An online investment and trading platform has been fined nearly Dh450,000 for offering securities without an approved prospectus, Abu Dhabi authorities announced on Tuesday.
Sarwa Digital Wealth has been ordered to pay a Dh449,881 penalty after the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) found that it violated regulations.
Prior to making an offer in the ADGM, a company should get a prospectus approved by the FSRA. A prospectus is a document that shows all necessary data that can help an investor make an informed decision.
An FSRA investigation found that Sarwa — in and around April and May 2023 — offered an opportunity to invest in securities related to a number of shares of its parent entity to its network of clients and registered users of its application. It did this by:
- Distributing communications to a significant number of potential investors containing information on the terms of the offer and the securities offered, to enable investors to buy or subscribe to the offer
- Maintaining a website publishing further information in relation to the offer
- Engaging in further communication with potential investors to provide additional information and to facilitate subscriptions
Without a prospectus, potential investors to whom Sarwa made the offer were not provided with sufficient information about the investment. Some 144 investors subscribed to the offer and committed approximately $2.1 million, a statement said.
Besides the penalty, the FSRA has also ordered Sarwa to review its governance arrangements.
Firm takes action
Acknowledging the violation, Sarwa reportedly reversed all committed subscriptions upon being informed of the FSRA’s concerns.
The company also agreed to settle penalty immediately, so it was able to avail of a discount. A further reduction was given in recognition of the regulatory action taken by the Dubai Financial Services Authority (DFSA).
The FSRA’s investigation was conducted in close coordination with the DFSA, which investigated a related licensed firm in the Dubai International Financial Centre.
“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,” said Emmanuel Givanakis, chief executive officer of the FSRA.