Title: Announcement regarding issuance of Disciplinary Board Resolution No. (75/2023) Disciplinary Board - (105/2023) Authority, and imposition of a fine against each of: First: Kuwait and Middle East Financial and Investment Company – KMEFIC, Second: Each of: 1- Chairman of the Board of Directors in his capacity and as Chairman of the Nomination and Remuneration Committee, 2- Vice Chairman of the Board of Directors in his capacity and as member of the Nomination and Remuneration Committee, member of the Audit Committee, and Chairman of the Risk Management Committee, 3- Member of the Board of Directors in his capacity and as member of the Risk Management Committee, 4- Member of the Board of Directors in her capacity and as member of the Audit Committee and member of the Risk Management Committee, 5- Member of the Board of Directors (independent member) in his capacity and as member of the Nomination and Remuneration Committee and Chairman of the Audit Committee for violating the rules of Clients’ Fund and Clients’ Assets and Corporate Governance

Announcement regarding issuance of Disciplinary Board Resolution No. (75/2023) Disciplinary Board - (105/2023) Authority, and imposition of a fine against each of:

First: Kuwait and Middle East Financial and Investment Company – KMEFIC.
Second: Each of:
1- Chairman of the Board of Directors in his capacity and as Chairman of the Nomination and Remuneration Committee.
2- Vice Chairman of the Board of Directors in his capacity and as member of the Nomination and Remuneration Committee, member of the Audit Committee, and Chairman of the Risk Management Committee.
3- Member of the Board of Directors in his capacity and as member of the Risk Management Committee.
4- Member of the Board of Directors in her capacity and as member of the Audit Committee and member of the Risk Management Committee.
5- Member of the Board of Directors (independent member) in his capacity and as member of the Nomination and Remuneration Committee and Chairman of the Audit Committee.

For violating the rules of Clients’ Fund and Clients’ Assets and Corporate Governance.

For the following reasons:
First: Kuwait and Middle East Financial and Investment Company – KMEFIC violated the provision of Item (6) of Article (5-1-9) of Module Seven (Clients’ Fund and Clients’ Assets) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven to the CMA that Kuwait and Middle East Financial and Investment Company – KMEFIC did not take the necessary measures for updating the contracts of establishing portfolios concluded with their clients to include the provisions of handing over the clients’ funds and assets to them or to the party concerned with holding, managing, or safe-keeping them in the event of cancelling the Company’s license by the CMA after the end of the period specified for meeting the requirements stipulated in Article 4 of the CMA Resolution No. (54) of 2022 issued on 11/4/2022 Regarding the Regulation of Procedures for the Handing Over of Clients’ Funds and Clients’ Assets after the Cancelation of the Licensed Person’s License. The aforementioned Resolution stipulated the following:

“Licensed Persons addressed by these amendments shall update their current contracts with their clients in accordance with the requirements set by the CMA in this regard by including the relevant provisions regarding handing over clients’ funds and clients’ assets to them or to whom has a relationship in holding them or managing them. 
Provided that the Licensed Persons shall fulfill the requirements stipulated in this Article within a maximum period of 6 months from the date of this Resolution.”

It was proven that the Company contacted the clients to update their contracts on 17/4/2023, however, they were required to meet the requirements stipulated in Article 4 within a maximum period of 6 months from the date of the CMA Resolution on 11/4/2023.

Second: Board of Directors of Kuwait and Middle East Financial and Investment Company – KMEFIC:
1- Chairman of the Board of Directors.
2- Vice Chairman of the Board of Directors.
3- Member of the Board of Directors.
4- Member of the Board of Directors.
5- Member of the Board of Directors (independent member).

For violating the following:
1) Provision of Item (15) and Item (18) of Article (3-7) of Module Fifteen (Corporate Governance) of the of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the CMA that the Board of Directors failed to perform some of their tasks and responsibilities as follows:
a. The Board of Directors did not approve the resignation of the Senior Director - Asset Management Division and the appointment of the Executive Director -Asset Management Division, but it was satisfied with the approval of the Nomination and Remuneration Committee affiliated from the Board of Directors passed in Resolution No. 4/2021 dated 11/10/2021.

b.  The Board of Directors did not periodically ensure the efficiency and sufficiency of the applicable internal audit systems in Middle East Financial Brokerage Company (Subsidiary Company) based on the remarks monitored through the field inspection conducted on the subsidiary company during the period from 5/3/2023 to 30/3/2023 which revealed the Subsidiary Company’s non-compliance with Article (6-9) of Module Eight (Conduct of Business) and Appendix 1 of the mentioned Module as follows:

• Middle East Financial Brokerage Company did not maintain proper recordings of telephone conversations and videos of the clients’ orders.
• The recorded telephone conversations of the orders issued by clients were not available.
• The recorded videos of the clients’ direct orders (Counter Orders) for the last five years as of 7/6/2022 were not available.
• There were no backup copies of the clients’ direct orders (Counter Orders) for the last five years as of 7/6/2022.

2) Provision of Item (3) of Article (3-12) of the same Module:
It was proven to the CMA that the Board of Directors of Kuwait and Middle East Financial and Investment Company – KMEFIC failed to procure the fulfilment the Committees that are affiliated with it of tasks assigned to them due to weakness in the performance of the Committees’ work as follows:

a. Remarks on the Nomination and Remuneration Committee:
• The Committee accepted the resignation of the Senior Director - Asset Management Division and approved the appointment of the Executive Director -Asset Management Division without submitting a recommendation to the Board of Directors thereon to approve it, which was passed in the Committee’s Resolution No. 4/2021 dated 11/10/2021.
• The Committee did not set a remuneration policy for the Company’s Board Members and Executive Management; however, it was revealed that the Board of Directors periodically reviews this policy without the existence of a recommendation from the Committee.
• The Committee did not design job descriptions for the Executive Members, Non-Executive Members of a Board of Directors, and independent members; however, it was revealed that the Board of Directors periodically reviews these job descriptions without the existence of a recommendation from the Committee.
• The Committee did not prepare a report on the remunerations granted to the Members of the Board of Directors and the Executive Management for the financial year 2021.

b. Remarks on the Audit Committee:
• The Committee failed to submit a recommendation to the Board of Directors regarding the reappointment of external auditors for the financial year that ended on 13/12/2020 and the financial year that ended on 31/12/2021.
• The Committee failed to prepare a report which includes the opinion and recommendations of the Committee regarding sufficiency of the conditions of internal audit systems applied in the Company.
• The Committee failed to submit a recommendation to the Board of Directors regarding the appointment of an internal audit officer, but it was satisfied with the approval of the Nomination and Remuneration Committee thereon passed in the Audit Committee’s Resolution No. 2/2021 dated 18/4/2021.
• The Committee failed to review the results of the Regulatory Bodies’ reports and ensure that the necessary measures were taken thereon, as it was revealed that the Committee did not review the report of field inspection sent by the CMA on 20/9/2021 and ensure that the necessary measures were taken regarding the remarks included in it. However, the Committee was satisfied with reviewing the procedures taken regarding the Disciplinary Board Resolution No. 2/2022 according to the Committee’s minutes of meeting no. 8/2022 dated 10/11/2022.

c. Remarks on the Risk Management Committee:
The Risk Management Committee failed to prepare reports to the Board of Directors on the evaluation, monitoring, and identification of the weakness of risk operations experienced by the Company, and in particular the technical issues that the Company was exposed to during 2022, which resulted in suspending the Company’s work for different intervals.

Third: Nomination and Remuneration Committee at Kuwait and Middle East Financial and Investment Company – KMEFIC:
1. Chairman of the Committee.
2. Member of the Committee.
3. Member of the Committee.

This is due to their violation of the provisions of Items (1, 2, 3, and 5) of Article (4-3) of the same Module: It was proven to the CMA that Nomination and Remuneration Committee did not perform some of their tasks and responsibilities as follows:
• Chairman of the Committee accepted the resignation of the Senior Director - Asset Management Division and approved the appointment of the Executive Director -Asset Management Division without submitting a recommendation to the Board of Directors thereon to approve it, which was passed in the Committee’s Resolution No. 4/2021 dated 11/10/2021.
• The Committee did not set a remuneration policy for the Company’s Board Members and Executive Management; however, it was revealed that the Board of Directors periodically approves and reviews that policy without the existence of a recommendation from the competent Committee.
• The Committee did not design job descriptions for the Executive Members, Non-Executive Members of a Board of Directors, and independent members; however, it was revealed that the Board of Directors periodically approves and reviews these job descriptions without the existence of a recommendation from the Committee.
• The Committee did not prepare a report on the remunerations granted to the Members of the Board of Directors and the Executive Management for the financial year 2021.

Fourth: Audit Committee at Kuwait and Middle East Financial and Investment Company – KMEFIC:
1. Chairman of the Committee.
2. Member of the Committee.
3. Member of the Committee.

This is due to their violation of the provisions of Items (2, 6, 8, and 11) of Article (5-7) of the same Module:
It was proven to the CMA that the Audit Committee did not perform some of their tasks as follows:
• The Committee failed to submit a recommendation to the Board of Directors regarding reappointment of the external auditors for the financial year that ended on 13/12/2020 and the financial year that ended on 31/12/2021.
• The Committee failed to prepare a report which includes the opinion and recommendations of the Committee regarding the sufficiency of the conditions of the internal audit systems applied in the Company.
• The Committee failed to submit a recommendation to the Board of Directors regarding the appointment of an internal audit officer, but it was satisfied with the approval of the Nomination and Remuneration Committee thereon passed in the Audit Committee’s Resolution No. 2/2021 dated 18/4/2021.
• The Committee failed to review the results of the Regulatory Bodies’ reports and ensure that the necessary measures were taken thereon, as it was revealed that the Committee did not review the field inspection report sent by the CMA on 20/9/2021 and ensure that the necessary measures were taken regarding the remarks included in it. However, the Committee was satisfied with reviewing the procedures taken regarding Disciplinary Board Resolution No. 2/2022 according to the Committee’s minutes of meeting no. 8/2022 dated 10/11/2022.

Fifth: Risk Management Committee at Kuwait and Middle East Financial and Investment Company – KMEFIC:
1. Chairman of the Committee.
2. Member of the Committee.
3. Member of the Committee.

This is due to their violation of the provisions of Items (3 and 8) of Article (6-5) of the same Module:
It was proven to the CMA that the Risk Management Committee failed to prepare reports to the Board of Directors on the evaluation, monitoring, and identification of the weakness of risk operations experienced by the Company, and in particular the technical issues that the Company faced during 2022, which resulted in suspending the Company’s work for different intervals.

The Resolution included the infliction of the following penalty: -
“First: Levying a fine against Kuwait and Middle East Financial and Investment Company – KMEFIC in the amount of 5,000 (five thousand Dinars) for the attributed violation.

Second: Levying a fine against Members of the Board of directors as follows:
a) Each of:
1- Chairman of the Board of Directors in his capacity and as Chairman of the Nomination and Remuneration Committee.
2- Member of the Board of Directors in his capacity and as member of the Risk Management Committee.
In the amount of KWD 2,000 (two thousand Dinars) on each one of them for the attributed violations.

b) Each of:
1- Member of the Board of Directors in her capacity and as member of the Audit Committee and member of the Risk Management Committee.
2- Member of the Board of Directors (independent member) in his capacity and as member of the Nomination and Remuneration Committee and Chairman of the Audit Committee.
In the amount of KWD 3,000 (three thousand Dinars) on each one of them for the attributed violations.

c) Vice Chairman of the Board of Directors in his capacity and as member of the Nomination and Remuneration Committee, member of the Audit Committee, and Chairman of the Risk Management Committee.
In the amount of KWD 4,000 (four thousand Dinars) for the attributed violations”.

In this regard, the CMA emphasizes the implementation of CMA Law and its Executive Bylaws on all persons dealing in securities activities, and urges them to comply with these rules in order to promote investors' confidence, create a sound investment environment, and implement the Law according to the principles of fairness, transparency, and integrity in line with the best international practice.