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Screenshot of a breaking news alert e-mail from Q2 2017
LeapRate Exclusive… LeapRate has learned that FCA regulated FX broker IKON Finance has decided to exit the Retail Forex sector, to focus solely on institutional clients and services.
In addition, due to regulatory restrictions which have been imposed on IKON by the FCA, IKON is no longer accepting any new clients. IKON has been instructed by the FCA that by the end of trading tomorrow (March 30) the company must ensure that all open client positions are fully closed out such that each client account is left with a cash balance in the client’s base currency. IKON must then immediately either refund the cash balance, or transfer the client funds to another FCA licensed broker.
Toward that end, we have learned that IKON has been quietly transferring its retail clients to Hantec Markets over the past few weeks, since the FCA restrictions were first imposed on March 6. Inquiries to IKON Finance about opening a new account are returned with a message (see below) to contact Hantec.
IKON’s status with the FCA has been changed as well to “Closed to New Business”.
The FCA’s actions against IKON Finance were due to issues the regulator noted including:
- IKON not having appropriate human and operational resources in place, including adequate governance and oversight of all functions,
- IKON not having appropriate anti-money laundering (AML) systems and controls in place, and
- IKON needs to obtain and verify up-to-date and risk-sensitive customer due diligence information for customers, in accordance with the Money Laundering Regulations 2007.
Interestingly, IKON’s FCA license has not been formally suspended. The regulator has just imposed the restrictions on opening any new client accounts, or doing any trades for clients other than closing trades, until the aforementioned issues are resolved.
IKON Finance is controlled by Turkish businessman Engin Yikilmazoglu. The broker used to have operations around the world, including an NFA-licensed subsidiary in the US called IKON Global Markets. IKON exited the US retail forex market earlier this decade when US regulators tightened capital requirements and other rules around retail forex trading. Before exiting the US, IKON Global was hit with a $320,000 fine related to charges that it engaged in asymmetric price slippage practices on its MT4 platform that were favorable to IKON and caused disadvantageous trading conditions for certain customers.
In its most recent fiscal year reported (2015), IKON Finance had revenues of £6.6 million, and a net loss of £0.9 million. The company held about £11.6 million of client funds.
An IKON Finance representative noted:
IKON Finance is undergoing some changes to our business, where we will be looking to focus more on our quality institutional services. Due to these changes we will be migrating our business to Hantec Markets Limited which is authorized and regulated by the Financial Conduct Authority (FCA Register No: FRN 502635.). Hantec Markets is a reliable partner who IKON Finance has had a relationship with for many years in its institutional capacity.
The message IKON has sent out regarding new account inquiries reads as follows:
Thanks for your interest in IKON Finance!
We are now transferring our client accounts to Hantec Markets, which is also an FCA regulated broker located in London, UK. Please visit their website for more information: https://www.hantecfx.com/
In order to make a new application at Hantec Markets, please go to the link below and complete your online application:
Please let us know if you need any more help/information.
The full text of the FCA restrictions on IKON Finance reads as follows (certain passages bolded for emphasis):
Requirements are rules placed on the firm that apply to all of the financial services activities that it can operate.
Closed to new business
Any reference to cash balances under the below requirements include balances that constitute “client money” under chapter CASS 7 of the FCA Handbook of Rules and Guidance as well as balances received and held by IFL on a title transfer basis.
(a) With immediate effect Ikon Finance Limited (IFL) must not accept any new clients.
(b) With effect from close of business on 6 March 2017, IFL must not facilitate any new order for:
1) any client with existing net equity of less than USD 25,000 (as at 3
2) any client who has no open positions as at today’s date;
in each case ((1) and (2)) unless IFL has the Authority’s prior written consent or such order is executed pursuant to paragraph (g) below.
(c) With effect from 17 March 2017 IFL must not facilitate any new order for any existing client other than pursuant to paragraph (g) below.
(d) With effect from close of business on 6 March 2017, IFL must not accept any further deposit of money from clients on any trading accounts with the exception of
i. variation margin;
ii. margin on positions resulting from new orders permitted under paragraph (b); and
iii. money that is required to avoid a forced close out of an existing position prior to the date all existing trades have to be closed out as per paragraph (g).
(e) On or before 15 March 2017, IFL must send (which may include email) the letter at Annex A to all clients with open positions or funded accounts remaining as at close of business on 14 March 2017.
(f) On or before 15 March 2017, IFL must establish a prominent message on the client log-in page on its proprietary and external online platforms which provides the information as set out in the letter at Annex A.
(g) By the end of trading on 30 March 2017 IFL must ensure that all open client positions are fully closed out and that any secondary currency exposures (on or falling to client account ledgers) are liquidated by the same point in time, such that each client account is left with a cash balance in the client’s base currency.
(h) IFL must immediately return cash balances to the relevant client for all trading accounts on which there are no open positions. In respect of trading accounts on which there are open positions, IFL must return cash balances to the relevant client immediately after positions are closed in accordance with (g). In either case IFL may, instead of returning a cash balance to a client but only where a client so instructs, transfer the balance to another firm that is authorised and regulated by the Authority. In cases where a cash balance constitutes client money under chapter CASS 7 of the FCA Handbook of Rules and Guidance, and IFL is unable to obtain a payment instruction from a client to give effect to this requirement then IFL must notify the circumstances to the FCA.
(i) All the above requirements will remain in force until the Authority has communicated to IFL that it is satisfied that IFL has:
i. appropriate human and operational resources in place, including adequate governance and oversight of all functions;
ii. implemented appropriate AML systems and controls; and
iii. obtained and verified up-to-date and risk-sensitive customer due diligence information for customers, in accordance with the Money Laundering Regulations 2007.