'Top Five Flaws' in the CRSD Ruling in the MMG Case

DAMMAM, Saudi Arabia, June 30, 2016 /PRNewswire/ --

We, the founders of MMG, wish to express our deep anxiety for the current state of the Saudi Stock Market in light of the recent CRSD ruling made in the MMG case.

It is essential the Saudi Stock Market continues to flourish supported by a strong, transparent and fair regulatory framework. With that in mind, we fully and respectfully engaged with the action brought by the CMA against us and a dozen other defendants.  

Although the CRSD is appointed, funded and is subject to the regulatory framework of the CMA, the prosecutor in our proceedings, we had hoped that the system would work properly and the CRSD would adopt an approach to the parties that is fair, objective and transparent.  Unfortunately, this has not proved to be the case. The CRSD's remit per its name is resolution of security disputes and, not, in fact, to act as judge, jury and executioner which is what happened in MMG's case.

The CRSD ruling is a bleak warning for all market participants, and, in particular, companies that face trading losses in turbulent market conditions.  

Obvious flaws in the ruling that fundamentally undermine the validity of the imposed penalties and of themselves demonstrate its unfairness, include the following:

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 thirteen different defendants over eighteen months, including by one the "Big Four" global 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 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 flaws in the CRSD's proceedings against us are clearly a cause for serious concern, but the mishandling of this case extends far beyond.

The CRSD's ruling relies solely on the report produced by consultancy firm, Protiviti Member Firm (Middle East) Limited. The Protiviti's report has since been discredited by a global forensic accountancy firm, FTI Consulting. As FTI have put it: "by Protiviti's own admission, the investigation conducted was incomplete," "integral procedures, including interviews of key senior management referenced throughout Protiviti's Report, were not performed." FTI further found that there was no evidence that the Protiviti team had "any legal experience at all," to justify its recommendations on civil or criminal action.

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 a way that creates a considerable disincentive to the rules of fair and equal procedure which foreign investment is accustomed to.

For further information contact Project Associates on: 

Tel +44-20-7321-0773 or Al-Mojil@projectassociatesltd.com