DFSA fines reinsurance broker for misleading and deceptive conduct

Government

DFSA fines reinsurance broker for misleading and deceptive conduct

The Dubai Financial Services Authority (DFSA) has imposed a fine of $455,176 (AED 1.67 million) on reinsurance brokerage Ed Broking (MENA) Limited for multiple regulatory breaches, including misleading and deceptive conduct within the Dubai International Financial Centre (DIFC).

The DFSA said the penalty follows findings that the firm committed several contraventions of DFSA legislation in connection with reinsurance placements and client communications.

The firm agreed to settle the case, with the final fine reduced from $575,104 due to the settlement. The total amount includes disgorgement of $175,343 — comprising $148,039 plus $27,304 in interest — and an additional penalty of $279,833.

Different premiums and misleading disclosures

According to the DFSA, the firm provided cedent insurers (original insurers issuing underlying policies) and reinsurers with two different premium figures for the same reinsurance placements.

The regulator found that the broker:

Misled reinsurers about premium deductions and the brokerage commission it earned
Misled a client regarding brokerage earned across 121 placements
Provided inaccurate information about premium deductions on some placements

The misconduct was enabled by the firm’s failure to disclose brokerage commissions to clients and its non-compliance with internal systems and controls. The DFSA said the violations also involved the use of altered documents.

Failures in controls and professional standards

The DFSA further determined that the firm:

Failed to ensure communications with cedent insurers and reinsurers were clear, fair and not misleading
Failed to act with due skill, care and diligence

However, the regulator acknowledged that the firm promptly self-reported the misconduct, conducted an internal investigation, and paid restitution to affected clients where altered documents were used.

DFSA warning to DIFC firms

Alan Linning, Managing Director of Enforcement at the DFSA, said firms operating in DIFC are expected to maintain the highest standards of business conduct.

He said: “The DFSA expects financial services firms within DIFC to uphold the highest standards of conduct in their business dealings. In misleading clients and reinsurers, Ed Broking failed to meet these expectations. The fine reflects the seriousness of the misconduct and serves as a warning against similar behaviour.”

The authority added that it will continue to pursue strict enforcement actions and provide clear regulatory guidance to ensure firms in DIFC comply with regulatory and ethical standards.