The Dubai Financial Services Authority (DFSA), the independent regulatory body overseeing banking, financial services, and markets within the Dubai International Financial Centre, has imposed a fine of $504,000 (approximately AED 1,850,940) on Arc Capital Management (Dubai) Limited. This penalty is due to insufficient systems and controls to identify instances of market abuse, as well as the failure to inform the DFSA about a proposed change in control.
Alan Lining, the General Manager for Enforcement at the DFSA, stated, “The integrity of financial markets relies on the vigilance of their participants. The regulated business community is responsible for ensuring that they do not enable market abuse. Therefore, the DFSA requires firms to have effective systems in place to detect potential instances of market abuse and to promptly report suspicious transactions and orders when they have reasonable grounds for concern.”
The DFSA found that while Arc had effective systems to identify trading patterns associated with market abuse, the firm did not pay sufficient attention to alerts generated by those systems and, in certain instances, failed to review them in a timely manner. Consequently, the DFSA determined that Arc’s systems and controls for identifying market abuse were ineffective, leading to at least 10 trading instances that went unreported or were reported too late.
Additionally, Arc failed to notify the DFSA about a proposed change in control. Although this change did not ultimately occur, an agreement had been made for an investor to acquire a 9.5% stake in Arc, with an option to increase this share to 90% upon fulfillment of certain conditions. Arc mistakenly believed that since the initial acquisition did not exceed the 10% threshold requiring DFSA approval, it was not obligated to inform the authority about the proposed change in control.
Lining added, “The relationship between the DFSA and the firms it regulates is founded on the principle of transparency. Therefore, the authority expects to be notified of any proposed changes in control at those firms, including notifications of potential ownership changes, which is expressly mandated in our rules. Consequently, structuring transactions to avoid the need for regulatory approval, such as segmenting purchases into smaller percentages, does not exempt firms from their independent obligation to notify the DFSA of any potential changes in control. This is particularly applicable when existing agreements outline a pathway that could lead to changes in ownership.”
The DFSA remains committed to developing, managing, and enforcing the highest levels of regulation for financial services in the Dubai International Financial Centre. As part of its ongoing strategy and mission, it will continue to implement stringent enforcement actions and provide clear regulatory guidance to ensure that all institutions operating within the DFSA’s jurisdiction adhere to the highest standards of regulatory compliance and ethical conduct.