Regulator cracks down on DIB scam

09 September 2005
The Securities & Commodities Authority (SCA) cancelled all trades in the shares of Dubai Islamic Bank (DIB)on 28 August, after a large-scale attempt to manipulate the market by two Saudi investors. The regulator won approval from observers for prompt and tough action, as it barred all those involved, including a brokerage house, from future trading and pledged an investigation (see Capital Markets).

The attempted manipulation was impossible to ignore, as some $2,600 million-worth of DIB shares changed hands over the course of the day, accounting for more than 80 per cent of the day's trades. The two investors exploited rumours of a capital increase by the bank - following similar hikes by numerous other local institutions - and traded millions of shares between each other, persuading other investors that the move was definitely imminent.

'The authority ordered today severe penalties [against those involved],' executive director of the SCA Abdullah al-Turaifi told the local Al-Arabiya TV station. 'The people who took part in the manipulation or took advantage of the manipulations in the market will be completely stopped from trading in the financial markets.' Of the brokerage involved, Al-Turaifi said it 'knew directly and very well about the irregularities by these manipulators'.

In late August, Saudi Arabia's Capital Market Authority (CMA) also gave notice of its intention to crack down on market abuses. Investors were warned about trading through unlicensed brokerages, following the issue in mid-July of two sets of rules implementing the parts of the capital market law dealing with brokerage activities (MEED 22:7:05).

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