The DFSA has fined Ark Capital Management (Dubai) Limited $504,000 (Dh1.85 million) due to having inadequate market-abuse systems and not notifying the regulator of a proposed change in control.
The Dubai Financial Services Authority, which regulates companies in the Dubai International Financial Centre, stated that Ark had tools to flag suspicious trading patterns but failed to evaluate or analyze the alerts. Therefore, at least ten trades were missed or late reported.
Alan Linning, Managing Director of Enforcement at the DFSA, said, “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.”
In a separate breach, Ark did not tell the DFSA about an agreement that could have led to a change in ownership. As part of the agreement, an investor purchased a 9.5 percent stake in the firm with a prospect of raising the stake to 90 percent in the future.
The investor also got representation at the board and senior management level. The regulator indicated that although the larger transfer was never completed, the fact that the agreement was in place indicated that Ark should have disclosed the same to the DFSA.
Linning stated, “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.”
Ark was established in the DIFC in September 2013 and licensed by the DFSA in the same year to organize and facilitate investments as an agent.
Ark consented to settle and got a discount on early settlement. The DFSA indicated that the fine would have been reduced to $720,000 (Dh2.64 million) without that reduction.
