DFSA fines former CFO of listed REIT for being knowingly concerned in misleading statements and accounting breaches

The Dubai Financial Services Authority (DFSA) has today published a Decision Notice imposing a penalty of USD 33,220 (AED 122,000) on Mr Remi Ishak.

Mr Ishak was the Chief Financial Officer (CFO) of Equitativa (Dubai) Limited (Equitativa) and Emirates REIT (CEIC) PLC (Emirates REIT), a Public Fund and NASDAQ Dubai Listed Fund whose portfolio of properties is composed of commercial, retail and educational assets. Mr Ishak was also an Authorised Individual carrying out the Licensed Functions of Finance Officer and Senior Manager at Equitativa.

In December 2021, the DFSA published its Decision Notice penalising Equitativa for making misleading statements in relation to the Emirates REIT, not preparing financial statements in accordance with International Financial Reporting Standards (IFRS), and failing to take reasonable steps to ensure that relevant information was reported to its auditors.  The DFSA found that Mr Ishak was knowingly concerned in those breaches. 

Specifically in 2018, as the CFO, Mr Ishak made public statements in relation to a school, that had been vacated by the previous tenant with unpaid rent of over AED 9 million, to the effect that a new tenant had been secured to start in the following academic year (i.e., September 2019).  Those public statements implied that the asset’s revenue and valuation would be unaffected and therefore were misleading since there was no binding offer or agreement in place at the time.        

Mr Ishak also signed off on Emirates REIT’s 2018 half-year financial statements without including a provision for the unpaid rent or any impairment of the asset value for the school as required under IFRS, notwithstanding clear indicators that this was the case. Instead, the asset was reported as 100% occupied on the assumption that there was a long-term tenant in place.  As CFO, Mr Ishak was responsible for overseeing the management and coordination of all financial reporting (including the maintenance of internal controls at Equitativa that ensured all relevant information was conveyed to the auditors of EREIT) and ensuring that Equitativa fulfilled its regulatory duties. In this regard. Mr Ishak failed to take reasonable steps to ensure that Equitativa or its employees reported certain information, relevant to the recoverability of the asset, to Emirates REIT’s external auditors for their review of the 2018 half-year financial statements. 

Consequently, the DFSA also found that Mr Ishak breached Principle 2 of its Principles for Authorised Individuals by failing to act with due skill, care, and diligence when carrying out his role as a Finance Officer at Equitativa in relation to the matters as set out in the Decision Notice. 

Ian Johnston, Chief Executive of the DFSA, said: “CFOs of Public Funds and Listed Funds play a critical role in ensuring that financial statements and any associated public announcements are fair and accurate.  CFOs need to ensure that all the facts relevant to the preparation of financial statement are provided to external auditors in a full and transparent manner.”