Gulf Finance House has been put under probation by Kuwait’s stock market regulator after investigations into unusual trading activity on its shares last year ahead of a regulatory disclosure.
GFH will be placed under monitoring for six months by Kuwait’s Capital Markets Authority. The firm will fight the decision, it said yesterday.
The move came after trading volumes peaked to record highs in May last year before an agreement was signed in June between Khaleeji Commercial Bank – an associate – and Bank Al Khair to study a possible merger.
When the CMA asked GFH in May if it had information to disclose following the heightened trading volumes, the Bahrain-based investment bank responded by saying that “no recent or major development” had taken place.
But in June, when the memorandum of understanding was signed between the two parties, alarm bells rang.
In a statement posted on the website of the Kuwait and Dubai exchanges yesterday, GFH disclosed that in September the regulator notified the bank “about the probe being conducted on the above events and summoned GFH’s lawyer and asked to submit GFH’s justifications on the questions raised by CMA Kuwait Legal”.
On April 17, the regulator’s disciplinary council issued a decision to keep the bank under monitoring for a period of up to six months with no financial penalty, the statement said.
“As of yesterday, GFH has filed a petition with CMA Kuwait against this decision, as GFH considers that the high trading volumes on 19th-21st May last year was not due to the MoU signed on 30th May and subsequently announced on 3rd June 2013, post the regulatory approvals,” the statement said.
Kuwait’s regulator has ramped up scrutiny and fines on listed firms over the past year after its inception in 2011 – more than 30 years after the stock exchange came into fruition.
Fund managers criticised both parties – GFH for its corporate governance and the regulator for taking delayed action.
“Why now? The story is old,” said Wadah Al Taha, the chief investment officer at Dubai-based Al Zarooni Group, the investment firm. “There’s no party here in the right.”
This week, a news report from the Bahrain daily Alayam said GFH's previous chairman Issam Janahi had raised a lawsuit against Bahrain's central bank when the regulator decided to freeze its assets after the executive received US$96 million worth of bonuses from 2005-08 without disclosure or approval from shareholders.
“All the news flow on GFH is going to impact the stock negatively,” Mr Al Taha said. “This gives a bad reputation for a financial institution and shakes the confidence and trust of the industry. It will have a medium to long-term impact. There is weak corporate governance, weak internal controls and shareholders need to take some responsibility. There hasn’t been questions or follow-up from them.”
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