The Dubai Financial Services Authority (DFSA) has fined Ark Capital Management (Dubai) Limited (ARK) USD 504,000 (AED 1,850,940) for failures relating to market abuse systems and controls and for not notifying the regulator of a proposed change in control.
The DFSA said ARK did not adequately review alerts generated by its market abuse monitoring systems and failed to submit Suspicious Transaction and Order Reports within required timeframes.
The regulator also found that ARK did not notify the DFSA of a proposed ownership structure that could have resulted in a change in control.
Dubai regulator cites delayed and missed suspicious transaction reports
According to the DFSA, ARK had systems designed to identify trading patterns linked to market abuse. However, the firm did not give sufficient consideration to alerts produced by those systems and did not review some alerts promptly.
The DFSA said these failures meant ARK’s systems and controls were ineffective. As a result, at least ten trading instances were either not reported to the DFSA or were reported late.
“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,” Alan Linning, Managing Director, Enforcement, of the DFSA said in a statement.
The DFSA also found that ARK failed to notify the regulator of a proposed change in control. Although the change did not proceed, an agreement allowed an investor to acquire 9.5 per cent of ARK’s shares, with an option to increase the holding to 90% once certain conditions were met.
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“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,” Linning added.
ARK concluded that the initial acquisition did not require notification because it was below the 10 per cent threshold that would have required DFSA approval.
The regulator said this interpretation was incorrect and that notification was required due to the structure of the agreement and the potential outcome.
ARK agreed to settle the matter and received a reduction for early settlement. Without the reduction, the DFSA said the financial penalty would have been $720,000.
The DFSA said it will continue to develop, administer and enforce financial services regulation within the Dubai International Financial Centre. The regulator said it will continue to apply enforcement measures and provide regulatory guidance to firms operating in the centre.
