IronFX faces record fine, settles € 335,000 in cash
Limassol-based IronFX, facing a flurry of complaints from trader clients that they were not allowed to cash-in on their investments, has been fined a record EUR 335,000 by the Cyprus Securities and Exchange Commission, which the company has settled and paid. However, this is not the end for the once-glorious forex trader, whose reputation had been tarnished by public comments and attacks by traders. It also opens the doors to legal recourse or individual settlement through the Financial Ombudsman’s office, all of which may lead to high legal costs and record settlement rewards.
The fine, the second biggest among a total of five imposed by the CySEC for a total EUR 1.33 mln, for violations of the regulations under which Cyprus Investment Firms (CIFs) operate on the island.
The other sanctioned CIFs that have not opted to settle are WGM Services Ltd. (EUR 340,000), Pegase Capital Ltd. (EUR 300,000), Depaho Ltd. (EUR 233,000) and Reliantco Investments Ltd. (EUR 123,000).
These are also some of the highest fines imposed by any European regulator and sends a clear message that CySEC will not tolerate violations, while also warning others who have so far been fined smaller amounts that they could face similarly hefty or even bigger penalties, depending on their violation, a CySEC official told the Financial Mirror.
The IronFX case concludes a thorough investigation of nearly a year into hundreds of complaints from investors around the world. The violations for all five include obligations to protect clients, lack of control mechanisms and risk management, subcontracting operations to third parties, lack of corporate governance while providing services to clients or would-be clients, and the provision of services only for what the CIF had been licensed for.
CySEC said that regardless of the fine and or its settlement, all five CIFs are obliged to take corrective measures to improve their internal procedures, regulations and practices, and comply full with the law. They have a further two months to prove their compliance to the CySEC that will return for a follow-up inspection.
IronFX, that in the past had claimed it too was the victim of trading abuse by clients, was not immediately available for comment as to what this meant for the company and how, if at all, clients would be compensated.
Traders may now use the CySEC ruling and resort to either of two options: to appeal to the Financial Ombudsman http://www.financialombudsman.gov.cy for claims up to EUR 170,000, or take legal action in the Cyprus courts, where cases could drag up to 2-3 years.