DIFC Regulator To Strengthen Corporate Oversight In Wake Of Abraaj Collapse

The collapse of embattled private equity firm Abraaj may lead the Dubai Financial Services Authority (DFSA) - the DIFC's independent financial regulatory agency - to change its oversight procedures and will “influence thinking” on corporate governance, chief executive Bryan Stirewalt said in a report.

Abraaj was once one of the most influential emerging-market investors in the world until it collapsed last year, months after investors began an investigation into mismanagement of money in its healthcare fund.

In a report outlining the DFSA’s plans for 2019 and 2020, Stirewalt said its investigations into the Abraaj case will leads the entity to “take steps to strengthen our supervisory oversight going forward.”

“We will also be reviewing our risk-based approach to supervision to ensure that it properly captures some of the features of the particular case,” Stirewalt wrote in the report.

While the DFSA licensed Abraaj Capital Limited (ACL) to carry on regulated activities within the Dubai International Financial Centre (DIFC), it did not regulate Abraaj Holdings, Abraaj Investment Management Limited or license the firms private equity firms, which were all registered in the Cayman Islands.

“We will examine whether our regime addresses correctly the situation where firms locate legal entities providing services to each other in different locations, which can complicate supervision,” Stirewalt added in the report.

Lastly, Stirewalt said that the DFSA’s thinking on corporate governance would be influenced, particularly regarding the allocation of responsibilities amongst the senior management of firms and the best ways to assign responsibility for compliance within regulated firms.

In August 2018, the DFSA moved to stop Abraaj Capital Limited from taking on new business or moving money while investigations into the group were ongoing.

“The DFSA has for some time been investigating a range of matters in relation to ACL,” Stirewalt added.