x Abu Dhabi, UAEFriday 21 July 2017

DFSA suspends GFS for rules violations

A financial firm in Dubai has been suspended from operating and ordered to pay more than half a million dollars in compensation.

A financial firm in Dubai has been suspended from operating and ordered to pay more than half a million dollars in compensation and fines for violating regulatory rules and deliberately misleading investors. GFS Investments (Middle East) had violated regulations by taking on clients who were not approved under its licence and trading on their accounts without their permission, according to the Dubai Financial Services Authority (DFSA), the regulatory body of Dubai International Financial Centre (DIFC).
GFS, the Dubai subsidiary of the American firm GFS Forex and Futures, began operations in Dubai last summer with a licence to provide online foreign currency and commodities trading to professional investors. DFSA, however, discovered that none of its 37 clients met that criteria and that the company had actively solicited retail investors who had little or no knowledge about currency and commodities markets.
Stephen Glynn, the director and head of enforcement at DFSA, said the company came under investigation last March when the authority received complaints from a retail investor who had invested about US$25,000 (Dh91,750) with GFS. The company had then traded under his account, charged him a commission each time and lost nearly all the money invested, Mr Glynn said. "In the view of DFSA, what GFS had done was very serious," he said. A DFSA statement went further: "The unauthorised trading carried out by the relevant employees was frequently unfair and unsuitable to the interests of the clients, motivated more by a desire to maximise commissions than to profit the clients." David Knott, the DFSA chief executive, said the regulator was "disappointed by the unacceptable conduct of GFS Investments, and our response should send a clear message that we will deal firmly with any firm that fails to maintain the standards required within this centre".
DFSA fined GFS $25,000, the maximum penalty, and ordered it to compensate 17 clients in amounts ranging from $1,100 to about $105,000, which together totalled more than $502,000. DFSA also found that GFS directors had failed to exercise the required level of corporate governance and supervision of their employees. It imposed $5,000 fines on both Alfred Tang, the company's financial officer, and Mike Leung, the senior executive officer. Mr Tang reached an agreement with the DIFC that he would not seek a licence from the centre again.
Mr Leung was banned by the DIFC for five years. Additionally, four other executives and five employees received fines and were suspended for up to five years from working as licensed financial professionals with DIFC-registered companies. GFS is barred from operating again until it has installed employees who meet regulatory approvals and adopted reporting and compliance standards satisfactory to the DFSA. GFS did not return a message requesting comment.
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