Mubasher, 3 November 2024: The Kuwaiti Capital Markets Authority has announced the issuance of Kuwait Ministerial Kuwait Capital Markets Authority Decision No. 29/2024 imposing a financial penalty against ASICO Industries Company and its board members, and Kuwait Finance Center Company.

According to the Authority’s statement, the number of board members is three members, a former board member, the former chairman of the company’s board of directors, Al-Bazai and Partners Office, and the company’s auditor; for violating the listing rules, market conduct, corporate governance, market ethics, securities activities, and registered persons.

The Authority has clarified that it was conclusively proven that the transactions carried out by ASICO Industries during 2018 and 2019, specifically the sale of a substantial stake in a (subsidiary) company, which resulted in profits of around 40 million Kuwaiti dinars, within the financial statements ending in 2018, were fictitious and not real.

It became clear that the purpose was to revalue the (subsidiary) company to improve and enhance the financial position of ASICO Industries.

Additionally, the transaction carried out by the company was essentially a financing transaction and not a sale transaction, as the final outcome of this transaction became clear during 2019 after ASICO Industries exercised the right to repurchase the sold stake without complying with the application of International Accounting Standards.

The three board members were proven to have violated Article 3-7(5) of Book Fifteen (Corporate Governance) of the Executive Bylaws of Kuwait Law No. 7/2010 and its amendments, for failing to fulfil their role in complying with International Accounting Standards following the transactions carried out by ASICO Industries during 2018 and 2019, specifically the sale of a substantial stake on 8 July 2018, of 30.23 million shares of its ownership in a (subsidiary) company to (the Buyer).

This resulted in profits of around 40 million Kuwaiti dinars within the financial statements ending in 2018, which was proven to be a fictitious and not a real transaction aimed at revaluing the (subsidiary) company to improve and enhance the financial position of ASICO Industries.

Additionally, the transaction carried out by the company was essentially a financing transaction and not a sale transaction, as the final outcome of this transaction became clear during 2019 after ASICO Industries exercised the right to repurchase the sold stake in the (subsidiary) company’s shares, without complying with the application of International Accounting Standards.

Regarding Kuwait Finance Center Company, it was proven to have violated Article 3-2(4) of Book Eight (Work Ethics) of the Executive Bylaws of Kuwait Law No. 7/2010 and its amendments, as the company arranged a transaction for its client ASICO Industries (the Seller), and the other party in that transaction was a subsidiary of Kuwait Finance Center Company.

It also violated Article 8-2(2) of Book Eight (Work Ethics) of the Executive Bylaws of Kuwait Law No. 7/2010 and its amendments.

As it was conclusively proven that Kuwait Finance Centre Company, in its capacity as an investment advisor to ASICO Industries, arranged the sale of a stake in a (subsidiary) company to (the Buyer), with one of the conditions for its execution being the opening of a portfolio with Kuwait Finance Centre Company and the collection of a management fee of 50,000 Kuwaiti dinars annually.

Obtaining a fee is considered obtaining a benefit by the licensed person from arranging the transaction through which profits and benefits are achieved other than the basic advisory fees.

Al-Bazai and Partners Office was found to have violated Article 3-4-5 of Book Five (Securities Activities and Registered Persons) of the Executive Bylaws of Kuwait Law No. 7/2010 and its amendments.

The violation occurred due to the firm’s failure, as the auditor of ASICO Industries, to report any observations in its review of the company’s financial statements for the years ending in 2018 and 2019.

Specifically, the auditor did not address the improper recording of the financial impact of a transaction in which a stake in a subsidiary was sold on July 8, 2018, to a buyer. Despite the sale, ASICO Industries continued to control the sold stake after the transaction was completed, given the company’s retained right to repurchase the stake as specified in Article Four of the contract dated July 8, 2018.

The decision included imposing a financial penalty on ASICO Industries of 50,000 Kuwaiti dinars for the first violation, and 5,000 Kuwaiti dinars for each of the four board members and the former chairman of the board for the violation attributed to them.

A financial penalty of 50,000 Kuwaiti dinars was imposed on Kuwait Finance Center Company for the first and second related violations, and Al-Bazai and Partners Office, as the auditor of ASICO Industries, was fined 20,000 Kuwaiti dinars for the violation attributed to it.

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