DFSA fines Abraaj founder Arif Naqvi nearly half a billion dirhams
The Dubai Financial Services Authority (DFSA) has fined Arif Naqvi, founder of the Abraaj Group, and Waqar Siddiqui, the group’s former Chief Operating Officer (COO), due to what it described as a “gross failure” on their part in relation to the Abraaj Group.
According to the details, DFSA, the financial regulatory agency of the special economic zone in Dubai, imposed a fine of $135.56 million (497.86 million dirhams) on Naqvi and a fine of $1.15 million (4.22 million dirhams) on Siddiqui. The authority also prevented and restricted them from practicing any job in or from the Dubai International Financial Centre (DIFC).
The DFSA said in a statement that both Naqvi and Siddiqui had objected to the findings of the DFSA and had referred the decision issued against them to the Legal Authority for Financial Markets so that the case would be presented by all parties before it. Therefore, the decisions made by the authority are temporary, and reflect its beliefs about the observed behaviours.
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The Legal Authority for Financial Markets will decide the appropriate action to be taken by the DFSA, if any, and will refer the matter to the Authority with the directions it deems appropriate to enforce its decision. The authority’s decisions may be upheld, changed or reversed as a result of the authority’s review.
According to the DFSA, Siddiqui and Naqvi have applied to the Financial Markets Legal Authority for an order prohibiting the DFSA from publishing decision notices, and for the authority’s hearings to be held confidentially rather than publicly.
The DFSA says: “Earlier in June 2021, Naqvi applied to the DIFC Courts for permission to initiate a judicial review of the DFSA’s decision to take action against him. This application was also denied, and the authority started issuing a decision notice against Naqvi, who in turn referred it to the Legal Authority for Financial Markets.”
Furthermore, DFSA said that Arif Naqvi founded the Abraaj Group in 2002, which, under his leadership, became one of the largest private equity firms in the region, with assets under management estimated at $14 billion. Naqvi has been the Group’s majority shareholder of the company and has been seen as the face and personality behind the group by creating a worldwide reputation based on the alleged success of the group’s investment strategy. Naqvi was the most influential person within the Abraaj Group and the ultimate decision maker on substantive or contested issues.
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“The decision notice states that Naqvi knowingly engaged in the process of misleading investors about the misuse of their funds by Abraaj Investment Management Limited (AIML), a company registered in the Cayman Islands and not authorized by the DFSA,” the statement read.
Moreover, Naqvi directed and encouraged other members of Abraaj’s senior management to mislead and deceive investors and fund shareholders, according to the DFSA statement.
Naqvi knowingly participated in the execution by Abraaj Investment Management Limited (AIML) of unlicensed financial services activities in or from the DIFC by exploiting his role as Chairman of the Global Investment Committee at AIML and through his actions in managing Abraaj funds. According to the DFSA, the large fine imposed on Naqvi reflects the severity of the wrongdoing and is based on his earnings from the Abraaj Group.
The DFSA found that Waqar Siddiqui was knowingly involved in violations committed by AIML and Abraaj Capital Limited (ACLD), a DFSA authorized firm. Siddiqui was a member of the senior management of the Abraaj Group from September 2005 to June 2018. During this period, he held a number of positions in the group, including the position of Chief Operating Officer (from February 1, 2011 to February 2012), and Chief Affairs Officer, Finance and Operations (from January 2017 until his resignation in 2018).
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According to the DFSA, Siddiqui was knowingly involved in AIML’s misleading and deceiving of investors about the use of their money in Abraaj funds. In particular, Siddiqui was aware that approximately $400 million had been taken from two Abraaj funds and used as working capital for the Abraaj Group or to fund other investment commitments.
In order to disguise this shortfall, Siddiqui has been involved in deceiving auditors and investors about the actual balance in the fund’s bank accounts, including signing loan agreements that have been used to issue misleading assertions about bank balances and misleading financial statements.
According to the DFSA’s statement, Siddiqui was knowingly involved in the irregularities committed by Abraaj Capital Limited by failing to maintain its capital requirements; Whereas, it approved the majority of temporary cash transfers during the five-year quarterly reporting period.
He also signed two financial reports sent to the DFSA in which they falsely state Abraaj Capital Limited’s compliance with capital requirements. As such, Siddiqui has failed to act with integrity while carrying out his licensed employment with Abraaj Capital Limited.
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