UAE's securities regulator working with DFSA on Abraaj impact on investors

Securities and Commodities Authority says: "Once we get tangible evidence, we can move forward in coordination with local and federal governments."

Arif Naqvi, founder of Abraaj. Mr Naqvi faces a criminal complaint hearing in absentia in Sharjah on Thursday. Sarah Dea / The National

The UAE's top securities regulator is working with the Dubai Financial Services Authority (DFSA) to ascertain whether local investors have been affected by the financial woes of private equity firm Abraaj.

The regulator's first public statement about possible scrutiny of Abraaj comes as concerns grow over the financial state of the Dubai-based firm, whose funds have also attracted money from UAE institutions and family offices.

"We are coordinating with DFSA to see where national investors are affected," said Obaid al Zaabi, chief executive of the UAE's Securities and Commodities Authority.

"Once we get tangible evidence, we can move forward in coordination with local and federal governments."

The Middle East and North Africa's largest private equity group, Abraaj has been grappling with the fallout from a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), over how it used their money in a $1 billion healthcare fund.

Abraaj, which has denied any wrongdoing, declined to comment on discussions that the DFSA may be having with other parties, but told Reuters that it continues to actively engage with the Dubai financial regulator.

"The regulator is fully apprised of key developments taking place at the firm," it said.

DFSA, the financial regulator of Dubai's financial free zone, said on Monday: "DFSA is aware of various matters involving Abraaj Group, which has a regulated entity in the DIFC [Dubai International Financial Centre], and relevant matters are under our attention."

It said it cannot comment further on circumstances of individual firms.

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The four investors have hired Ankura Consulting to look into how Abraaj used their money in the healthcare fund.

Separately, Abraaj hired Deloitte to examine its business, including the healthcare fund, after investors questioned an earlier review by KPMG.

Summary findings of Deloitte's review show that liquidity problems at Abraaj led to a “commingling” of Abraaj’s investor money with its own money in relation to the healthcare fund and its fourth buyout fund.

However, there was no evidence of embezzlement or misappropriation, according to the findings, which were shared by Deloitte at a meeting between Abraaj and its creditors on June 4.

The findings did highlight a lack of "adequate governance" and "overall weakness in the control framework".

When asked for comment, Deloitte said it does not comment on any client engagements or related matters. Abraaj declined to comment, saying the content of the Deloitte review is confidential.

According to the findings, all the money of the healthcare fund had been either invested, used for management fees and other fund expenses, or returned to investors.

But the firm's fund management business, Abraaj Investment Management Limited (AIML), has yet to pay back $94.6 million to the buyout fund, money that was moved from the fourth fund to AIML and is now accounted as a receivable, the document showed.

According to the summary finding, Deloitte's final report on the healthcare fund has been submitted to the DFSA.