Dubai regulator says it learnt its lessons from Abraaj collapse

Pedro Gonçalves
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Dubai regulator says it learnt its lessons from Abraaj collapse

Dubai's financial services regulator claims it took appropriate action regarding the supervision of now collapsed private equity company Abraaj Group but admits it needs better communication and scrutiny of risky companies, according to the regulator's chief executive.

"I think the actions we took were appropriate, but one of our lessons learnt is to better communicate our actions to the market, to address public concerns," Bryan Stirewalt, chief executive of the Dubai Financial Services Authority, told The National.

The DFSA is preparing to introduce tougher policies with regard to corporate transparency and risk management.

There are a lot of firms who now have a communications strategy to their stakeholders that explains exactly how they are not like Abraaj"

"There are a lot of firms who now have a communications strategy to their stakeholders that explains exactly how they are not like Abraaj," he added. "If this results in overall strengthening of systems, controls and governance in the region or globally, that's a positive outcome."

The collapse of Abraaj Group, the world's largest insolvent private equity firm, has exposed a gap in oversight of the global financial system.

Abraaj created companies and funds in jurisdictions including Dubai, the Cayman Islands, London, Singapore, Mauritius and the US. But no single regulator was responsible for supervising the entire firm. This allowed regulators to absolve themselves of blame for not identifying any mismanagement.

Abraaj, once the biggest buyout company in the Middle East with about $14 billion (Dh15.41bn) of assets under management, started to unravel last February, when four investors in its $1bn healthcare fund alleged mismanagement of funds and hired consultants to investigate the matter.

The company is currently in provisional liquidation. Global corporate services provider Deloitte, which is overseeing the break-up of embattled Abraaj Group's private-equity unit, is asking the investors in the Dubai company for additional legal protection and money, according to The Wall Street Journal.

As the scandal continues, Dubai International Financial Centre (DIFC) CEO Arif Amiri has said that the implosion of the developing world's largest private equity fund last year has had no real effect on the financial hub's business and that it continues to expect to grow in the coming years.

"In terms of numbers, no. Our numbers are extremely good," Amiri told Arabian Business when asked about any impact The Abraaj Group's collapse last year might have had.

When asked if there was an impact related to perception or the prestige of DIFC, Amiri said, "Look, things happen everywhere, including in London or the rest of the Europe. And we're a global financial hub."

The largest financial hub across the Middle East, Africa and South Asia, DIFC's in its latest press call announced seeing 437 new business registrations in 2018, the largest in its history, growing its roster of active registered companies to 2,137.