JEDDAH, 6 October 2005 — The Capital Market Authority (CMA) has approved licensing for the first financial advisers in the Kingdom, one in Jeddah and the other in Riyadh. CMA announced yesterday granting Mohammed Basil Al-Ghalayini Financial Advisory Center (known as BMG Financial Advisors) and Al-Malaz Financial Consultant office licenses to practice financial arranging and advising according to CMA’s rules and regulations.

“By licensing qualified financial advisers, the CMA is creating new avenues and channels of professional advisory firms for issuers of financial papers and/or family business opting to go public” said Basil Al-Ghalayini, CEO of BMG Financial Advisors. “By CMA’s rules, any issuer of financial papers be it private or via IPO has to appoint a financial adviser in order to coach, manage and arrange the offering according to the underlying rules of that specific offering” said Al-Ghalayini to Arab News. BMG is considered one of the active advisory firms in the Kingdom on corporate finance related activities as well as they publish equity research on listed companies circulated to the general public.

“The licensing of more firms in the future, from an ethical and professional perspective, will help reduce any abuse in the market and will allow the public the option to rely on professional advisers rather than relying on amateurs or non-professionals,” said Al-Ghalayini.

In a related development, CMA is investigating the alleged share price manipulation by four traders and a broker in a local bank. CMA announced two days ago on its website that it is transferring the five unnamed individuals to a financial dispute settlement committee. They are accused of illegal activities in the stock market including entering a series of large purchase orders with increasing prices, entering fictitious matching sell-and- purchase orders between two portfolios, and entering false sell-and-purchase orders immediately before, or at the closing of trade and then canceling the orders for the purpose of making false deals and creating misleading impressions about company share prices. The four traders and the broker are facing punishment including jail, a fine of some SR183 million as well as seizure of assets equivalent to that amount. They will also be banned from managing portfolios and from working in companies that trade shares in the stock market.

“They were doing insider trading and making transactions that created false impressions among traders as well as trading during off-hours,” said Dr. Abdul Aziz Al-Zoom from CMA to Arab News. “They had been conducting these activities for a few months but in an investigation we had to gather evidence before filing charges. The managers of the portfolios will be punished in accordance with regulations,” said Dr. Al-Zoom.

Analysts welcomed the step, saying that it is needed to maintain confidence in the market which has soared in the past few years. Some traders, however, blamed the announcement for the downward trend in the past few days. “This is an illogical argument. These regulations are for the protection of traders and implementing them is for the benefit of the market and the traders. They have to prove casuality. The announcement might be one of the causes but it can’t be the only cause,” said Dr. Al-Zoom.

Two days before that, CMA announced suspending two investors for 30 days for violating a CMA ban on fraud and price manipulation. CMA did not name the two investors whom it accused of swindling and deception. The authority will investigate the case against the two investors who will be fined in accordance with the law.