Title: Announcement regarding issuance of Disciplinary Board Resolution No. (38/2025 Disciplinary Board) (38/2025 Authority) and imposition of a fine against: 1- EFG Hermes IFA Brokerage Company, 2- Internal Audit Officer, for violating the Rules of Securities Activities and Registered Persons, Conduct of Business, and Corporate Governance.

Announcement regarding issuance of Disciplinary Board Resolution No. (38/2025 Disciplinary Board) (38/2025 Authority) and imposition of a fine against: 1- EFG Hermes IFA Brokerage Company, 2- The Internal Audit Officer, for violating the Rules of Securities Activities and Registered Persons, Conduct of Business, and Corporate Governance.

For the following reasons:
First: EFG Hermes IFA Brokerage Company violated the following:

1- The provisions of Items (1, 4, 8, 9, and 10) of Article (3-2-8) of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments. It was proven to the CMA that the Company did not update the contract with a company dated 25/08/2011 (to obtain the services of internal audit, risk management, and other technical services) to be in line with the requirements of the Article subject of the notice, as the following was proven upon revision of the contract:

(a) No feasibility assessment study was conducted on the assigned external entity to perform auditing.
(b) The CMA’s approval was not taken for the assignment of an external entity to perform auditing.
(c) The contract did not include the business continuity plan of the external entity.
(d) Failure to comply with the Item of assigning an external entity for one financial year, as the contract is still valid since 25/08/2011 to this date.

2- Article (6-1) of Module Eight (Conduct of Business) of the Executive Bylaws previously mentioned. It was undoubtedly proven that the mechanism of receiving order (quality of order) of the orders sent by some clients did not conform with the mechanism of receiving order registered in the Company’s order register.

3- Article (13-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws previously mentioned. It was undoubtedly proven that the information submitted by the Company relating to the report of implementing the rules of corporate governance issued by the CMA was incorrect, particularly the following Items of the report:

• Item (5) of the Governance Report for the years 2023 and 2024: the Audit Unit did not prepare the report that includes a review and an evaluation of the internal audit systems in accordance with the corporate governance regulations.

• Item (20) of the Governance Report for the years 2023: not appointing an external auditor in accordance with the corporate governance regulations.

• Item (34) of the Governance Report for the years 2023 and 2024: the Audit Committee did not perform the tasks and responsibilities that should be complied with.

• Item (43) of the Governance Report for the years 2023 and 2024: the Nomination and Remuneration Committee did not prepare a remuneration policy for the members of the board of directors and executive management.

• Item (50) of the Governance Report for the years 2023: not recording the place of meeting in the register of the board of directors’ meetings.

• Item (75) of the Governance Report for the years 2023 and 2024: the board of directors did not perform the tasks and responsibilities that should be complied with.

Second: The Internal Audit Officer violated the provision of Article (6-8) of Module Fifteen (Corporate Governance) of the Executive Bylaws previously mentioned. It was undoubtedly proven through reviewing the reports prepared by the Audit Unit for the years 2023 and 2024 that the reports did not meet the required Items stipulated in the mentioned Article. In addition, the reports did not include any comments on the Company’s compliance with the relevant laws, policies, systems, and instructions, as they did not follow a methodology that produce reports in compliance with the requirements of the mentioned Article so as to show the failure of the internal audit system applied by the Company. This confirms that the nature of comments monitored about the Company during the mentioned inspection process reflect the existence of default in its internal audit system, which should be proved in the reports subject of the violations. Those comments consisted of the following:

1. Allowing those not representing the broker to enter the brokers room that is allocated for receiving and implementing clients’ orders, which violates the Boursa Kuwait Rulebook and subsequently the CMA’s Executive Bylaws.

2. The Company did not update the contract with a company, dated 25/08/2011 (to obtain the services of internal audit, risk management, and other technical services) to be in line with the requirements of the CMA’s Executive Bylaws.

3. The Company did not prepare policies and procedures that clearly determine the limits of power, authority, and responsibility of the licensed person relating to the board of directors, executive management, and other key support professions of various authorities.

4. Assigning the tasks of reviewing the transactions and trades proposed to be implemented by the Company with related parties to the Audit Unit, as the Company was required to assign such tasks to the Risk Department.

5. The risk policy of the Company did not determine the minimum limit of exposure to one entity and the procedures to be followed in the event of reaching this limit.

6. The Company did not include the place of meeting in the register of the board of directors’ minutes of meetings for several meetings.

7. The board of directors did not approve the policy of delegation and implementation of work assigned to the executive management.

8. The Nomination and Remuneration Committee affiliated with the board of directors did not set a clear policy for the remunerations of the board members and executive management.

9. The audit committee did not comply with some of its responsibilities determined in the CMA’s Bylaws, such as:

- The committee did not provide the board of directors with its recommendation regarding re-appointment of the external auditor.
- The committee did not ensure the effectiveness of the operations and tasks of the internal audit department.
- The audit committee did not review the field inspection report made on the company during the period from 05/03/2023 to 30/03/2023 and ensure that the necessary procedures were taken regarding the observations stated in the report.
- The audit committee did not review the internal audit guide to be in line with the approved organizational structure.

10. The business charter approved by the board of directors did not meet the requirements of the CMA’s Executive Bylaws.

The Resolution included the infliction of the following penalty: -
“First: Levying a fine on EFG Hermes IFA Brokerage Company in an amount of KWD 5,000 (five thousand Dinars) for each of the three violations attributed to it.

Second: Levying a fine on the Company’s Internal Audit Officer in an amount of KWD 5,000 (five thousand Dinars) for the violation attributed to him in all its items.”

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.