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Screenshot of a breaking news alert e-mail from Q2 2017
As was first reported Friday on LeapRate, Cyprus financial regulator CySEC announced fines ranging from €123,000 up to €340,000 against a number of Forex and Binary brokerage operators (most notably UFX Markets, EZTrader, InteractiveOption, and FXGM), as well as a settlement with IronFX.
Not much information was given at the time, other than our revealing that this was ‘Step 1’ in a comprehensive review CySEC has been making of a number of Cyprus-based regulated brokers.
LeapRate has received a more formal statement from CySEC about the fines/settlement, including a quote on the matter from CySEC Chair Demetra Kalogerou (pictured above). We include the full statement and quote below.
But first, we’d note a few observations:
- The fine to WGM (operator of EZTrader.com and EZInvest.com) seems to be the largest doled out it provided investment / portfolio management services without authorization, and also it managed its platform and the conclusion of transactions from Israel, not Cyprus.
- Reliantco’s fine (UFX, UFX Markets) was smallest as, unlike the other fined companies, its was not found to have been involved in portfolio management services.
- Other issues brought up by CySEC in the various fine descriptions (see table below for linked text to each individual company’s fine summary) include procedures in granting ‘deposit bonuses’ to clients in ways which aren’t in the clients’ best interests, not informing clients properly of risks associated with leveraged trading, weakness in customer due diligence procedures, and unfair or misleading advertisements.
The Cyprus Securities and Exchange Commission (“CySEC”) announced today the decision to impose sanctions totaling €1,331,000 on five Cyprus Investment Firms (“CIFs”).
The fines against the CIFs were imposed following the conclusion of onsite inspections by the Supervising Authority, in relation to weaknesses detected in the compliance of the companies in question with their legal obligations. These weaknesses concern, among other issues, the companies’ obligations for the protection of client funds, their risk detection and management procedures, issues of outsourcing of their services, their professional conduct in the provision of services to clients or potential clients, as well as the provision of investment services solely for which they have been licensed.
|WGM Services Ltd||€340,000|
|Iron FX Global Ltd||€335,000|
|Pegase Capital Ltd||€300,000|
|Reliatco Investments Ltd||€123,000|
The decision to impose the fines in question were taken within the framework of a broader program of supervisory inspections that CySEC is conducting on CIFs, which will continue into 2016, with emphasis on high risk and medium to high risk CIFs. This program examines issues related primarily with CIF organizational requirements and issues of professional conduct towards their clients.
IronFX Global Ltd has exercised the right to seek a compromise agreement. According to national law, supervised entities have the right to request a compromise agreement and CySEC may proceed with such a compromise for any violation or possible violation, action or omission, for which there is reasonable suspicion that it was committed in violation of the existing legislation, as long as supervised entities chose to exercise this right.
Accepting the compromise agreement presupposes the immediate payment of the agreed amount and the acceptance by the supervised entity that it may not legally appeal it, thus avoiding the possibility of a long legal dispute.
Such compromise agreements are common practice for Supervisory Authorities globally, and CySEC has reached compromise agreements in other cases in the past.
In addition to imposing these fines, CySEC has also indicated to the five CIFs in question the need to take corrective measures in order to improve their internal processes and practices, aiming to fully comply with their legal obligations. The CIFs, regardless of whether a fine was imposed or have reached a compromise agreement, are obliged to comply with this within two months, at which point CySEC will re-examine the firm’s compliance. Supervisory inspections and checks by CySEC will continue in general, and enforcement actions, including fines, will take place where violations of the legislation are detected.
Statement by the CySEC Chairman:
The ultimate goal of onsite checks conducted by the Cyprus Securities and Exchange Commission (CySEC) is to ensure investor protection and the fair functioning of the securities market as a whole, through the improvement in Cyprus Investment Firms’ (CIFs) compliance with the necessary laws.
CIFs must operate at all times within the legal framework of the securities market and have a responsibility to their investor-clients. Where these duties are breached, as we have seen with these firms, the CySEC will impose fines as provided for by the Law. The CySEC will indicate to CIFs to take corrective measures within a set framework, otherwise additional measures will be taken such as the imposition of new fines, the suspension and/or even the withdrawal of their licenses.
CySEC will continue to closely monitor Cyprus investment firms and will have no hesitation in taking further action against firms that fail to comply with the rules that are designed to protect investors.