7 September 2008 — DFSA Enforces Sanctions Against GFS Investments
Dubai, UAE, 7 September, 2008: The Dubai Financial Services Authority ("DFSA") today announced the imposition of enforcement sanctions against GFS Investments (Middle East) Limited ("GFS Investments").
The DFSA's action follows a detailed investigation into the business operations of GFS Investments which determined:
As a consequence of these findings, the DFSA has imposed a range of sanctions including:
The DFSA's Chief Executive, Mr. David Knott, said:
"The DFSA has an important role to maintain business standards within the DIFC. The vast majority of our licensed firms take their governance and compliance responsibilities very seriously and this has helped the DIFC to quickly establish a reputation for excellence. We are, therefore, 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."
"The DFSA's intervention will also ensure that all investors who suffered financial loss as a result of the misconduct will be fully compensated at a cost to GFS Investments of approximately USD 502,000 (AED 1,842,340). This is an excellent outcome for the investors" said Mr. Knott.
Details of the enforcement sanctions are as follows:
Fined USD 5,000 (AED 18,350)
Licensed Director and Finance Officer
The DFSA acknowledges that the Authorised Individual has confirmed he will resign as Licensed Director and Finance Officer of GFS Investments and has confirmed his intention not to perform any function in connection with the provision of Financial Services or Ancillary Services in or from the DIFC or to re-apply for Authorised Individual Status in the DIFC in the future.
Banned* for 5 years and fined USD 5,000 (AED 18,350):
Senior Executive Officer
Compliance and Anti-Money Laundering Officer
Non-executive Licensed Director
Non-executive Licensed Director
Banned* for 5 years and fined between USD 3,000 and USD 4,000 (AED 11,010 to AED 14,680):
* All bans prevent the individuals from performing any function in or in connection with the provision of financial services or ancillary services in or from the DIFC during the designated period.
Compensation payments by GFS Investments to customers who suffered losses resulting from the misconduct are to be finalised to the satisfaction of the DFSA by no later than 30 November 2008. The former Finance Officer of GFS Investments, an Authorised Individual has undertaken to ensure that the amount of approximately USD 502,000 (AED 1,842,340) is made available for the payment of compensation by GFS Investments.
GFS Investments has been fined USD 25,000 (AED 91,750). The business operations of GFS Investments have been suspended and may only be resumed upon DFSA's satisfaction that new management has installed proper governance and risk management systems.
All of the above sanctions have been recorded in enforceable undertakings made with the DFSA by GFS Investments and its relevant officers and employees. Copies are available on the DFSA's website.
Information Regarding GFS Investments and the DFSA Investigation
GFS Investments is licensed to provide an on-line foreign exchange and commodities trading facility to clients who meet DFSA's required eligibility standards (professional investors). The trading platform is operated by the US parent company of GFS Investments. Eligible professional investors gain direct access to that platform via unique login and password so that they may trade on their own account. Under its license, GFS Investments is not itself permitted to conduct the trades, but receives commissions for each trade carried out by its customers. The business is therefore, suitable for professional investors who have relevant market experience, but unsuitable for retail investors who may have little or no experience of foreign exchange and commodities markets.
The DFSA commenced its investigation some months ago as a result of customer complaints. Those investigations determined that GFS Investments had operated outside its authorisation by conducting business with non-eligible retail clients and by itself carrying out trading in the names of clients. The DFSA took immediate steps to ensure that no further unlawful trading took place.
Subsequent investigation disclosed that the relevant employees of GFS Investments engaged in conduct designed to misrepresent the eligibility of clients, including the falsification of client particulars.
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 maximize commissions than to profit the clients. Most clients suffered financial losses as a result of this misconduct.
For further information please contact:
Ms. Angharad Irving-Jones
Manager, Communications and Strategic Planning
Dubai Financial Services Authority
Level 13, The Gate
Tel: +971 (0)4 362 1661
Fax: +971 (0)4 362 0801
The Dubai Financial Services Authority (DFSA) is the sole independent regulator of all financial and ancillary services conducted through the Dubai International Financial Centre (DIFC), a purpose-built financial free zone in Dubai. The DFSA's regulatory mandate covers asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange and an international commodities derivatives exchange.
David Knott was appointed Chief Executive of the DFSA on 1 June, 2005. He is a former Chairman of the Australian Securities and Investments Commission (ASIC) and was Chairman of the Technical Committee of the International Organisation of Securities Commissions (IOSCO). Other positions previously held by him include COO of the Australian Prudential Regulation Authority; CEO of Commonwealth Funds Management; CEO of the Australian Financial Institutions Commission; and Director of the Australian Crime Commission.