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Screenshot of a breaking news alert e-mail from Q2 2017
Alpari’s UK division has ceased to accept clients from Canada, citing Canadian regulatory requirements as the reason.
An investigation by LeapRate into this matter concluded that whilst many other bona fide FX companies with regulatory licenses outside Canada continue to provide service to Canadian clients, Alpari has ceased.
When asked to provide full details as to the regulatory directive which was cited, Alpari’s representative could not elaborate further, however LeapRate made several inquiries in order to establish the rationale behind the firm’s decision, which conclude that Alpari is indeed acting in accordance with the law.
According to a securities lawyer at a major Toronto law firm who elected to remain anonymous, the practice of soliciting Canadian clients by firms based abroad without operations or licensing in Canada is not lawful.
The lawyer explained to LeapRate “You would have to be a registered broker dealer to provide services in Canada to Canadian clients.”
He continued that “In order to solicit clients, the relevant provincial license would be required, however it is very hard for authorities to go after companies which actively solicit Canadian clients if they are abroad and have no office in Canada.”
According to the lawyer, proprietary trading firms are the only notable exception, as they are trading on their own accounts, and not providing services to clients or accepting funds for the purposes of FX trading from investors or retail clients.
“There are orders each week against companies which transgress” stated the lawyer, “but if someone is doing it from the UK, then it is pretty hard for the regulators to know, and a lot of this goes on all over the world without any action amounting to anything. Should a client make a complaint, they would have to report it to the relevant provincial regulator in Canada, and then the regulator in Canada would have to go to the regulator in the country where the firm operates from, which is not an easy process.”
He concluded by stating that “We have lots of regulatory proceedings all the time.”
Bearing this in mind, Alpari is taking a very correct and prudent step in not accepting clients from Canada.
South of the border in the United States, the National Futures Association (NFA), which regulates financial markets activity at federal level, introduced a ruling as part of the Dodd Frank Wall Street Reform Act that electronic trading companies under its jurisdiction would not be allowed to accept customers from outside the United States, and similarly that US-based investors would not be allowed to place their funds with an overseas company, ensuring that they are only able to choose NFA regulated, US-based firms.
In Canada, things are somewhat different insofar as that non-bank financial services providers and FX firms are regulated on a provincial basis, with affiliation to the self-regulatory organization the Investment Industry Regulatory Organization of Canada (IIROC) as an accompaniment.
Many other companies overseas continue to offer services to Canadian clients, and openly advertise to a Canadian audience, with very little consequence, however if Alpari is taking the lead in ensuring that this rule is adhered to, others may require to either exit Canada’s market, or establish operations in Canada and obtain regulatory approval from the relevant provincial authority.