The Dubai Financial Services Authority (DFSA) has imposed a fine of USD 373,842 (AED 1,373,122) on FFA Private Bank (Dubai) Limited (FFA) for having inadequate systems and controls to identify, assess and report trading, which exhibited suspicions of market abuse between February 2018 and March 2021.
This action follows, and is connected to, the prohibition that was imposed on FFA on 18 May 2021 from receiving, arranging or executing orders from or on behalf of specific clients. The prohibition was lifted on 15 July 2021 after FFA was able to demonstrate to the DFSA that it had addressed the weaknesses in its systems and controls. This action concludes the DFSA’s investigation into these failings. The DFSA would highlight that FFA fully cooperated with the DFSA’s investigation, and promptly addressed the weaknesses in their systems and controls.
The weaknesses in FFA’s systems and controls meant that FFA failed to identify or properly assess a significant number of instances of suspicious trading which, based on the information available, should have been reported to the DFSA. This led to an unacceptable risk that FFA may have indirectly facilitated market abuse.
The DFSA identified instances of trading by two specific clients during the relevant period that had the characteristics of market abuse and should have resulted in a report being made to the DFSA. Although FFA’s systems flagged the majority of this trading as potentially suspicious, FFA’s approach to assessing such trading was flawed.
FFA outsourced responsibility for the monitoring and assessment of client trading, however FFA failed to effectively supervise these activities. Outsourcing these activities did not absolve FFA of its responsibility for ensuring that the systems and controls being used were adequate and met FFA’s regulatory obligations.
Ian Johnston, Chief Executive of the DFSA, commented: “Authorised Firms are the first line of defence in protecting the integrity of financial markets. By failing to ensure that it had effective arrangements in place to identify instances of suspicious trading by its clients, FFA facilitated trading which had the characteristics of market abuse for a long time.
This case serves as a reminder that firms cannot rely blindly on those to whom they delegate responsibility for the performance of key compliance activities. Steps must be taken to ensure processes are operating effectively as it is ultimately the Authorised Firm that will be accountable if things go wrong.”
A copy of the DFSA's Decision Notices can be found in the Decision Notices & Regulatory Actions section of the DFSA website.
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