Shuaa Capital sanctioned for market manipulation

Dubai regulator fines Shuaa $950,000 for DP World share inflation, blocking investigation.
Shuaa Capital sanctioned for market manipulation
By Amy Glass
Wed 24 Sep 2008 02:23 PM

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.

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