The Dubai Financial Services Authority has banned the Abdullah brothers from executive positions at Damas and dissolved the board.
DFSA bans, fines Abdullah brothers
The Dubai Financial Services Authority (DFSA) today took its most aggressive action since it was founded by banning the Abdullah brothers from executive roles at Damas International, and dissolving the board of directors after an investigation into unauthorised transactions. Damas as a company was fined Dh2,569,000, of which Dh367,000 is due within 30 days. The rest of the fine has been suspended, but will be payable if Damas fails to comply with the agreement.
The DFSA said the brothers, Tawhid, Tawfique and Tamjid Abdullah, would have to resign any executive positions at their family company and pay a combined financial penalty of Dh11,010,000 for violating DFSA laws. They are required to pay Dh1,101,000 of the fine within 180 days, with the rest suspended unless they break any of the agreements with the DFSA. "We want to convey a message to the market: you have to meet those standards that are internationally accepted," said Paul Koster, the chief executive of the DFSA, which was founded in 2004. "You will be accountable for it."
Damas International, the region's largest gold and jewellery retailer, has been at the centre of investigations by the DFSA, the Dubai International Financial Centre Registrar of Companies and PricewaterhouseCoopers since last October, when Tawhid Abdullah, the chief executive, revealed there had been US$165 million (Dh605.9m) worth of transactions, which had not been authorised by the company. The money was used for at least 50 investments, mostly in property.
Tawfique Abdullah, the chairman of Damas, has agreed to be banned from a director's role at any DIFC company for 10 years, while Tamjid and Tawhid are banned for five years. The brothers have agreed to disclose any assets with a value of more than Dh300,000 and grant Damas a legal mortgage over their assets. The DFSA also said that each non-executive board member must resign within 30 days and an extraordinary meeting of shareholders would be convened to elect a new board.
Damas will have to hire a compliance officer and company secretary, and appoint a new auditor. Mr Koster said the brothers had clearly violated DFSA laws against making transactions with company money without authorisation from the shareholders. "You should not use money from the company for personal use unless you fully disclose and have agreements from the shareholders," he said. The board members had failed to perform their oversight responsibilities at the company, Mr Koster said, adding the audit committee did not convene any meeting other than when the year-end results were presented by the auditor.
"That is not the way we feel it should be done," he said. "They should have been more alert." Damas's shares were suspended from trading on NASDAQ Dubai this morning, pending the DFSA announcement. The stock has lost about a quarter of its value so far this year. @Email:email@example.com firstname.lastname@example.org