A brash Kuwaiti financier facing a fraud suit by U.S. authorities was found dead Sunday in an apparent suicide that sent shockwaves through the Gulf Arab financial sector.

A security source told Reuters that Hazem Al-Braikan appeared to have died from a single gunshot wound to the side of the head, while a policeman standing outside Braikan's house said the well-connected financier, 37, had shot himself.

Braikan was the chief executive of Al Raya Investment, which is 10 percent owned by Citigroup Inc, and had been at the center of a financial scandal that erupted last week.

It's very sad news. This crisis has seen a lot of people in the Gulf and across the world fall from grace, and each person is different in terms of their ability to handle pressure, said Mohammed Yasin, chief executive of Dubai-based investment bank Shuaa Securities.

The U.S. Securities and Exchange Commission filed a lawsuit against Braikan and two other finance firms last week, accusing them of having improperly earned millions of dollars from trades in two U.S. firms, Harman International Industries Inc and Textron Inc.

A policeman at Braikan's two-storey villa in the Kuwait City neighborhood of al-Rawda told Reuters that Braikan's brother had called for help.

An employee at Al Raya said Braikan, who was single, had not come to work Sunday, the start of the working week in the Gulf region.

We are shocked. Everybody is shocked, the employee said by telephone. We called his brother, and he confirmed the news.

He was here at the office yesterday until 7 or 8 at night. I don't know why he decided to end it.

LACK OF TRANSPARENCY

Braikan's death comes on the heels of another financial scandal that has rocked the Gulf region, involving two Saudi conglomerates.

Regulators and bankers are grappling with the fallout from debt restructuring and fraud allegations at privately held Saad Group and Ahmad Hamad Algosaibi & Bros.

Algosaibi has sued the head of Saad Group in a New York court for fraud in a case involving allegations of $10 billion in loan irregularities.

Investors have been left largely in the dark on the case, the biggest blow to hit the Middle East since the financial crisis.

The SEC's lawsuit, which also names a Bahrain bank and a state-linked Kuwaiti firm, will intensify focus on concerns about transparency and weak regulation in the Gulf region.

OPEC member Kuwait is home to the Arab world's second largest bourse, yet it is the only Gulf Arab state without a stock market regulator, as plans have been stalled in parliament for years.

In other Gulf Arab markets, some companies release their results in the local press first over the weekend, to the dismay of investors.

This incident will shed the light on the need for tougher legislation for bourse trading and leaked media reports in Kuwait, said a Kuwait-based trader.

'IN THE HANDS OF LAWYERS'

Braikan, reached by Reuters on July 25, the day before his death, had declined to comment on the case.

I have nothing to say. It is in the hands of the lawyers now.

Hours later, he issued a statement saying he had named a U.S. attorney to defend him, declaring: I would like to confirm on the soundness of my legal situation.

In papers filed in federal court in Manhattan last week, the SEC said Braikan and entities linked to him earned more than $5 million from well-timed trades in the two U.S. firms.

Other defendants include United Gulf Bank and KIPCO Asset Management Co (KAMCO). Both are part of the Kuwait Projects Co (KIPCO) group.

All the firms have denied the allegations.

SEC spokesman Kevin Callahan declined to comment.

Ron Geffner, a former SEC enforcement attorney who now oversees the financial services group with Sadis & Goldberg in New York, said the government's lawsuit would not come to a halt because of Braikan's death.

The reality is his estate benefited monetarily, Geffner said. His death doesn't change that. They still have to follow through. His unfortunate death doesn't alleviate responsibility in the matter.

KIPCO is affiliated with senior members of Kuwait's ruling al-Sabah family and is the biggest investment firm by assets in Kuwait.

KAMCO and United Gulf Bank said Friday they made no gain from trading in the shares of Harman and Textron.

Shares in KIPCO slid 3.5 percent on the Kuwaiti bourse on Sunday, on the first trading day after the lawsuit was filed.

The SEC said it obtained an emergency court order freezing the trading profits in U.S. accounts held by Braikan and the other firms.

An SEC official said an investigation began soon after learning about a takeover hoax last Monday, at the same time as the markets and media outlets.

Harman shares briefly soared after several media outlets reported that a private investment firm called Arabian Peninsula Group planned to buy it at almost double its market price.

The incident was similar to a phony offer for Textron in April from a United Arab Emirates-Kuwait consortium.

(Additional reporting by Matt Smith in Dubai and Steve Eder in New York, writing by Amran Abocar; editing by Thomas Atkins, Will Waterman and Leslie Adler)

Dubai