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24 September 2008 — DFSA Sanctions Shuaa Capital for Market Abuse
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Sep 24 2008 onwards

24 September 2008 — DFSA Sanctions Shuaa Capital for Market Abuse



Dubai, UAE, 24 September, 2008: The Dubai Financial Services Authority ("DFSA") today announced enforcement sanctions against Shuaa Capital relating to alleged market manipulation earlier this year.

The sanctions include financial penalties totaling USD 950,000 (AED 3,486,350) together with other remedial actions agreed to by Shuaa Capital pursuant to an Enforceable Undertaking made with the DFSA.

Background:

The announcement follows an extensive and complex investigation by the DFSA into suspicious trading in the shares of DP World Limited on the Dubai International Financial Exchange (DIFX) at the end of March 2008. The trading was carried out by Shuaa Capital International Limited (a firm licensed by the DFSA) at the direction of its parent firm Shuaa Capital P.S.C. (collectively called Shuaa Capital). The trading was referred to the DFSA by the DIFX in April 2008.

The DFSA has determined that Shuaa Capital intentionally set about to raise the closing price of DP World shares on 31 March 2008 so that it could mark up the book value of its proprietary portfolio in those shares for accounting purposes. It did so by standing in the market during the closing minutes of trading with bid prices well above those at which DP World shares had been trading in the ordinary course of business. The DFSA has also determined that Shuaa Capital obstructed its investigation.

DFSA's Chief Executive Mr. David Knott, said:

"The manipulation of markets for ulterior motives is a classic form of market abuse that is outlawed in all well regulated exchange traded markets. Such practices run contrary to the maintenance of orderly markets and efficient price discovery in traded securities. In this case Shuaa Capital artificially inflated the price of DP World shares and generated a false market in those shares.

Both the DFSA and the DIFX are totally committed to ensuring that investors on the DIFX can have confidence in the integrity of the market.

The seriousness of this offence was exacerbated by Shuaa Capital's obstruction of the DFSA's investigation. This conduct has prolonged resolution of the investigation and is inconsistent with the standards of behaviour that DFSA expects from regulated firms within the DIFC.

The DFSA emphasises that DP World is entirely blameless in this matter and is not implicated in any part of the misconduct."

The Sanctions:

Shuaa Capital has entered into an Enforceable Undertaking with the DFSA under which it has accepted that it failed to maintain proper risk management controls in relation to the misconduct. It is required by the terms of the Enforceable Undertaking to:

•   Appoint a new Chief Compliance Officer reporting directly to the Chief Executive of Shuaa Capital;
•   Commission and implement the recommendations of an independent compliance and risk review;
•   Undertake training of its relevant staff in the requirements of the laws and regulations applying within the Dubai International Financial Centre (DIFC);
•   Pay to the DFSA a penalty of USD 850,000 (AED 3,119,500) in relation to the alleged market manipulation; and
•   Pay to the DFSA a penalty of USD 100,000 (AED 367,000) in relation to the alleged obstruction of the DFSA's investigation.

Trading Details:

Further details of the transactions investigated by the DFSA follow:

1. At 16:42:40 hours, on 31 March 2008, 2 minutes and 20 seconds before the close of continuous trading on the DIFX, the last traded price of DP World shares on DIFX was USD 0.87 ("the last traded price").
2. During the last 2 minutes and 20 seconds of continuous trading on DIFX, Shuaa Capital entered twelve (12) separate bids to purchase 1,000,000 shares each at prices between USD 0.89 and USD 0.98 per share.
3. By the time continuous trading on the DIFX had closed 2 minutes and 20 seconds later, Shuaa Capital had bought, for its proprietary portfolio, 12,000,000 DP World shares, at prices between USD 0.88 and USD 0.97.
4. In the closing auction period on 31 March 2008 Shuaa Capital purchased for its proprietary portfolio, an additional 3 million DP World shares. The final price of DP World shares at the close of the market on 31 March 2008 was USD 0.95.
5. The price of USD 0.95 per DP World share represented an increase of 9.2% on the last traded price.

Enforceable Undertaking:

A copy of the Enforceable Undertaking between the DFSA and Shuaa Capital is posted on the DFSA website: https://www.dfsa.ae/What-We-Do/ENFORCEMENT#Regulatory-Actions.

- Ends -

For further information please contact:

Ms. Angharad Irving-Jones
Manager, Communications and Strategic Planning
Dubai Financial Services Authority
Level 13, The Gate
Dubai, U.A.E.
Tel: +971 (0)4 362 1661
Fax: +971 (0)4 362 0801
Email: airvingjones@dfsa.ae
www.dfsa.ae

Editor's notes:

The Dubai Financial Services Authority (DFSA) is the sole independent regulator of all financial and ancillary services conducted through the Dubai International Financial Centre (DIFC), a purpose-built financial free zone in Dubai. The DFSA's regulatory mandate covers asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange and an international commodities derivatives exchange.

David Knott was appointed Chief Executive of the DFSA on 1 June, 2005. He is a former Chairman of the Australian Securities and Investments Commission (ASIC) and was Chairman of the Technical Committee of the International Organisation of Securities Commissions (IOSCO). Other positions previously held by him include COO of the Australian Prudential Regulation Authority; CEO of Commonwealth Funds Management; CEO of the Australian Financial Institutions Commission; and Director of the Australian Crime Commission.