Dubai's Financial Markets Tribunal upheld a Dubai Financial Services Authority ruling that imposed $4.5 million worth of fines against Al Masah Capital and banned three individuals that ran the company from offering financial services out of the Dubai International Financial Centre.
The tribunal upheld a $3m fine against Cayman Islands-based Al Masah Capital and a $1.5m fine against Al Masah Capital Management, which operated from the Dubai International Financial Centre. It also upheld fines of $225,000 against the company's former chief executive Shailesh Dash and a fine of $150,000 executive director Don Lim Jung Chiat. It increased a fine against chief financial officer Nrupaditya Singhdeo by $25,000 to $175,000. They were also ordered to pay the DFSA's legal costs.
Mr Dash did not respond to a request to comment when contacted by The National.
The DFSA originally issued enforcement notices against the two companies and the three individuals in September last year.
The case involved complicated structures in which investors bought shares in companies that then bought shares in other businesses.
However, the tribunal agreed with the DFSA that the arrangements were investments in funds and that these funds were being managed by Cayman Islands-based Al Masah Capital from within the DIFC, when it was not authorised to do so.
The tribunal also agreed that the two companies and three individuals had concealed from potential investors that placement fees paid to Al Masah Capital had been paid to a related party, and that the misrepresentation of fees was "intentional and deceptive", according to a DFSA statement on Wednesday.
"Where we see this conduct, we don't just take action against the firm, we take action against the responsible individuals and in particular the single individuals who are responsible," the DFSA's head of enforcement Patrick Meaney told The National.
Al Masah Capital was placed into liquidation in the Cayman Islands last month, meaning that the DFSA may not be able to recover the full amount of the fine imposed. However, the DFSA will be "a creditor in the insolvent estate and ... will also seek to recover against the DIFC entity", Mr Meaney said.
"But it's the individuals that matter at the end of the day and holding individuals accountable," he added.
"We expect that we will be able to recover the fines against the three individuals, but more importantly the prohibitions on them operating not only operate within the DIFC but send a message to any other regulatory body that these are not individuals that that they should be allowing to conduct financial services within their regulatory regimes," Mr Meaney added.
Peter Smith, the DFSA's head of strategy, policy and risk, said: "One of the key elements of taking action against firms is not just to punish those that have done wrong things, but also to get a message out that this sort of behaviour is unacceptable and won't be tolerated."
The DFSA remains on the lookout for businesses which structure their operations to give the appearance that they don't need to be authorised while carrying out operations from the DIFC, Mr Meaney said.
"Secondly, we view it as unacceptable for financial services firms to conceal or mislead investors in relation to information that is important for them making investment decisions."