Dubai: The DIFC registered Sarwa Digital Wealth Ltd. has been hit with a Dh701,815 ($191,100) fine for making a sale offer of securities to the public without an approved prospectus. The regulator, DFSA (Dubai Financial Services Authority) found this action to be in breach of the Markets Law.
Similarly, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) imposed a financial penalty of Dh449,881 ($122,500) on Sarwa Digital Wealth (Capital) Ltd, also an FSRA licensed firm in ADGM, citing Sarwa made a similar offer of securities in ADGM without an approved prospectus.
The penalty on Sarwa DIFC was reduced from Dh1.43 million ($390,000) following mitigation and settlement discounts. These were the mitigating circumstances for the discount:
- On being advised by DFSA that the offer of shares may have contravened DFSA law, Sarwa DIFC immediately took action to halt the share sale and arranged for the prompt return of all monies to the investors.
- A related Sarwa entity is also being fined by Abu Dhabi Global Market's (ADGM) Financial Services Regulatory Authority.
The first email offering the sale of Sarwa Digital Wealth (BVI) Ltd. shares - parent company of Sarwa DIFC and Sarwa Digital Wealth (Capital) Ltd. based in ADGM (Sarwa ADGM) - was sent to almost 100,000 users. Following which $2 million in commitments was received into an escrow account from over 150 potential investors.
Separately, the ADGM statement noted that after 14 days, 144 investors committed to approximately $2.1 million which was held in an escrow account.
The DFSA found Sarwa DIFC 'withheld financial information that would have been included in an approved prospectus'. And 'provided positive metrics' that gave investors a misleading impression about the financial performance and position of Sarwa DIFC and Sarwa ADGM.
Coordinated action
The DFSA and FSRA of ADGM then worked together to 'make their investigations more efficient'. This included joint communications with Sarwa, joint interviews with Sarwa staff and others, common information requests, and the sharing of intelligence and findings.
"The coordination between the DFSA and the FSRA of ADGM demonstrates the value of UAE regulatory bodies working together to uphold market integrity and reduce regulatory arbitrage," said a statement.
Ian Johnston, Chief Executive of DFSA, said: “Protecting retail investors is a key priority for the DFSA and the requirement to issue a DFSA approved prospectus is there to do exactly that. I am also very pleased to see the effectiveness of the cooperation between the DFSA and the FSRA of ADGM."
