DFSA Assists Law Enforcement Agencies in Closing Down Rogue Investment Firm

A rogue Investment company, SMI Private Equity, was closed down this week. The action was as a result of a collaborative investigation by Law Enforcement authorities and the Dubai Financial Services Authority, with liaison from other international Securities agencies. The authorities suspected that SMI had been operating a “boiler room” operation, selling questionable Securities to investors. SMI targeted mostly expatriates living in Europe and the Middle East.

In a “boiler room” operation, a company sells questionable Securities exaggerating their worth and performance. Investors are often misled on the basis of plausible sales techniques in relation to the performance of Securities. Often, investors are told to rely upon the performance that their Investment will increase in one or two years. Some of the Securities offered Related to unregulated companies in the USA. SMI allegedly promised returns to investors ranging from 100 – 700% and more. Some investors complained that they had not received any of the returns promised by SMI.

SMI was formerly known as Stein Morgan International and was blacklisted in 2002 by the Financial Services Authority in the UK. The Employees of SMI formerly operated Stein Morgan International in Kuala Lumpur. Over the last few years, international Securities agencies have received numerous complaints from investors who purchased Securities from SMI. Authorities understand that some of these investors have never received their funds.

In a truly collaborative operation, the Dubai Police, led by Brigadier Khamis Matar Al Mzaina, Director of The General Department of Criminal Investigation, and Younus Yousuf Al Moalem, Head of Anti-Money Laundering and Financial Crimes Section were also assisted by the Central Bank of the UAE, and its Governor, His Excellency Sultan Nasser Al Suwaidi, along with Abdullah Al Turaifi, Chief Executive Officer of Emirates Securities and Commodities Authority (Esca).

Dr Habib Al Mulla, Chairman of the DFSA, said: “The DFSA gave its expertise, assistance, and international contacts to the law enforcement authorities on this occasion, because the activities of SMI would have damaged the reputation of the UAE as an international financial centre, if left unchecked. On this occasion, we were asked to work with other UAE agencies and were happy to provide our expertise to assist in the investigation of SMI. Cases such as these serve as a warning to those who are offered unrealistically high returns. If it appears too good to be true, it probably is.”