The Dubai Financial Services Authority, the regulator of the Dubai International Financial Centre, has imposed a fine of $373,842 on FFA Private Bank for failing to ensure that its systems were able to contain market abuse.
The lender had “inadequate systems and controls to identify, assess and report suspicious and potential market abuse between February 2018 and March 2021", the DFSA said on Thursday.,
FFA provides services across private wealth management, online trading and capital markets from its Dubai base.
The move comes after the regulator imposed a prohibition on FFA on May 18, 2021, banning it from receiving, arranging or executing orders from or on behalf of specific clients.
The prohibition was lifted two months later after the lender was able to demonstrate to the DFSA that it had addressed the weaknesses in its systems and controls.
The latest action “concludes the DFSA’s investigation into these failings", the regulator said.
“Authorised firms are the first line of defence in protecting the integrity of financial markets," said Ian Johnston, chief executive of the DFSA.
“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."
Although the DFSA acknowledged that FFA fully co-operated with its investigation, it said there was “an unacceptable risk" that the bank may have indirectly enabled market abuse.
“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,” the regulator said.
The DFSA identified instances of trading by two specific clients during the relevant period that had the characteristics of market abuse.
FFA outsourced responsibility for the monitoring and assessment of client trading. However, it “failed to effectively supervise these activities", the regulator said.
“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," Mr Johnston said.
“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,”
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