Dubai Financial Services AuthorityDubai Financial Services Authority

DFSADFSA

The DFSADFSA's action follows a detailed investigation into the business operations of GFS Investments which determined:

• that GFS Investments has traded outside the permitted limits of its DFSADFSA licence;

• that the trading included repeated instances of mis-selling, including transactions that were unfair, unsuitable and not made in the best interests of customers;

• that, in some cases, the mis-selling was accompanied by deliberate and dishonest conduct; and

• that the Licensed Directors of GFS Investments failed to exercise the required level of governance and supervision of their relevant executives and employees.

As a consequence of these findings, the DFSADFSA has imposed a range of sanctions including:

• the banning from the Dubai International Financial Centre ("DIFC") of relevant individuals for 5 years;

• the imposition of fines; and

• the compensation of relevant clients for financial losses suffered as a result of the misconduct.

The DFSADFSA's Chief Executive, Mr. David Knott, said:

"The DFSADFSA has an important role to maintain business standards within the DIFC. The vast majority of our licensed firms take their governance and compliance responsibilities very seriously and this has helped the DIFC to quickly establish a reputation for excellence. We are, therefore, disappointed by the unacceptable conduct of GFS Investments and our response should send a clear message that we will deal firmly with any firm that fails to maintain the standards required within this Centre."

"The DFSADFSA's intervention will also ensure that all investors who suffered financial loss as a result of the misconduct will be fully compensated at a cost to GFS Investments of approximately USD 502,000 (AED 1,842,340). This is an excellent outcome for the investors" said Mr. Knott.

Details of the enforcement sanctions are as follows:

Fined USD 5000 (AED 18,350)

1. Alfred Tang
Licensed Director and Finance Officer

The DFSADFSA acknowledges that Mr. Tang has confirmed he will resign as Licensed Director and Finance Officer of GFS Investments and has confirmed his intention not to perform any function in connection with the provision of Financial Services or Ancillary Services in or from the DIFC or to re-apply for Authorised Individual Status in the DIFC in the future.

Banned* for 5 years and fined USD 5,000 (AED 18,350):

2. Mike Leung (also known as Tsz Fung David Ferreira Leung)
Senior Executive Officer

3. Mervyn Francis
Compliance and Anti-Money Laundering Officer

4. Stephen Cheung Ga Kin
Non-executive Licensed Director

5. Issa Mohammed Saif Al Rawahi
Non-executive Licensed Director

Banned* for 5 years and fined between USD 3,000 and USD 4,000 (AED 11,010 to AED 14,680):

6. Asad Abu Samra
Employee

7. Alaaeddin Farhan
Employee

8. Vimal Viresh Gomes
Employee

9. Moutaz Saab
Employee

* All bans prevent the individuals from performing any function in or in connection with the provision of financial services or ancillary services in or from the DIFC during the designated period.

Compensation Payments

Compensation payments by GFS Investments to customers who suffered losses resulting from the misconduct are to be finalised to the satisfaction of the DFSADFSA by no later than 30 November 2008. The former Finance Officer of GFS Investments, Mr. Alfred Tang has undertaken to ensure that the amount of approximately USD 502,000 (AED 1,842,340) is made available for the payment of compensation by GFS Investments.

GFS Investments

GFS Investments has been fined USD 25,000 (AED 91,750). The business operations of GFS Investments have been suspended and may only be resumed upon DFSADFSA's satisfaction that new management has installed proper governance and risk management systems.

Enforceable Undertakings

All of the above sanctions have been recorded in enforceable undertakings made with the DFSADFSA by GFS Investments and its relevant officers and employees. Copies are available on the DFSADFSA's website.

Information Regarding GFS Investments and the DFSADFSA Investigation

GFS Investments is licensed to provide an on-line foreign exchange and commodities trading facility to clients who meet DFSADFSA's required eligibility standards (professional investors). The trading platform is operated by the US parent company of GFS Investments. Eligible professional investors gain direct access to that platform via unique login and password so that they may trade on their own account. Under its licence, GFS Investments is not itself permitted to conduct the trades, but receives commissions for each trade carried out by its customers. The business is therefore, suitable for professional investors who have relevant market experience, but unsuitable for retail investors who may have little or no experience of foreign exchange and commodities markets.

The DFSADFSA commenced its investigation some months ago as a result of customer complaints. Those investigations determined that GFS Investments had operated outside its authorisation by conducting business with non-eligible retail clients and by itself carrying out trading in the names of clients. The DFSADFSA took immediate steps to ensure that no further unlawful trading took place.

Subsequent investigation disclosed that the relevant employees of GFS Investments engaged in conduct designed to misrepresent the eligibility of clients, including the falsification of client particulars.

The unauthorised trading carried out by the relevant employees was frequently unfair and unsuitable to the interests of the clients, motivated more by a desire to maximize commissions than to profit the clients. Most clients suffered financial losses as a result of this misconduct.

-Ends-

The Dubai Financial Services AuthorityDubai Financial Services Authority (DFSADFSA) 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 DFSADFSA'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 DFSADFSA 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.

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

© Press Release 2008 from Dubai Financial Services Authority

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