June 10, 2018 / 7:43 PM / 7 days ago

UAE regulator examines investor impact as audit of Abraaj exposes flaws

ABU DHABI (Reuters) - United Arab Emirates’ top securities regulator is working with the Dubai Financial Services Authority (DFSA) to ascertain whether local investors have been affected by the financial woes of private equity firm Abraaj.

The regulator’s first public statement about possible scrutiny of Abraaj comes as concerns grow over the financial state of the Dubai-based firm, whose funds have also attracted money from UAE institutions and family offices.

“We are coordinating with DFSA to see where national investors are affected,” Obaid al Zaabi, chief executive of the UAE’s Securities & Commodities Authority, told reporters late on Sunday.

“Once we get tangible evidence, we can move forward in coordination with local and federal governments.”

The Middle East and North Africa’s largest private equity group, Abraaj has been grappling with the fallout from a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), over how it used their money in a $1 billion healthcare fund.

Abraaj, which has denied any wrongdoing, declined to comment on discussions that the DFSA may be having with other parties, but said in an email to Reuters that it continues to actively engage with the Dubai financial regulator.

“The regulator is fully apprised of key developments taking place at the firm,” it said.

DFSA, the financial regulator of Dubai’s financial free zone, said in an email on Monday: “DFSA is aware of various matters involving Abraaj Group, which has a regulated entity in the DIFC (Dubai International Financial Centre), and relevant matters are under our attention.”

It said it cannot comment further on circumstances of individual firms.

‘COMMINGLING’ OF MONEY

The four investors have hired Ankura Consulting to look into how Abraaj used their money in the healthcare fund.

Separately, Abraaj hired Deloitte to examine its business, including the healthcare fund, after investors questioned an earlier review by KPMG.

Summary findings of Deloitte’s review, seen by Reuters, show that liquidity problems at Abraaj led to a “commingling” of Abraaj’s investor money with its own money in relation to the healthcare fund and its fourth buyout fund.

However there was no evidence of embezzlement or misappropriation, according to the findings, which were shared by Deloitte at a meeting between Abraaj and its creditors on June 4.

The findings did highlight a lack of “adequate governance” and “overall weakness in the control framework”.

When asked for comment, Deloitte said it does not comment on any client engagements or related matters. Abraaj declined to comment, saying the content of the Deloitte review is confidential.

According to the findings, all the money of the healthcare fund had been either invested, used for management fees and other fund expenses, or returned to investors.

But the firm’s fund management business, Abraaj Investment Management Limited (AIML), has yet to pay back $94.6 million to the buyout fund, money that was moved from the fourth fund to AIML and is now accounted as a receivable, the document showed.

According to the summary finding, Deloitte’s final report on the healthcare fund has been submitted to the DFSA.

Reporting by Stanley Carvalho, Saeed Azhar and Davide Barbuscia; editing by Ghaida Ghantous and Jason Neely

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