Dubai: The Dubai regulator DFSA has imposed a Dh497.86 million fine on the Arif Naqvi, who was the head of the private equity firm Abraaj Capital. The DFSA also imposed penalties of Dh4.22 million on Waqar Siddique, also with Abraaj, for serious failings related to the operations of the group.
Both are also prohibited and restricted from performing any function in or from the DIFC. The imposition of the penalties have been “disputed” by Naqvi and Siddique, and these have been referred by DFSA (Dubai Financial Services Regulator) to the Financial Markets Tribunal. There, the parties will present their respective cases.
“The DFSA’s decisions are therefore provisional and reflect the DFSA’s belief as to what occurred and how it considers their conduct should be characterised,” said the regulator in a statement.
The Financial Markets Tribunal will get to “determine what, if any, is the appropriate action for the DFSA to take and remit the matter to the DFSA with such directions as the FMT considers appropriate to give effect to its determination,” DFSA added in the statement. “The DFSA’s decisions may be confirmed, varied or overturned as a result of the FMT’s review.”
"In January 2022, the FMT determined that the DFSA could publish the Decision Notices and that the FMT hearings will be public. The FMT stayed the operation of the financial penalties until the conclusion of the FMT proceedings - but the prohibition and restrictions on Mr Naqvi and Mr Siddique from performing any function in or from the DIFC remain in effect.
"Mr Naqvi had previously applied to the DIFC Courts in June 2021 for permission to commence judicial review of the DFSA’s decision to take action against him. That application also failed, so the DFSA proceeded to issue Mr Naqvi with the Decision Notice, which he then referred to the FMT."
Always high on that profile
Through the first decade of this century (and even in the 1990s as the head of Cupola), Arif Naqvi had a dominant role in the highly charged and influential global private equity space. He was a regular at the World Economic Forum and any other high-profile gathering of the world’s influential.
That run came to an end after allegations were raised about the way Abraaj was utilising some of the funds made available to it. This was led by the Bill and Melinda Gates Foundation, which at one point was one of the prime backers of Naqvi and Abraaj.
Naqvi, who founded the Abraaj Group in 2002, oversaw the transition to it becoming the largest private equity firm in the region with an estimated $14 billion as assets under management. He was the largest shareholder, the CEO and executive vice-chairman of the Abraaj Group and was "by far the single most influential person within the Abraaj Group and the ultimate decision maker on material or disputed matters," DFSA notes.
• Instructed the use of investor monies to fund the Abraaj Group’s working capital and other commitments;
• Ranked investors according to the likelihood they would complain or challenge and withheld sale proceeds and reports from those investors who were less likely to do so;
• Approved and personally drafted false and misleading statements to investors to cover up the misuse of their funds. Naqvi also attempted to appeal to more senior members of staff at the investors’ organisations to quash their queries;
• Was central to the cover-up of a $400 million shortfall across two funds by temporarily borrowing monies for the purpose of producing bank balance confirmations and financial statements to mislead auditors and investors;
• Approved the change of a fund’s financial year end to avoid disclosing a $200 million shortfall; and
• Personally arranged to borrow $350 million from an individual in an attempt to make the Abraaj Group appear solvent and appease the demands of investors.
Naqvi instructed and encouraged other members of Abraaj senior management to mislead and deceive the investors and stakeholders of the Funds.
Waqar Siddique's role
Siddique was a member of the Abraaj Group’s senior management team from September 2005 until June 2018. He held a number of roles at the Abraaj Group, including the role of the COO (from February 1, 2011 until February 2012) and the head of finance and operations (from January 2017 until his resignation in 2018). "In those roles, Mr Siddique was knowingly involved in certain AIML and ACLD breaches," DFSA notes.
"Mr. Siddique was knowingly involved in AIML misleading and deceiving investors over the use of their monies with the Abraaj Funds. In particular, Mr. Siddique was aware that approximately $400 million was taken from two Abraaj Funds and used as working capital for the Abraaj Group or to fund other investment commitments.
"Mr. Siddique was knowingly involved in ACLD’s contraventions of not maintaining its capital requirements as he authorised the majority of temporary cash transfers at quarterly reporting period ends over a five-year period. Mr. Siddique also signed two financial returns sent to the DFSA which falsely declared that ACLD was in compliance with its Capital Requirements. In doing so, Mr Siddique also failed to act with integrity in carrying out his licensed function at ACLD."