Dubai: The Dubai Financial Services Authority (DFSA) has imposed a fine of US$504,000 (AED1,850,940) 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.
According to Emirates News Agency, Alan Linning, Managing Director of Enforcement at the DFSA, emphasized the importance of vigilance in maintaining the integrity of financial markets. He stated that the regulated community has a duty to ensure it does not facilitate market abuse. Linning noted that the DFSA requires firms to have systems to detect potential instances of market abuse and to immediately report any suspicious transactions or orders.
The DFSA found that ARK had systems to identify trading patterns indicative of market abuse. However, the firm failed to adequately consider alerts generated by these systems and did not promptly review them in some cases. As a result, the DFSA deemed ARK's market abuse controls ineffective, leading to at least ten instances of trading that were overlooked and not reported in a timely manner.
Furthermore, ARK was found to have failed to notify the DFSA of a proposed change in control. Although the change did not ultimately occur, an agreement was made for an investor to acquire 9.5 percent of ARK's shares, with an option to increase to 90 percent once specific conditions were met. ARK mistakenly believed that because the initial shareholding was below the 10 percent threshold requiring DFSA approval, notification was not necessary.
Linning added that transparency is fundamental in the relationship between the DFSA and regulated firms. It is expected that firms inform the DFSA of proposed changes to Controllers, including potential ownership changes. He explained that structuring transactions to avoid DFSA approval, such as breaking purchases into smaller tranches, does not absolve firms from notifying the DFSA of potential changes in Controllers, especially when agreements indicate a path to significant ownership changes.
