Dubai — The stiff penalties imposed by the Dubai Financial Services Authority (DFSA) against Al Masah Capital has been upheld by the Financial Markets Tribunal (FMT), it announced on Wednesday.
Following an eight-day hearing earlier this year, the FMT issued its decision on October 27.
However, the tribunal said in its judgement in paragraph 111 that Al Masah’s founder Shailesh Dash “came over as an extremely intelligent and forceful individual… and is no doubt essentially a truthful person”.
It also added that Dash exhibited “a formidable mastery of the arguments in this case.”
The case essentially revolved around placement fees and the extent of disclosure to investors on transactions during a six-year period. It involved complicated structures in which investors bought shares in companies that then bought shares in further businesses.
According to observers, the compliance officer reportedly did not pick up the issue and made returns accordingly, and though the DFSA says the case is “headscratchingly” complex, there was nothing hidden or underhanded about the structure, and that auditors, regulators and compliance officers could see it for what it was.
The FMT sanctions are the same as those imposed by the DFSA, except for the fine for Mr Singhdeo, which the FMT increased by $25,000. This was because the FMT saw Mr Singhdeo’s responsibility for the misconduct as somewhat greater than that reflected in the fine imposed by the DFSA.
The FMT also upheld the DFSA’s decision to prohibit all three individuals and concluded they are not fit and proper to perform any function in connection with financial services in or from the DIFC. The FMT also ordered them to pay the DFSA’s costs of the proceedings.
The Al Masah case is believed to have far-reaching implications considering the prevailing perceptions of private equity and the downfall of Abraaj Group as well as the ongoing NMC Healthcare saga.
The Al Masah case demonstrates that Dubai strictly enforces the rules for its financial markets to ensure transparency, fairness and compliance with international law.
Bryan Stirewalt, chief executive of the DFSA, said firms and the individuals in charge have a responsibility to ensure that all financial services activities in or from the DIFC are appropriately authorised and carried out properly.
“The DFSA is particularly concerned by attempts to use legal structures to avoid regulation when the substance of the activity is a financial service conducted in or from the DIFC. This matter also shows the extent to which the DFSA will take action to ensure investors are treated fairly and are not misled by misrepresentation, concealment or omission,” he said.
“Protection of direct and indirect users of DIFC financial services is a key priority of the DFSA. The DFSA will also take appropriate action against individuals involved in the running of companies that breach the DFSA’s rule,” he added.