MIE-3.1.1

This section sets out the CBB's approach to enforcement, and the measures used by the CBB to address failures and contraventions by various market participants, including capital market service providers, investors or any other persons involved in the non-compliance or contravention. The purpose of such measures is to encourage high standards of compliance by all those involved in the capital market, thus reducing risk to the Kingdom's financial sector in general, and the capital market in particular.

MIE-3.1.2

Since most of the CBB's enforcement powers are derived from the CBB Law, this Module contains a large number of references to the Law. Users of the Module should therefore refer to the Law as well as to the Module where necessary. In the event of a dispute on interpretation between the Law and the description of an enforcement power in this Module, the provisions of the Law prevail.

MIE-3.1.3

The CBB's effective and proportionate use of its enforcement powers plays an important role in the pursuit of its regulatory objectives of protecting investors, maintaining confidence in the financial system, promoting public awareness and reducing risks and financial crime. For example, using enforcement helps to contribute to the protection of investors and to deter future contraventions of the CBB Law and other application requirements and market abuse. It can also be a particularly effective way, through publication of enforcement outcomes, of raising awareness of regulatory standards.

MIE-3.1.4

There are a number of principles underlying the CBB's approach to the exercise of its enforcement powers:

MIE-3.1.5

Where a person has failed to comply with the requirements of the CBB Law, rules and regulations, or other relevant laws, rules and regulations, it may be appropriate to deal with this without the need for formal disciplinary or other enforcement action. The proactive supervision and monitoring of the capital market and an open and cooperative relationship between market participants and their regulators, will in some cases where a contravention has taken place, lead the CBB to decide against taking formal disciplinary action. However, in those cases, the CBB will expect the market participant or relevant person to act promptly in taking the necessary remedial action agreed with its regulators or SROs, to deal with the CBB's concerns. If the market participant or relevant person does not do this, the CBB may take disciplinary or other enforcement action in respect of the original contravention.

MIE-3.1.6

The CBB favours an open, pragmatic and collaborative relationship with market participants, within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements.

MIE-3.1.7

The CBB's approach is not to prescribe in detail the exact regulatory response for each and every contravention, as there may be several types of contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.

MIE-3.1.8

In deciding any given regulatory and enforcement response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the CBB Law and this Module. The CBB's overall approach is to take into account:

MIE-3.1.9

Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account a person's compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve an overall consistency in its regulatory actions.

MIE-3.1.10

Underlying the CBB's approach in paragraph MIE-3.1.8 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures — such as initiating prosecution for imposing criminal sanctions, cancellation of license or withdrawal of "fit and proper" status — for the most serious contraventions.

MIE-3.1.11

Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the person concerned, before using one of this Module's enforcement mechanisms. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually move immediately to one or more of the enforcement mechanisms outlined in this Module. In most such cases, though, the CBB also expects to continue an active dialogue with the person concerned, aimed at remedying the contravention.

MIE-3.1.12

Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the person concerned has been given a suitable opportunity to be heard and/or make representations.

MIE-3.1.12A

To help the CBB achieve the purpose of this Module, licensees and listed companies must not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the fines provided for in this Module.

MIE-3.1.12B

The CBB will not as a matter of general policy publicise individual cases when it uses enforcement measures. However, in such cases the CBB may inform the licensee’s or listed company’s external auditor and – in the case of overseas operations – relevant overseas regulators.

MIE-3.1.12C

In exceptional circumstances, as allowed by Article 132 of the CBB Law, the CBB may decide to publicise individual cases when the measures set out in MIE are used, where there is a strong case that doing so would help achieve the CBB’s supervisory objectives. In such instances, the CBB will usually allow the licensee, listed company or individual concerned the opportunity to make representations to the CBB before a public statement is issued.

MIE-3.1.12D

With respect to the financial penalties provided Chapter MIE-4, licensees and listed companies are required to disclose in their annual report the amount of any such penalties paid to the CBB, together with a factual description of the reason(s) given by the CBB for the penalty.

MIE-3.1.12E

Without prejudice to the above policy, the CBB may from time to time publish aggregate information on its use of measures set out in MIE, without identifying the licensees, listed companies or individuals concerned, unless their identities have previously been disclosed as provided for in Paragraphs MIE-3.1.12C or MIE-3.1.12D.

MIE-3.1.12F

By their nature, penalties relating to placing licensees under administration and/or amending or cancelling of a license, are public acts, once applied. The CBB will in these instances generally issue a public statement explaining the circumstances of the case.

MIE-3.1.13

The CBB is committed to ensuring that senior managers of CBB licensees, listed companies, issuers of securities and other persons fulfil their responsibilities. The CBB expects senior management to take responsibility for ensuring their organizations identify risks, develop appropriate systems and controls to manage those risks and ensure that the systems and controls are effective in practice. Where senior managers are themselves responsible for misconduct, the CBB will where appropriate, bring cases against individuals as well as organizations. The CBB believes that deterrence will most effectively be achieved by bringing home to such individuals the consequences of their actions.

MIE-3.1.14

The CBB recognises that cases against individuals are very different in their nature from cases against corporate entities and the CBB is mindful that an individual will generally face greater risks from enforcement action in terms of financial implications, reputation and livelihood than would a corporate entity. However, taking action against individuals sends an important message about the CBB's regulatory objectives and priorities and the CBB considers that such cases have important deterrent values. The CBB is therefore committed to pursuing appropriate cases robustly, and will dedicate sufficient resources to them to achieve effective outcomes.

MIE-3.1.15

An important consideration before an enforcement investigation and/or enforcement action is taken forward is the nature of a capital market service provider's, or other person's overall relationship with the CBB and whether, against that background, the use of enforcement procedures is likely to further the CBB's aims and objectives. So, for any similar set of facts, using enforcement procedures will be less likely if a capital market service provider, or any other person has built up over time a strong track record of taking its senior management responsibilities seriously and been open and communicative with the CBB.

In addition, a person's conduct in response to the specific issue which has given rise to the question of whether enforcement procedures should be used will also be relevant. In this respect, relevant matters may include whether the person has self-reported, helped the CBB establish the facts and/or taken remedial action such as addressing any systems and controls issues and compensating any consumers who have lost out. Such matters will not, however, necessarily mean that enforcement procedures will not be used. The CBB has to consider each case on its merits and in the wider regulatory context, and any such steps cannot automatically lead to an enforcement sanction. However, they may in any event be factors which will mitigate the penalty.

MIE-3.1.16

In those cases where enforcement action is not taken and/or a formal investigation is not commenced, the CBB will expect the capital market service provider or other person to act promptly to take the necessary remedial action agreed with its regulators to deal with the CBB's concerns. In cases of failure to take prompt remedial action, the CBB may take disciplinary or other enforcement action in respect of the original contravention.

MIE-3.1.17

The CBB attaches considerable importance to the timely submission of reports by capital market service providers. This is because the information contained in such reports is essential to the CBB's assessment of whether a market participant is complying with the requirements and standards of the regulatory system. So in the majority of cases involving non-submission of reports or repeated failure to submit complete reports in time, the CBB considers that it will be appropriate to initiate enforcement actions.