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Wed 24 Sep 2008 02:23 PM

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Shuaa Capital sanctioned for market manipulation

Dubai regulator fines Shuaa $950,000 for DP World share inflation, blocking investigation.

Dubai-based investment bank Shuaa Capital has been fined $950,000 by Dubai’s financial regulator, after it was found to have manipulated the share price of DP World earlier this year.

The Dubai Financial Services Authority (DFSA) said in a statement on Wednesday it was enforcing sanctions against Shuaa Capital relating to alleged market manipulation in March.

David Knott, chief executive at DFSA, said Shuaa Capital artificially inflated the price of DP World shares and generated a false market in those shares.

“The seriousness of this offence was exacerbated by Shuaa Capital's obstruction of the DFSA's investigation. This conduct has prolonged resolution of the investigation and is inconsistent with the standards of behaviour that DFSA expects from regulated firms within the DIFC,” he said.

The announcement follows an "extensive and complex" investigation by the DFSA into suspicious trading in the shares of DP World on the Dubai International Financial Exchange (DIFX) at the end of March 2008.

The DFSA said Shuaa Capital had intentionally set about raising the closing price of DP World shares on March 31 so that it could mark up the book value of its proprietary portfolio in those shares for accounting purposes.

Shuaa did this by standing in the market during the closing minutes of trading with bid prices well above those at which the shares had been trading at that day.

The penalty consists of $850,000 for the market manipulation, and $100,000 for the obstruction of the DFSA's investigation.

Oliver Schutzmann, head of investor relations at Shuaa Capital had earlier told Arabian Business he could not comment.

Shuaa's shares fell 11.43 percent on the Dubai Financial Market (DFM) on Wednesday to close at 3.95 dirhams.

The DFSA sanctions also include the appointment of a new chief risk management officer reporting direct to the chief executive of Shuaa Capital, and training of relevant staff in the Dubai International Financial Centre (DIFC) laws and regulations.

The DFSA statement said DP World was “blameless in this matter and is not implicated in any part of the misconduct”.

DP World's shares have nosedived since the listing on the Dubai International Financial Exchange (DIFX), down around 46 percent to date.

SR 11 years ago

Isn''t this illegal? Fine of USD 950K and sacking the Risk Manager!!! Well the poor Risk Manager has been made a scapegoat for decisions taken at a much higher level. In any other market (developed or not) the license would have been cancelled!! Anyway, I guess this is also good for the market!!!

matthewwuillemin 11 years ago

Well this is the frontier!! what can you expect really from the land of greed is good... Any visit to the stock markets here shows you how mad it is... if they started a real casino here it would be better regulated... and probably take the gamblers out of the real markets. having said that, one only has to look at what are supposed to be regulated markets ie the US and see what happens when poor corporate governance etc kicks in.. as always the risk manager is sacked ... happens in EVERY organisation.