Title: Announcement regarding issuance of Disciplinary Board Resolution No. (67/2023) Disciplinary Board - (103/2023) Authority and imposition of a fine against: Azyan Capital Company for violating the rules of Securities Activities and Registered Persons

Announcement regarding issuance of Disciplinary Board Resolution No. (67/2023) Disciplinary Board - (103/2023) Authority and imposition of a fine against: Azyan Capital Company for violating the rules of Securities Activities and Registered Persons.

For the following reasons:
Violation of the provision of Article (2-1-1) of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 of their amendments. It was proven to the CMA through reviewing the financial statements of the year that ended on December 31, 2022, in particular the auditor’s notice regarding a) Balance of payments made in a value of KWD 8,148,576 and b) Financial assets at fair value through the other comprehensive income as investment in unpriced foreign shares in a value of KWD 7,769,944 that the Company failed to comply with the International Financial Reporting Standard (9) (IFRS 9 Financial Instruments). The Company did not take one of the following procedures on the balance of financial assets at fair value through the other comprehensive income:

• Application of the impairment requirements for the recognition and measurement of a loss allowance for financial assets that are measured at fair value through other comprehensive income - in the event that this Item was classified as financial assets at fair value through the other comprehensive income in accordance with Paragraph (5-5-2) of the aforementioned standard which stipulates:
“An entity shall apply the impairment requirements for the recognition and measurement of a loss allowance for financial assets that are measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A.”

• Measurement of the value of the foreign company – in the event that this Item was classified as investment in fair value in accordance with Paragraph (4-1-4) of the aforementioned standard which stipulates:
“A financial asset shall be measured at fair value through profit or loss unless it is measured at amortised cost in accordance with paragraph 4.1.2 or at fair value through other comprehensive income in accordance with paragraph 4.1.2A. However an entity may make an irrevocable election at initial recognition for particular investments in equity instruments that would otherwise be measured at fair value through profit or loss to present subsequent changes in fair value in other comprehensive income.”

The opinion of the Company’s auditor included reservation on the following:
a. Balance of payments made in a value of KWD 8,148,576.
b. The auditor’s opinion: we draw the attention to Clarification No. (8) Regarding Financial Statements. Financial assets at fair value through the other comprehensive income are represented as investment in unpriced foreign shares in which the Company’s ownership of 40% of the capital of Azyan Najd Company (W.L.L.) is in the amount of KWD 7,769,944. We were unable to obtain audit proofs that are sufficient and suitable for the investment value as on December 31, 2022. As a result, we were unable to determine the need to calculate the decrease in the book value of the investment as on December 31,2022.

The Resolution included the infliction of the following penalty: -
"Levying a fine against Azyan Capital Company in an amount of KWD 20,000 (twenty thousand Dinars) for the violation attributed to it in Item (a) and an amount of KWD 3,000 (three thousand Dinars) for the violation attributed to it in Item (b).”

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 Laws 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.