The Dubai Financial Services Authority has fined Sarwa Digital Wealth $191,100 for making a Public Offer of Shares without an Approved Prospectus while in a coordinated action The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) imposed a financial penalty of $122,500 on Sarwa Digital Wealth (Capital).
Sarwa Digital Wealth Limited is a DFSA regulated and Dubai International Financial Centre incorporated company (Sarwa DIFC) and Sarwa Digital Wealth (Capital) Limited (Sarwa), is an FSRA licensed firm in ADGM.
The DFSA said in a decision statement today (21 May) that it had imposed a financial penalty of $191,100 (AED 701,815) on Sarwa DIFC, reduced from $390,000 (AED 1,432,275) following mitigation and settlement discounts.
The mitigation discount included recognition that on being advised by the DFSA that the offer of shares may have contravened DFSA law, it immediately took action to halt the share sale and arranged for the prompt return of all monies to the investors; and a related Sarwa entity was also being fined by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM).
The DFSA took action against Sarwa DIFC for making an Offer of Securities to the Public in or from the DIFC without an Approved Prospectus, in breach of the Markets Law.
The first email offering the sale of Sarwa Digital Wealth (BVI) Limited shares (parent company of Sarwa DIFC and Sarwa Digital Wealth (Capital) Limited based in ADGM (Sarwa ADGM)) was sent to almost 100,000 users. USD 2 million in commitments was received into an escrow account from over 150 potential investors.
The DFSA also found that Sarwa DIFC withheld financial information, that would have been included in an Approved Prospectus, and provided positive metrics that gave potential investors a misleading impression about the financial performance and position of Sarwa DIFC and Sarwa ADGM (collectively referred to as Sarwa).
The DFSA and the FSRA of ADGM have worked closely to make their investigations more efficient, including 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”, the statement said.
Ian Johnston, chief executive of the 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.
In its separate statement issued today (21 May) The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) imposed a financial penalty of $122,500 (AED 449,881) on Sarwa Digital Wealth (Capital) Limited (Sarwa), an FSRA licensed firm in ADGM.
The FSRA found that Sarwa contravened FSRA administered regulations by making an Offer of Securities in ADGM without an Approved Prospectus.
The FSRA has also imposed a Requirement on Sarwa to undertake an independent review of its governance arrangements.
The FSRA administered regulations prohibit the making of an Offer of Securities in ADGM without a prospectus, approved by the FSRA, that contains all information that an investor would reasonably require to make an informed decision in relation to the investment.
An FSRA Investigation found that Sarwa, in and around April and May 2023 offered an opportunity to invest in securities related to a number of shares of its parent entity to its network of clients and registered users of its application. It did this by:
- distributing communications to a significant number of potential investors containing information on the terms of the offer and the securities offered, to enable investors to buy or subscribe to the offer;
- maintaining a website publishing further information in relation to the offer; and
- engaging in further communication with potential investors to provide additional information and to facilitate subscriptions.
- made the offer were not provided with sufficient information to make an informed decision in relation to the investment.
Sarwa did not provide an Approved Prospectus to potential investors. As a result, the potential investors to whom Sarwa made the offer were not provided with sufficient information to make an informed decision in relation to the investment.
144 investors subscribed to the offer and committed approximately $2.1m.
Emmanuel Givanakis, chief executive officer of the FSRA said: “This enforcement action demonstrates the FSRA’s robust regulatory approach to its regulatory framework, ensuring investor protection is of paramount importance and making sure all regulated entities maintain high standards of conduct.
“More importantly, this is also a matter that demonstrates the strong collaborative approach between UAE Regulators through cooperating and sharing information in parallel investigations, thereby safeguarding the UAE’s financial ecosystem and protecting its investors.”
