Dubai, United Arab Emirates: The Dubai Financial Services Authority (DFSA), the independent banking, financial services, and markets regulator of Dubai International Financial Centre (DIFC) has imposed a fine of USD 504,000 (AED 1,850,940) on Ark Capital Management (Dubai) Limited (ARK) for having inadequate market abuse systems and controls, and for failing to notify the DFSA of a proposed change in control.
Alan Linning, Managing Director, Enforcement, of the DFSA commented: “The integrity of financial markets relies on the vigilance of its participants. The regulated community has an obligation to ensure that it does not facilitate market abuse. The DFSA requires firms to have in place systems to detect potential instances of market abuse, and to immediately submit a Suspicious Transaction and Order Report, when they have reasonable grounds for suspecting market abuse.”
The DFSA found that whilst ARK had systems in place to identify trading pattens consistent with market abuse typologies, it failed to give adequate consideration to alerts generated by those systems, and in some instances did not promptly review them. As a result, the DFSA considers that ARK’s market abuse systems and controls were ineffective. This resulted in at least ten instances of trading that, were overlooked and not reported to the DFSA or not reported in a timely manner.
ARK was also found to have failed to notify the DFSA of a proposed change in control. Although the change in control ultimately did not take place, an agreement had been entered into that meant an investor acquired 9.5% of ARK’s shares, with the option to increase that shareholding to 90% once certain conditions had been met. ARK mistakenly considered that because the initial shareholding acquisition fell below the 10% threshold which would have necessitated the DFSA’s approval, it was not required to notify the DFSA about the proposed change of control.
Alan Linning, Managing Director, Enforcement, of the DFSA added: “The relationship between the DFSA and the firms it regulates is built on transparency, as such the DFSA expects to be informed of proposed changes to firms’ Controllers. This includes notifying the DFSA of potential changes of ownership, which is specifically required under our rules. Structuring transactions to avoid the need for DFSA approval, such as staggering purchases into tranches that fall below percentage thresholds, does not absolve firms of their separate obligation to notify the DFSA of a potential change in Controllers. This is especially true when there are agreements in place setting out a path that may result in a firm’s ownership changing.”
The DFSA remains committed to developing, administering, and enforcing world-class regulations of financial services within DIFC. As part of its strategy and ongoing mission, the Authority will continue to implement stringent enforcement measures and provide clear regulatory guidance to ensure that all entities operating within the Centre adhere to the highest standards of regulation and ethical conduct.
A copy of the Decision Notice setting out full details of this matter can be found in the Decision Notices section of the DFSA website.
For further information, please contact:
Corporate Communications
Dubai Financial Services Authority (DFSA)
Level 13, The Gate, West Wing
Dubai, UAE
Tel: +971 (0)4 362 1500
Email: DFSAcorpcomms@dfsa.ae
www.dfsa.ae
