Dubai regulator fines asset manager $504,000 over market abuse controls

Dubai: Dubai’s financial regulator has imposed a $504,000 fine on Ark Capital Management (Dubai) Limited (ARK) after finding serious gaps in its market abuse monitoring and failures to notify authorities about a proposed change in ownership.

The Dubai Financial Services Authority said the penalty followed an enforcement investigation that identified ineffective systems and controls designed to detect potential market abuse, alongside breaches of notification requirements linked to changes in control.

Regulators found that the firm had surveillance systems in place to flag trading patterns associated with market abuse. Those alerts, however, were not given adequate attention and, in several cases, were not reviewed promptly.

The watchdog said this led to at least ten instances of trading activity that were either not reported or reported late through Suspicious Transaction and Order Reports, a core requirement for regulated firms operating in Dubai’s financial centre.

“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,” said Alan Linning, Managing Director of Enforcement at the DFSA.

He added, “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.”

The investigation also found that the Ark failed to notify the regulator about a proposed change in control. An agreement had been entered into under which an investor acquired a 9.5% stake, with the option to increase ownership to 90% once certain conditions were met.

The firm took the view that notification was not required because the initial acquisition fell below the 10% threshold that would have triggered formal approval. The regulator rejected that interpretation, noting that the existence of an agreement outlining a path to control was sufficient to require disclosure.

Although the transaction did not ultimately proceed, the DFSA said the obligation to notify remained.

Linning said the regulatory relationship depends on openness between firms and the authority. “The relationship between the DFSA and the firms it regulates is built on transparency,” he said, adding that potential changes of ownership must be disclosed even if they are structured in stages.

“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,” he said.