DFSA sanctions Shuaa Capital for market abuse

The sanctions include financial penalties totaling $950,000 (Dhs3,486,350) together with other remedial actions agreed to by Shuaa Capital pursuant to an Enforceable Undertaking made with the DFSA.

Background:

The announcement follows an extensive and complex investigation by the DFSA into suspicious trading in the shares of DP World Limited on the Dubai International Financial Exchange (DIFX) at the end of March 2008. The trading was carried out by Shuaa Capital International Limited (a firm licensed by the DFSA) at the direction of its parent firm Shuaa Capital P.S.C. (collectively called Shuaa Capital). The trading was referred to the DFSA by the DIFX in April 2008.

The DFSA has determined that Shuaa Capital intentionally set about to raise the closing price of DP World shares on 31 March 2008 so that it could mark up the book value of its proprietary portfolio in those shares for accounting purposes. It did so by standing in the market during the closing minutes of trading with bid prices well above those at which DP World shares had been trading in the ordinary course of business. The DFSA has also determined that Shuaa Capital obstructed its investigation.

DFSA's Chief Executive Mr. David Knott, said:

"The manipulation of markets for ulterior motives is a classic form of market abuse that is outlawed in all well regulated exchange traded markets. Such practices run contrary to the maintenance of orderly markets and efficient price discovery in traded securities. In this case Shuaa Capital artificially inflated the price of DP World shares and generated a false market in those shares."

Both the DFSA and the DIFX are totally committed to ensuring that investors on the DIFX can have confidence in the integrity of the market.

The seriousness of this offence was exacerbated by Shuaa Capital's obstruction of the DFSA's investigation. This conduct has prolonged resolution of the investigation and is inconsistent with the standards of behaviour that DFSA expects from regulated firms within the DIFC.

The DFSA emphasises that DP World is entirely blameless in this matter and is not implicated in any part of the misconduct."

The Sanctions:

Shuaa Capital has entered into an Enforceable Undertaking with the DFSA under which it has accepted that it failed to maintain proper risk management controls in relation to the misconduct. It is required by the terms of the Enforceable Undertaking to:

• Appoint a new Chief Risk Management Officer reporting direct to the Chief Executive of Shuaa Capital;

• Commission and implement the recommendations of an independent risk management review;

• Undertake training of its relevant staff in the requirements of the laws and regulations applying within the Dubai International Financial Centre (DIFC);

• Pay to the DFSA a penalty of $850,000 (Dhs3,119,500) in relation to the alleged market manipulation; and

• Pay to the DFSA a penalty of $100,000 (Dhs367,000) in relation to the alleged obstruction of the DFSA's investigation.