Regulator of Dubai's financial centre stresses "renewed emphasis" on governance post-Abraaj collapse

DFSA CEO Bryan Stirewalt says regulator will look at "possibly changing" governance rules if Abraaj investigations reveal any weaknesses

  
DIFC district in Dubai. Image used for illustrative purpose.

DIFC district in Dubai. Image used for illustrative purpose.

DIFC/Handout via Thomson Reuters Zawya

The CEO of the Dubai Financial Services Authority (DFSA) has said that it will look at “possibly changing” corporate governance rules following the collapse of the Dubai-based private equity group Abraaj last year.

Speaking to Zawya in an interview on the sidelines of the MENA Regulatory Summit in Dubai last week, DFSA CEO Bryan Stirewalt said, “We probably have a renewed emphasis on corporate governance... corporate governance of that particular firm and to see if there's any lateral effects that could have”.

“I will have to say that the collapse of Abraaj was an Abraaj Group issue. This was not a MENA issue, it wasn't a GCC issue. And it's not a private equity issue,” Stirewalt said.

“This was a problem with one firm that caused this. There may, or may not, be lateral damage to other firms in that respect. But it appears certain that there were corporate governance weaknesses at almost every level and every facet that we will have to take a look at in the future.”

The DFSA is responsible for regulating companies with a presence within the Dubai International Financial Centre (DIFC), the emirate’s financial free zone.  Stirewalt, who was appointed as CEO of the DFSA in September last year after an eight-year stint as managing director of its supervisory arm, reiterated comments made in the Authority’s recently-published business plan that its job as regulator was only to oversee the entity that was based within the DIFC.

“The holding company in the fund, the fund manager, and the funds were all in Cayman Islands, so they were not in the DIFC,” he said. “We had a subsidiary of the funds manager, which had a limited licence and that's what we dealt with - what we had authorised to happen in the DIFC.

“If there was unauthorised activity going on in the DIFC - and our investigations will bear that out eventually - then we will take action based on that fact,” he added.

The Abraaj Group was founded in 2002 by businessman Arif Naqvi and it grew to become one of the biggest private equity players in the emerging markets space, with over $13 billion of assets under management. However, reports emerged in the Wall Street Journal and the New York Times in February last year that some investors in a $1 billion healthcare fund had raised concerns about the firm’s handling of funds. A report by Deloitte in June last year subsequently stated that investors’ funds had been commingled after the firm faced cash shortages.  On June 18, 2018, joint liquidators from PwC and Deloitte were appointed to Cayman Islands-registered Abraaj Holdings and Abraaj Investment Management Ltd, respectively.

Liquidators have been since working on asset sales and although news emerged in December that fund manager Actis was due to take over some emerging market funds, the Wall Street Journal reported on Friday that Deloitte was seeking legal protection from prosecution ahead of potential asset sales. Deloitte declined to comment when contacted by Zawya.

The full interview with Bryan Stirewalt can be found here.

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

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