Khalijia Invest, a Saudi investment firm which counts two major Kuwaiti investment banks as shareholders, plans to shut down most of its operations due to a cash crunch, a document seen by Reuters showed.

The retrenchment could be the first in a slew of similar actions in the kingdom where a raft of investment firms have been facing financial stress, with consolidation expected.

Riyadh-based Khalijia, which counts Kuwait's National Investments and Gulf Bank as shareholders, has decided to cancel the licenses of its asset management, brokerage and custody services, an email to Khalijia staff said.

'A full restructuring of the company's activities and staffing is being considered and will be conveyed to all staff members in due time,' the email said, adding the decision had been taken after an extraordinary board meeting on March 29.

Khalijia will decrease the company's capital and retain its investment advisory and consultancy business, the email said.

Khalijia Invest declined to comment when contacted by Reuters.   

The firm, which was incorporated with a capital base of 400 million riyals ($106.7 million) in 2008, saw its authorised share capital fall below the stipulated regulatory requirement of 50 million riyals, prompting the move to shut down, two sources familiar with the matter said.

Shareholders refused to commit more capital prompting the move to scale down operations, the two sources added.

Khalijia will meet with the Saudi regulator, Capital Markets Authority (CMA), on Tuesday, the Saudi source said. He said the CMA may intervene to bail out the firm. - Reuters