The Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) have taken dual action to penalise Sarwa Digital Wealth (Sarwa DIFC) and Sarwa Digital Wealth (Capital) Ltd. (Sarwa ADGM).
Sarwa DIFC was fined Dh701,815 ($191,100) by DFSA for offering shares of Sarwa Digital Wealth (BVI) Ltd. for sale without an approved prospectus, in breach of the Markets Law.
At the same time, Sarwa ADGM, an FSRA-licensed firm in ADGM received a Dh449,881 ($122,500) fine by FSRA for making a public offer of shares on ADGM without an approved prospectus. The FSRA has also imposed a requirement on Sarwa to undertake an independent review of its governance arrangements.
The first email offering the sale of Sarwa Digital Wealth (BVI) Ltd. shares was sent to almost 100,000 users in and around April and May 2023. The email resulted in $2 million in commitments from over 144 investors, a DFSA statement said.
The DFSA also found that Sarwa DIFC withheld financial information and provided positive metrics that “gave potential investors a misleading impression about the financial performance and position of Sarwa DIFC and Sarwa ADGM”.
The DFSA penalty was reduced from the original amount of Dh1.45 million ($390,000 ), due to Sarwa’s quick action to halt the share sale and arrange for the prompt return of all monies to the investors once notified of the breach. The amount was further discounted as a result of the fine imposed by FSRA on a related Sarwa entity.
The FSRA penalty was also discounted on similar grounds, although the entity did not reveal the original amount.
“Protecting retail investors is a key priority for the DFSA and the requirement to issue a DFSA Approved Prospectus is there to do exactly that,” said Ian Johnston, CEO of the DFSA. “I am also very pleased to see the effectiveness of the cooperation between the DFSA and the FSRA of ADGM.”
Emmanuel Givanakis, CEO of the FSRA added, “This enforcement action demonstrates the FSRA’s robust regulatory approach to its regulatory framework, ensuring investor protection is of paramount importance and making sure all regulated entities maintain high standards of conduct.
“More importantly, this is also a matter that demonstrates the strong collaborative approach between UAE Regulators through cooperating and sharing information in parallel investigations, thereby safeguarding the UAE’s financial ecosystem and protecting its investors.”
Sarwa is a UAE-based fintech, named the “fastest growing investment and personal finance platform in the MENA region”. The company claims to “take the stress out of investing” by matching individual investors with personalised portfolios of diversified, low-cost index funds and using automated rebalancing to keep the investments on track.
The DFSA and FSRA worked together to ensure the efficiency of the investigations. They made communications with Sarwa, as well as carried out joint interviews with Sarwa staff and others, and shared intelligence and findings.