IronFX faces record fine, set­tles € 335,000 in cash

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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