DIFC property deals questioned

A former high-level executive of the Dubai Financial Services Authority (DFSA) has joined ex-chairman, Ian Hay Davison, in speaking out about the actions of the regulatory body.

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By  Rhys Jones Published  October 9, 2005

Just days after Hay Davison released a damning account of his time at the DFSA, another past boss at the body has hit out at “insider” property deals, which he claims threatens to tarnish its image. Speaking to Arabian Business, the former high-ranking official said: “We were never aware what was going on in terms of the actual land tenders, but there was a perception that there was a lot of insider dealing going on. “We had no knowledge whether these rumours were true, false or indifferent, but it didn’t matter because it is all about perception and reputation in financial services, but no-one did anything about it,” the source added. Hay Davison and former chief regulator Philip Thorpe were both controversially dismissed from their posts in June 2004. Neither has since given any official account of the events surrounding their respective departures. But in a recently released article in EuroMoney magazine Hay Davison claimed he met with Anis Al Jallaf, the chairman of the DIFC in Rome in 2003 to explain to him that a conflict of interest was likely to arise over the awarding of DIFC land. Al Jallaf is also the chairman of Union Properties, one of the UAE’s biggest development firms. “I particularly emphasised to [Al Jallaf] the difficulties with his own position as chairman of one of the largest property developers in Dubai, a company that would certainly wish to apply to develop a site in the DIFC,” Hay Davison wrote. “I pointed out that, because he could not place himself in the position of appearing to grant himself a licence to develop a site, he should proceed urgently to establish a separate land board with an independent chairman,” he added. This became known to the media and the then chief executive of the DIFC, Naser Nabulsi’s reaction was “a frantic search for whoever had leaked the information”, wrote Hay Davison. “Nabulsi’s eye fell on Phillip Thorpe (the former chief executive), who was certainly not responsible.” The former DIFC source told Arabian Business “even if everything regarding the property deals had been 100% above board, we were saying ‘if it’s looking bad — fix it’ but that didn’t happen.” The source added: “I think whether it is true or not was proved by what happened subsequently, which was a lot of the deals were undone and the land was taken back by the executive office. This suggests that it wasn’t just a perception problem.” Hay Davison wanted a principal feature of the FSA to be the unitary regulator, which would be a highly respected, internationally renowned individual having substantial experience in the regulation of financial services companies and global financial markets. “The international stature of the regulator is a critical element in the inception of the DIFC, as the regulator will play an important role in establishing the credibility of the DIFC in the global financial community,” Hay Davison wrote. DIFC is under the spotlight due to the opening of Dubai International Financial Exchange (DIFX) late last month and much of its success depends on how it is regulated. However, the former high-ranking DIFC official does not believe the culture has necessarily changed within the centre, despite the fact that the DFSA is now a fully independent statutory authority. “The question is can you really make a culture change by putting some more words on a piece of paper? Do you really get a culture change by changing the legislation?” the source said. “In the case of Dubai, there’s a lot of ingrained behaviour traits and I think you have to look and say ‘has there been a fundamental change in the way Dubai does its business?’” he added.

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