Dubai Financial Services Authority hands down huge penalties to Abraaj companies for deceiving investors
The Dubai Financial Services Authority (DFSA) on Tuesday imposed record fines of more than $300 million on two Abraaj Group companies for deceiving investors and the regulator.
The DFSA said it has handed out fines of $299.3 million and $15.2 million on Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited (ACLD), respectively, the largest imposed by the regulator .
The regulator said in a statement that its investigation, which commenced in January 2018, was complex and spanned multiple jurisdictions, and found that AIML, a Cayman Islands company now in provisional liquidation, carried out unauthorised financial services, including fund management within and from the Dubai International Financial Centre (DIFC).
It was also found to have actively misled and deceived investors in Abraaj funds over an extended period and misused investors’ monies in various funds to meet its own operating and other expenses, which included payments to entities connected to some members of AIML staff, and to meet ever-increasing cash shortfalls.
The investigation also found that AIML concealed this by providing misleading financial information to investors and making false statements about the use of money drawn down from investors and distributions.
It added that AIML deceived investors by borrowing money just prior to financial reporting dates to produce temporary bank balances at a level expected by the investors and changing the reporting period for a fund to disguise shortfalls. It also lied about delays in making distributions of exit proceeds to investors.
At the time AIML entered into provisional liquidation, because of the activities referred to above, two funds managed by AIML had a combined shortfall of at least $180 million.
With regard to ACLD, a DIFC company also in provisional liquidation, the DFSA investigation found that it failed to maintain adequate capital resources, deceived the DFSA about its compliance with various rules, including capital adequacy requirements and was knowingly concerned in AIML’s unauthorised financial services activities.
The DFSA said before taking any further action to enforce payment of the fines, the DFSA will consider the firms’ circumstances at that time and the corresponding implications of enforcing the fines for fund investors.
Bryan Stirewalt, chief executive of the DFSA, said: "The size of these fines reflects the seriousness with which the DFSA views AIML’s and ACLD’s contraventions. Senior management rode roughshod over their compliance function and the misconduct and deceit were pervasive and persistent. We will pursue the persons or entities who perpetrated this activity, including those who allowed this to happen through major corporate governance breaches, to the full extent of our powers.”
The DFSA added that it continues to investigate individuals and entities connected with this matter.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.