Monday, Sep 17, 2012
DUBAI (Zawya Dow Jones)--Arqaam Capital and the international accountancy firm Ernst & Young have agreed to pay fines of $50,000 apiece to settle a case brought by the regulator of the Dubai international financial center over breaches of its rules in the way Arqaam valued eight artworks in its 2009 financial statements.
The Dubai Financial Services Authority, the financial center regulator, reached the settlement Sunday night with Arqaam and Ernst & Young on the eve of a public hearing before the center's Financial Markets Tribunal. In addition to the fines, a reduction from the $75,000 the DFSA initially sought, Arqaam has agreed to restate its 2009 accounts within 28 days, according to the text of a settlement agreement reviewed by Zawya Dow Jones.
Both Arqaam and Ernst & Young agreed that they had breached DFSA rules, the settlement says.
The DFSA had alleged that Arqaam and its auditors Ernst & Young had contravened the DFSA regulations and international accounting standards in the way Arqaam valued eight artworks by the contemporary Iranian artist Farhad Moshiri in its 2009 accounts. Arqaam had commissioned the artworks for $200,000 in 2007, but valued them at $2.45 million in the accounts. The DFSA was seeking a restatement of Arqaam's 2009 accounts which it said had overstated operating income and understated the loss for the year.
Arqaam and Ernst & Young contested the allegations, which led to the tribunal hearing.
In a statement issued Monday, Arqaam said the settlement involved various conessions by the DFSA, including the reduction in the fines. While Arqaam restated its 2009 accounts and the notes to its 2010 accounts, the agreed settlement "confirms that there was no mis-statement of Arqaam's income or losses and will not affect subsequent years," the Arqaam statement said.
"Arqaam's balance sheet, income statement and cash flow numbers in its 2009 accounts remain the same (save for a correction to the netting off entries in the cash flow) and the notes and disclosures thereon will be improved," the statement said. On that basis, Ernst & Young has agreed to provide an unqualified audit for the accounts, the statement added.
Arqaam stressed that there was no allegation of dishonesty by the DFSA "or that the valuation was not genuine, or that anyone suffered loss."
Arqaam is an emerging markets investment bank that provides services including cash equity, asset management, credit trading, custody and research. It is owned privately by wealthy Arab Gulf investors.
Ernst & Young and the DFSA could not be reached for comment.
-Write to Asa Fitch asa.fitch@dowjones.com
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(END) Dow Jones Newswires
17-09-12 0918GMT
