July 30, 2019 / 12:50PM / By DFSA / Header Image Credit: arabianbusiness.com
- Serious wrongdoing by
two Abraaj group companies included carrying out unauthorised activities in the
DIFC and misusing investors’ monies.
- These are the largest
financial penalties ever imposed by the DFSA.
Dubai Financial Services Authority (DFSA) has today imposed financial penalties
of USD 299,300,000 (AED 1,098,431,000) and USD 15,275,925 (AED 56,062,645) on
Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited (ACLD),
The DFSA 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 DIFC;
- actively misled and deceived investors in Abraaj
funds over an extended period;
- 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; and
- concealed this by providing misleading financial
information to investors and making false statements about the use of
money drawn down from investors and distributions.
the many methods AIML used to deceive investors were:
- borrowing money just prior to financial reporting
dates to produce temporary bank balances at a level expected by the
- changing the reporting period for a fund to disguise
- deflecting demands from various parties to
provide updated financial information and bank statements; and
- lying about delays in making distributions of
exit proceeds to investors.
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 USD 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.
result of this misconduct, ACLD also breached the Regulatory Law as it:
- failed to observe minimum standards of integrity
and fair dealing;
- failed to ensure its affairs were managed
effectively and responsibly; and
- failed to deal with the DFSA in an open and
correspondence showed that Abraaj group’s compliance function raised concerns
about the group carrying on unauthorised financial services within the DIFC as
early as 2009, but ACLD’s senior management ignored this.
The DFSA has taken this action to penalise ACLD and AIML, deter others and
protect investors. 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 continues to investigate individuals and entities connected with this
matter, in respect of their culpability, to the full extent of its powers and
considering all sanctions available to it.
A copy of the DFSA's Decision Notices can be found in the Regulatory
Actions section of the DFSA website.
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