Why did Abu Dhabi Global Market regulator impose a $122,500 fine on Sarwa?

The penalty arises from Sarwa’s contravention of FSRA regulations by offering securities without an approved prospectus.

Its violations included:

• Sarwa, an FSRA-licenced firm, distributed offers to invest in its parent entity’s shares without providing a prospectus approved by the FSRA.
• The communications involved were sent to a broad network of clients and registered app users around April and May 2023.
• The offers included detailed terms and facilitated investor subscriptions via a website and direct communications.
• This oversight resulted in 144 investors committing approximately $2.1m without adequate information to make informed decisions.

Regulatory actions against Sarwa

FSRA’s regulations necessitate an approved prospectus to protect investors by ensuring they have all necessary information before investing. Sarwa cooperated with FSRA, reversing all committed subscriptions promptly upon notification of the regulatory concerns, as per the statement issued by the regulator.

Additionally, the regulator said the probe was closely coordinated between the FSRA and the Dubai Financial Services Authority (DFSA).

Emmanuel Givanakis, CEO of the FSRA, emphasised the importance of investor protection and maintaining high regulatory standards. “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.”

Givanakis added, “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.”

He praised the collaborative efforts between UAE regulators to safeguard the financial ecosystem and investor interests.

Due to their cooperation and prompt settlement FSRA said Sarwa received a discount on the financial penalty. An independent review of Sarwa’s governance arrangements has been mandated by the FSRA as well.

This enforcement action underscores ADGM’s commitment to stringent regulatory practices and the importance of thorough investor information and protection.