- Fintech to pay $313,500 penalties
- Had offered stake in its parent
- Failed to supply approved prospectus
Investment platform Sarwa Digital Wealth has been fined AED1,151,000 ($313,500) by regulators in Dubai and Abu Dhabi for offering shares and securities without an approved prospectus.
The Dubai Financial Services Authority (DFSA) said on Tuesday that it had imposed a penalty of AED701,815 on the fintech.
On the same day, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market announced that it had fined the company’s ADGM operation AED449,881.
Sarwa, an app that provides investment management largely based on algorithms, declined to comment when contacted by AGBI.
The fines were levied after the fintech offered clients an opportunity to invest in its parent company in April and May 2023.
Its first message about the sale was sent to almost 100,000 customers, the DFSA said. About 150 Sarwa users expressed an interest and $2 million in potential investments was collected.
The company halted the sale after the regulators warned that it could break their rules. All the money was returned to customers.
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The FRSA and DFSA both said Sarwa’s prompt response had led to a reduction in the fine they imposed, as had the involvement of the other regulator.
The Dubai and Abu Dhabi agencies co-ordinated their investigations, they added, conducting joint interviews and sharing evidence.
Abu Dhabi’s FRSA has ordered Sarwa to launch an independent review of its governance.
It previously fined the company AED36,000 for a 2022 breach of its financial reporting rules.
The DFSA statement also pointed out that the company had withheld critical financial information that should have been in an approved prospectus.
Instead, it provided positive financial metrics that misled potential investors regarding the health and performance of the Dubai and Abu Dhabi operations.
The platform, which was founded by Mark Chahwan, Jad Sayegh and Nadine Mezher in 2017, had more than 180,000 registered users by the first quarter of 2023.
It announced a net profit margin of 33 percent for the first quarter of 2024. Revenue was up 124 percent on Q4 2023, the company said.