CySEC issues press release asserting its “authority to reach settlements”.
Well it seems as if we’ve ruffled some feathers at Cyprus’ financial regulator CySEC. In an apparent response to our article Wednesday in which we claimed that CySEC is shaking down a number of FX brokers, CySEC issued a press release yesterday (full wording included below, or click here for the original CySEC press release), asserting its authority to reach settlements with regulated companies.
Let us be clear — our purpose in writing the original article was not to attack CySEC, but to bring to light one specific set of incidents which we believe the facts support. But overall, we do believe that CySEC is indeed a good regulator, well experienced in dealing with Retail FX brokers, of which there are many (several dozen) in Cyprus.
CySEC has generally been very good at focusing on things it should focus on — safety and security of client funds, ensuring that brokers are well capitalized, preventing fraud, improving standards of operation at firms it regulates, etc…. One of the reasons we believe that traders working with Cyprus brokers have been safe, while at the same time elsewhere in the world (e.g. UK – WorldSpreads, USA – PFGBest, MF Global) we see incidents of large-scale fraud and bankruptcy, is that CySEC generally is properly doing its job, and understands how Retail FX firms work.
We’ll let our audience provide their own interpretation of what CySEC really means in its press release (although they did not mention us by name) — feel free to provide yours in the Comments section below.
And we do stand by our original premise — that CySEC is systematically, one by one, approaching some of the larger, deeper pocketed FX firms in the country, and letting them know that they must be doing something wrong (administratively), and as such they should just avoid a long and potentially reputation-damaging inquiry and process by quietly settling and agreeing to a “fine”, and also get input into the press release announcing the fine. The approaches are not necessarily based on any real wrongdoing, nor real suspicion of wrongdoing.
Soon after our original article came out yesterday, another one of these “settlements” was announced, this time with Reliantco, parent of UFX Markets. The fine was larger than the eToro fine announced the day before, at €100,000, but again came along with a very vague and odd press release not really specifying any real wrongdoing. For those of you who follow us, you’ll know that these are much larger fines than CySEC has previously doled out for real administrative wrongdoing, in the €10,000-€25,000 range, and as such are very suspiciously large in nature — especially when they come with such strange explanations, or lack thereof.
14 February 2013 regarding CySEC’s authority to reach settlements
The Cyprus Securities and Exchange Commission (‘the Commission’) would like to note the following:
The Commission, under article 37(4) of the Cyprus Securities and Exchange Commission Law of 2009 (‘the Law’), has the power to reach a settlement (compromise) for any violation or possible violation, act or omission for which there is reasonable ground to believe that it took place in violation of the provisions of the Law or the Regulations or directives issued under this Law or the relevant legislation.
The Commission notes that even though a person, who agrees and consents to a compromise pursuant to section 37(4) of the Law and complies with all the terms that have been agreed, is not considered to have violated the relevant legislation he still has every obligation to fully comply with all weaknesses/alleged violations that CySEC established (through an inspection/investigation) and were the reasons why the settlement procedure was initiated.
CySEC wishes to stress that a settlement agreement DOES NOT in any way give a safe harbor to anyone from his obligations to comply with the relevant legislation. Following a settlement agreement, CySEC carries out new inspections to make sure that compliance has been achieved.
It is noted that the amounts due from settlement agreements are calculated as revenue (income) to the Treasury of the Republic and are not calculated as an income for CySEC.
Nicosia, February 14, 2013