14 Raydan board members, employees convicted of violating Capital Market Law; fined SAR 128M

The Capital Market Authority (CMA) announced that the Appeal Committee for Resolution of Securities Disputes (ACRSD) issued a final decision, convicting 14 board members and employees of Raydan Food Co. of violating the Capital Market Law. They were ordered to pay more than SAR 77 million for the avoided losses, and fined SAR 50.6 million.

The ACRSD convicted Chairman, Vice Chairman, and Managing Director, along with six other board members, including Head of the Audit Committee and two committee members, for violating the Capital Market Law. Further, Chairman, Vice Chairman, Managing Director, two board members, and others were convicted for violating the Capital Market Law and the Market Conduct Regulations.

According to the ACRSD, the decision was issued against board members, Khalid bin Awadhallah Alsulami, Muhammad bin Awadhallah Alsulami, Hassan bin Shaker Alsahafi, and Mish'al bin Awadhallah Alsulami, Mansour bin Awadhallah Alsulami, Abdulraouf bin Alsadiq Alqaidi.

This was in addition to Omar bin Rabeh Alsulami, member of the Audit Committee, and Saud bin Sa'eed Alsulami, board member and Head of the Audit Committee, Nasser bin Awadhallah Alsulami, board member and Vice Chairman, Zaher Fadl Aldabi, member of the Audit Committee, as well as Awadhallah bin Ahmad Alsulami, Chairman of the company.

They violated the Capital Market Law, by intentionally participating in acts and procedures that created a false and misleading impression regarding the value of the security of the company in an attempt to form such impression when they did not comply with the International Accounting Standard (IAS) No. (36) “Impairment of Assets" approved by the Saudi Organization for Chartered and Professional Accountants (SOCPA). They approved the consolidated financial statements for 2018, 2019, and 2020, and they were previously aware of the violations contained in such financial statements. In addition, they did not valuate all investment effects that Raydan carried out in Aljonah Co., and failed to prove the losses resulting from the impairment of the company's assets. They also did not reflect the result of such acts on the company's consolidated financial statements, despite the expressed reservation made by the company's external auditor who repeated the reservation for three consecutive years - with their goal to influence the company's share price in the fiscal years 2018, 2019, and 2020.

Further, Muhammad bin Mansour Alsulami, Khalid bin Awadhallah Alsulami, Ahmad bin Awadhallah Alsulami, Nassar bin Awadhallah Alsulami, Mish'al bin Awadhallah Alsulami, Mansour bin Awadhallah Alsulami, Nasser bin Awadhallah Alsulami, and Awadhallah bin Ahmad Alsulami were convicted of violating Article (50/a) of the Capital Market Law, and Article (6/a) of the Market Conduct Regulations. They made during the period from Nov. 12, 2019 until June 15, 2021 transfer transactions of a portion of the company's shares between their portfolios. They sold a total of 3.46 million of their owned shares at the company based on inside information, benefiting from such information prior to its publication and availability to the public on March 30, 2022. This was represented in the company's not valuating all the effects of the company's investment in Aljonah Co., along with not reflecting the losses resulting from such investment in the company's financial statements for 2018, 2019 and 2020. However, they were aware of such losses through the expressed reservations made by the external auditor regarding such issues, during the period from Nov. 12, 2019 (the first sale) until June 15, 2021 (the last sale).

In addition to the financial fines, the ACRSD sentenced four of the convicted individuals to 90 days in prison and ordered seven of the convicted individuals to pay SAR 77.48 million against avoided losses as a result of the illegal trading on their investment portfolios. The decision also included banning 11 of the convicted individuals from working in entities subject to the CMA's supervision for periods ranging from one to three years.

The CMA stated that the ACRSD's decision came as a result of joint coordination and cooperation between the CMA and relevant concerned authorities, and in light of the public penal lawsuit filed by the Public Prosecution, referred to it by the CMA, against the investors for violating the Capital Market Law.

The CMA stresses the importance of investors' confidence in the capital market for its growth and prosperity. The CMA continuously monitors any violating behaviors, identifies the perpetrators, and processes the necessary procedures to impose deterrent penalties against them, in order to enhance the CMA's efforts aimed at creating an attractive investment environment for all categories of investors and safe from unfair or unsound practices or that involve fraud, cheating, deception, misleading or manipulation.

Furthermore, any person affected by these violations, in this case, is entitled to file a compensation claim (as individual or class action) against those convicted persons with the Committee for Resolution of Securities Disputes (CRSD) for the damage he/she suffered from these violations, provided that such claim is preceded by a complaint filed with the CMA on this regard, via the following link: (File Complaint).

The General Secretariat of the Committee for Resolution of Securities Disputes (GS-CRSD) will announce to the public on its website in case of registering any class action in order to enable the rest of investors affected by such violations to apply to the CRSD to join the class action.

The GS-CRSD announced to the public on its website the identity of the violators after the violations and penalties were proven and the final decision was issued by the ACRSD against everyone who violated the capital market laws and implementing regulations.

On Aug. 15, the ACRSD issued final decision convicting nine board members of Raydan Food Co. for violating Article (211/b) of the Companies Law and obligating them to pay SAR 36 million, with each being fined SAR 4 million.