolving electricity disputes, and the Patent Committee, explained that there two types of monetary fines; ones that are imposed on violators, which are paid to the treasury in accordance with the applicable rules and regulations, and the CMA’s recovery of money resulting from violations, which are paid into the CMA’s account as explicitly stated by its regulations. He revealed that most of the cases heard by the CRSD are filed by small investors against banks that currently act as brokers for work and services rendered to client investors, which fall under the application of the CMA’s law, rules and regulations. Al Marzouqi added that, as explicitly provided for in the law, the decisions made by the CRSD against these banks are binding.