The Dubai
Financial Services Authority (DFSA) banned Kulvir Virk from working in
financial services within the Dubai International Financial Centre (DIFC),
marking the second time in 18 months that a regulator has prohibited the former
SVS Securities chief executive from the industry.
The DFSA
moved quickly after learning in November 2024 that Virk had become involved
with a regulated firm in the DIFC despite being barred by the UK’s Financial
Conduct Authority (FCA) five
months earlier.
The
restriction took effect immediately on December 9, preventing Virk from
performing any function connected to financial services in or from the Dubai
financial hub.
The UK’s Scandal Involving
SVS Securities Triggers International Action
Virk’s
troubles stem from his role at SVS Securities, a UK fund manager that collapsed
in 2019 after regulators discovered it had funneled £69.1 million of
customer pension funds into high-risk bonds. The FCA found that Virk designed a
business model that prioritized company profits through undisclosed commissions
reaching 12% of customer investments.
The bonds,
many operated by SVS directors and Virk’s business associates, later defaulted.
Customers are expected to recover only 20-35% of their investments in some
cases. A
total of 879 customers, most of whom had transferred existing pension
plans, lost substantial retirement savings.
“The
DFSA’s role as the regulator of financial services in the DIFC includes
ensuring that there are high standards of integrity and fair dealing,”
Alan Linning, Head of Enforcement at the DFSA, said in a statement.
“We
will continue to take action to ensure that those carrying out regulated
functions in our market are appropriate and that these high standards are
maintained.”
Complex Web of Conflicts
The FCA’s
investigation revealed Virk repeatedly ignored warnings about conflicts of
interest and regulatory compliance while running SVS between 2016 and 2019. He
pressed ahead with a 10% markdown on customer valuations despite being told it
wasn’t fair to clients, generating £359,800 in income for SVS at customer
expense.
Virk also
arranged for SVS to take a £750,000 advance from Innovation Capital Finance
Limited before conducting any due diligence on the investment, at a time when
the FCA had already raised concerns about inadequate vetting of fixed income
products. SVS had entered into an agreement to invest customer funds in ICFL
bonds in return for £1 million in commission.
The firm
used unauthorized introducers who received commission of 7-9% for steering
customers toward SVS’s model portfolios. More than half of SVS customers came
through two financial advice firms that were controlled by individuals who also
owned these introducers.
Five-Year Cleanup
SVS entered
special administration in August 2019 after the FCA stopped its operations over
concerns about how it managed customer funds. The firm’s client books were sold
to ITI Capital, which struggled with technical difficulties during the
migration. ITI later exited the retail business entirely.
The special
administration concluded
in March 2023, nearly four years after it began. More than 99% of SVS
clients transferred
to ITI through a single bulk transfer in June 2020, though eight clients,
including five corporate accounts, didn’t receive full compensation because
their deposits exceeded Financial Services Compensation Scheme limits.
The FCA
fined Virk £215,500 in June 2024 and issued a permanent ban from UK financial
services. Two other former SVS executives, Finance Director Demetrios
Hadjigeorgiou and Head of Compliance David Stephen, received smaller fines and
bans from senior management roles.
This article was written by Damian Chmiel at www.financemagnates.com.
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