Class action lawsuit against Saudi builder approved

Reuters/Faisal Al Nasser

• Action against MMG
• Claim over ‘misleading’ finances
• Dates back to 2011

A class action lawsuit against a Saudi construction company has been given the green light to proceed by authorities.

The Capital Market Authority said the Committee for the Resolution of Securities Disputes (CRSD) has accepted the lawsuit filed by an investor against some members of the board and employees of Mohammad Al Mojil Group.

The class action lawsuit is looking to claim compensation for damages suffered as a result of “false and misleading” announcements issued by the company in 2012 about its financial position.

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The claims follow the conclusion of a similar lawsuit in 2021 – Saudi Arabia’s first class action – when executives and an auditor at Mohammad Al Mojil Group were ordered to pay over $10 million to a group of shareholders.

Although the CMA did not give specifics about the number of compensation claims made against Mohammad Al Mojil Group in the new lawsuit, it clarified that it “reached the lawful number that allowed issuing a decision to register a class action”.

CRSD will now review the accepted class action applications, determining their eligibility for compensation and the amount of compensation due.

They relate to annual financial statements for 2011 and the first quarter of 2012 which were later found to be incorrect and led the investor leading the class action to trade in the company’s shares between February and July in 2012. 

In a statement, the CMA said the move was part of an assurance to protect capital market investors in the kingdom against “unjust and inappropriate practices”.

“The CMA is constantly working to provide appropriate means and capabilities for investors to exercise their rights and to organise and develop procedures that ensure limiting the risks connected to securities dealings,” it added.

In 2017, the CMA’s appeals panel upheld a decision by the CRSD to sentence company founder Mohammad Al Mojil and his son to five years in prison for irregularities related to the company’s IPO.

The founder and his son were also banned from working in Tadawul-listed companies for 10 years and seven years, respectively.

Also in 2017, the CMA introduced a new class action regime for claims by shareholders of listed companies in the kingdom.