It has taken Brexit for City watchdog to show some guts
R.F. writes: Last July, a friend persuaded me to try online investing. I first looked at Bitcoin, but then I was contacted by Investous and agreed to risk £1,000. Every day, Investous would call me to talk about investments, saying they would make me £50,000 by Christmas. Then one afternoon the caller said I was about to make a loss and should transfer another £1,000 to my account. He instructed me how to do this online while he stayed on the phone. He kept saying my money had not arrived and I should press a certain key again and again, which I did. When I checked my bank account, I found £34,500 had gone.
INVESTOUS is a name used by F1 Markets Limited. This is a Cypriot company, based in Limassol, and licensed by one of the weakest watchdogs in Europe, the Cyprus Securities & Exchange Commission (SEC).
Every rip-off operator in Europe knows that if you want to set up a shady business, Cyprus is the place to go. Having a licence there gives you the right under Brussels rules to ‘passport’ your business into other European countries, which is why F1 Markets appears on the public register of our own Financial Conduct Authority even though it has no offices or staff in Britain.
Investous handles very high-risk deals such as contracts for difference. These are only suitable for experienced investors and those well off enough to afford serious losses. You, on the other hand, have told me that you know nothing about investments and were looking for a bit of fun with a modest amount.
I contacted F1 Markets at the beginning of March and asked the company to comment. I pointed out that its website says it is an execution-only broker, offering no advice, guidance or recommendations, yet you made it clear that you followed investment instructions from its salesman.
F1 Markets offered no comments or explanations, but it immediately contacted you, referring to your complaints as ‘inquiries’. This appears to have been aimed at sidestepping Cyprus regulations which say firms must report complaints to the SEC.
So, I contacted the SEC in Nicosia as well as our own FCA.
The SEC asked to be kept informed and on April 28, I reported to it that you had been offered £20,000 by F1 Markets if you signed a secrecy agreement promising never to give evidence against it voluntarily. Sensibly, you accepted the £20,000, and honourably, you ignored the secrecy agreement. I told all this to the Cyprus SEC, which refused to comment, except to message that it would ‘take into account’ what I said.
I expected little from the FCA. For years, it has told me it is powerless to stop ‘passported’ firms ripping off British investors, since the Brussels fiction is that all regulators are equal, so a licence in one country should be accepted everywhere else. This time was no exception. On March 19, the FCA told me that if a passported firm causes concern, it raises those concerns with the firm’s home state regulator, and what happens after that is up to the home state. But in a bombshell development last Monday, this turned out to be utterly false.
The FCA suddenly ordered four Cypriot firms to stop offering highrisk contracts for difference to British investors. What seems to have attracted the FCA’s attention was not so much that they were cheating investors on a grand scale, but that according to the FCA: ‘It appears that these firms used unauthorised celebrity endorsements on social media as part of their marketing.’
One of the four Cypriot firms was F1 Marketing, and the SEC then banned the firm from providing any further investment services to British clients. The FCA then backtracked at a rate of knots on its March 19 ‘shrug of the shoulders’ that passed all responsibility to Nicosia. A few days ago it tried to say this was simply its ‘default position’, and that it has always had the power to kick out undesirable foreign firms. It is just that it has never, ever used it until now.
This will be startling news to all the victims of earlier passporting scandals such as Banc de Binary. Its victims lost hundreds of millions of pounds while the FCA did nothing. It even allowed Banc de Binary to appear on its public register of investment firms. Why? Because Banc de Binary and lots of other Israeli-run scams had been licensed by – you’ve guessed it – the Cyprus SEC.
Perhaps it is only now that Britain is leaving the EU that the FCA has found the guts to use the power it always denied it had. But this raises yet again the question of whether the FCA has lost its way in recent years and abandoned ordinary consumers to the wolves. If the answer is yes, then it is good that the tide has perhaps turned, but who will now stand up from the FCA, apologise, and make amends?