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AFX Capital Markets, an FX and CFD firm providing retail and institutional FX facilities which holds operations in Cyprus and Great Britain, has been issued with a €10,000 administrative penalty as a result of findings by the Cypriot regulatory authority during a spot check which was conducted in February 2013.
The total amount of the fine, which is relatively low by comparison to penalties imposed on companies as a result of compliance inspections in other jurisdictions, was made up of a number of smaller administrative penalties which relate to irregularities which were uncovered by CySec.
AFX Capital Markets, which operates its retail brokerage from Cyprus, but recently branched out into institutional FX from within its FCA-regulated London office, has concentrated considerable effort in recent times on managed portfolio (MAM) account provision, with a CySec approved portfolio management solution being offered, as well as having an in-house technology department.
Last year, the firm restructured its operations into 3 different divisions, SuperTradingOnline, the firm’s retail division, Market Technologies, the institutional arm of the company, and Quantic, its in-house portfolio management service provider.
With regard to this particular administrative penalty, an amount of €7.000 has been applied as a result of the company did not meet the following conditions:
Article 12 ( 3 ) of the Act – Administration of the Company must consist of at least two persons.
Article 18 ( 2 ) ( a) of the Act – Implementation of appropriate policies and procedures sufficient to ensure compliance with the law and Instructions.
Article 18 ( 2 ) ( b ) of the Law and Fri the 23rd ( 3 ) of Directive 1 – measures to avoid adversely affecting the interests of customers conflicts of interest.
Article 18 ( 2 ) ( d ) of the Law and Fri the 16th of Directive 1 – demonstration of care, diligence and skill when assigning operational officers (internal audit function) to a third party.
Article 18 ( 2 ) ( f ) of the Act and point 8 of Directive 1 – adequacy internal control mechanisms.
Article 18 ( 2 ) ( j ) of the Act – measures to protect clients’ interests and to prevent use client funds for its own account .
Furthermore, an additional €1,000 was levied for violating article 32 of the Law, which relates to non-disclosure to CySec of changes to the persons who effectively direct the Company.
CySec added a further €500 for violation of section 34 of the Act and paragraph 5 of the Directive 12, which relates to non-disclosure to CySec via the email notification system, XML, of substantial changes in the organizational structure of the Company, and another €500 for infringement of Article 76 ( 2 ) of the Act, concerning failure to disclose to CySec that the branch of the company in Italy had provided portfolio management services. AFX Capital Markets has substantial business in Italy via its CONSOB-regulated division, which provides many managed portfolio services to clients, as well as Sostituo d’Imposta, which is a service by which AFX Capital Markets calculates and pays the capital gains tax on behalf of its clients.
Within this administrative penalty, another €1,000 for infringement of Article 36 ( 1) of the Law was added, which relates to the requirement for the company to be registered in Italy as a Financial Adviser/Salesman. According to CySec, the firm was not listed on the appropriate register in Italy to act as a financial salesman or to promote its services.
To determine the level of all of the above administrative fines, CySec took into account in each case the gravity of such violations, which is reflected by the amount of the administrative penalty
provided for such violations. CySec also considered the responsibility given to ensuring that persons subject to CySec oversight comply fully with the provisions of the Act and its guidelines, as well as the mitigating circumstance that this firm had not committed any previous violation of CySec rulings.
The entire announcement by CySec can be read by clicking here.