Business | Banking
Shuaa charged with suspicious share trading
The Dubai Financial Services Authority (DFSA) on Wednesday announced enforcement sanctions against Shuaa Capital relating to alleged market manipulation earlier this year.
- By Babu Das Augustine, Banking Editor
- Published: 19:32 September 24, 2008
Dubai: The Dubai Financial Services Authority (DFSA) on Wednesday fined Shuaa Capital, a leading regional investment bank, for alleged market manipulation.
The sanctions include financial penalties totalling $950,000 (Dh3,486,350) together with other remedial actions agreed to by Shuaa.
"The DFSA has determined that Shuaa Capital intentionally set about to raise the closing price of DP World shares on March 31, 2008, so that it could mark up the book value of its proprietary portfolio in those shares for accounting purposes," the regulator said in a statement.
The DFSA investigated suspicious trading in the shares of DP World Limited on the Dubai International Financial Exchange (DIFX) at the end of March 2008.
The trading was carried out by Shuaa Capital International Limited (a firm licensed by the DFSA) at the direction of its parent firm Shuaa Capital PSC. The trading was referred to the DFSA by the DIFX in April 2008.
Proprietary portfolio
The DFSA has determined that Shuaa Capital intentionally set about to raise the closing price of DP World shares on March 31, 2008, so that it could mark up the book value of its proprietary portfolio in those shares for accounting purposes.
It did so by standing in the market during the closing minutes of trading with bid prices well above those at which DP World shares had been trading in the ordinary course of business. The DFSA has also determined that Shuaa Capital obstructed its investigation.
"The manipulation of markets for ulterior motives is a classic form of market abuse that is outlawed in all well regulated exchange traded markets. Such practices run contrary to the maintenance of orderly markets and efficient price discovery in traded securities. In this case Shuaa Capital artificially inflated the price of DP World shares and generated a false market in those shares," said David Knott DFSA's chief executive.
"Shuaa regrets the lapse in its internal control systems and will take measures to ensure that this will not be repeated in the future," Shuaa Capital said in a statement.
Shuaa Capital has entered into an enforceable undertaking with the DFSA, under which, it has accepted that it failed to maintain proper risk management controls in relation to the misconduct.
It is required by the terms of the enforceable undertaking to:
Appoint a new Chief Risk Management Officer, reporting directly to the chief executive of Shuaa Capital.
Commission and implement the recommendations of an independent risk management review.
Undertake training of its relevant staff in the requirements of the laws and regulations applying within the Dubai International Financial Centre (DIFC).
Pay to the DFSA a penalty of $850,000 (Dh3,119,500) in relation to the alleged market manipulation.
Pay to the DFSA a penalty of $100,000 (Dh367,000) in relation to the alleged obstruction of the DFSA's investigation.
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