CySec turning another blind eye to grossly misleading branding by CIFs

As Swiss as Aphrodite. CySec turning another blind eye to grossly misleading branding by CIFs

Why is BDSWISS allowed to continue to pretend to be a Swiss company when actually it is a CySec licensed binary options, CFD and OTC FX broker operating a b-book? Misleading advertising is one thing, pretending to be a Swiss firm is much more serious

FinanceFeeds has long maintained that the name and branding of an online trading company is a matter which should be thought through carefully, not only because the internet is the ‘shop window’ of the online brokerage sector, but also because of the importance of conveying a high quality image in order to engage the highest quality client base in an increasingly competitive world.

It is gauche and distasteful enough to select infra dignitatem nomenclature for a retail brokerage, however willfully projecting a completely misleading image with the intention of wrongly associating a very well recognized region or status with something which bears absolutely no resemblance to it or has no connection with it is far more serious.

Cyprus, home to over 180 retail FX firms and their associated prime brokerages, technology vendors, platform providers and corporate management consultants, is a finely honed center for the retail industry and is becoming a linchpin of industry knowledge across all aspects of the electronic trading industry.

The financial markets regulator, CySec, whilst having made tremendous steps toward more stringent enforcement, sometimes demonstrates its immaturity and lack of experience when compared with the Financial Conduct Authority in the UK or ASIC in Australia, which are long established and have decades of background in the regulatory procedure of financial markets in regions highly populous with multi-product electronic trading entities.

In January, FinanceFeeds reported on the irony that manifested itself in CySec’s acceptance of a 150,000 Euro settlement from retail binary options brokerage BDSWISS, which has now branched into CFDs and FX for having not complied with the rulings relating to fair, clear and non-misleading marketing communications.

At the time, FinanceFeeds asked CySec to explain exactly what these transgressions consisted of, and in what specific areas BDSWISS issued misleading marketing communications, however no reply was proffered, despite their having proactively contacted FinanceFeeds to explain that there had been a fine issued for that particular reason.

We must at this point state explicitly and unambiguously that at that time, the statements made in our report were based not on any material directly provided to us by BDSWISS, but instead on our own observations.

BDSWISS may well have had to write a check for 150,000 Euros to settle an arbitrary matter relating to some of their perhaps less than carefully considered marketing techniques, but the company has been allowed to register itself, and gain a license, and promote its services to a global audience whilst calling itself BDSWISS and using the Swiss flag (a brand in itself) as a company motif, and if that is not misleading, then who knows what is!

As pointed out at the time, Banc de Swiss is a vague attempt to appear Swiss, and an even more vague attempt at the use (or misuse) of the French language. BDSWISS is neither Swiss, nor is its moniker correct in French.

There is no such expression, nor spelling as Banc de Swiss, the correct French being ‘Banque Suisse d’options binaires’, however no such entity would exist, as Swiss banks, holding licenses from FINMA, do not provide OTC binary options trading facilities as a sole business activity.

A similar format has been used by Banc de Binary for several years, the same error in spelling being present, as well as in the case of BDSWISS, the similar grammatical misuse is accompanied by an equally similar geographical discrepancy as the company is located in Cyprus and has absolutely no connection to Switzerland despite its use of the Swiss flag, itself a brand, in its logo.

FinanceFeeds subsequently followed this matter up with CySec, having directly contacted CySec Chair Demetra Kalogerou and pointing this out categorically, however no response was proffered. We also contacted FTI Consulting, a large, multinational management consultancy which handles CySec’s public relations for an appropriate answer, however no response was forthcoming.

Furthermore, upon being contacted by BDSWISS in an attempt to bolster this bravado, the firm stated that it does have Swiss standing. This is not possible, as the Swiss banking regulations require that all Swiss electronic trading companies have ringfenced proprietary trading systems which are hosted within the premises of the brokerage, on Swiss territory and are fully licensed only by FINMA, the Swiss banking regulatory authority.

BDSWISS is not regulated by FINMA, instead being a CySec regulated entity, with its registered head office in Cyprus, using off the shelf platforms and not a ringfenced proprietary trading system, none of which is hosted in Switzerland or overseen by the Swiss banking authorities.

This week, however, the direction continues, with BDSWISS having produced yet another attempt at majoring on Swiss-style branding and alluding to Swiss brokerage capabilities when in fact, the firm is as Swiss as Moussaka.

FinanceFeeds once again reached out to CySec for an explanation as to why this is allowed to prevail, as well as from PFI Consulting’s division that handles the public relations on behalf of CySec, to which no reply was proffered.

This week’s elevation of its attempts to convince unassuming investors that it is a Swiss entity constitutes an advertisement which blatantly labels the firm as Swiss, and as using a Swiss trading environment.

In this case, it is our responsibility to point out that there are only four retail electronic trading companies with a Swiss banking license, whose trading systems are hosted in Switzerland and are in accordance with Swiss regulations, and which can legitimately call themselves Swiss entities. Those are IG Bank, Swissquote Bank, Dukascopy Bank and Saxo Bank. There are absolutely no others.

Published on LinkedIn yesterday by former IronFX CEO for UK Stefanos Mitsi who is now CEO at BDSWISS was the absolute pinnacle of this deceptive advertising, with a Swiss flag adorning BDSWISS latest advertisement, stating that it is a true STP broker, which it is not, and that it offers ‘Swiss markets’, which it does not and is not licensed to operate.

On this note, before any nineteen year old former binary options salesman with a moustache that resembles an earwig attempts to trumpet BDSWISS’ claims of processing trades straight to market, it is worth bearing in mind that absolutely no binary options brands whatsoever have a live price feed, and that on the FX and CFD pricing side, any Tier 1 bank looking to extend counterparty credit to a retail brokerage would request a balance sheet with between $50 million to $100 million before even considering a prime brokerage relationship.

A CySec license to operate a binary options brand via software and market making from a third party supplier and a MetaTrader 4 white label license that processes orders via a dealing desk does not constitute FINMA regulation.

In regards to protection of the Swiss flag from commercial misuses, there are additional laws to protect it from misuse in relation to the Red Cross symbol.

According to: “Model law concerning the use and protection of the emblem of the Red Cross or Red Crescent” (31-08-1996 International Review of the Red Cross no 313, p.486-495, Section III, Article 12 reads, “Owing to the confusion which may arise between the arms of Switzerland and the emblem of the red cross, the use of the white cross on a red ground or of any other sign constituting an imitation thereof, whether as a trademark or commercial mark or as a component of such marks, or for a purpose contrary to fair trade, or in circumstances likely to wound Swiss national sentiment, is likewise prohibited at all times.

Hence not only is this a breach of advertising standards and is an allusion to holding a banking licence that it does not hold, but is also in contravention of Swiss national law.

Switzerland is embroiled in controversy over the commercial use of the flag, and confusion over its legal use. It is legal to use the Swiss flag for decoration and publicity, but its use is also regulated by the Society for the Promotion of Swiss Products and Services, better known as “Swiss Label”.

A 1931 law, which many now consider a useless relic, prohibits the use of the federal cross on any product not so licensed by the Society. To qualify a product must be more than 50% manufactured in Switzerland.

Many products, like most Swiss chocolate, no longer qualify and yet continue to illegally use the federal cross. The Society sees this as deception in advertising, since foreign consumers have come to trust products that are Swiss-made. A recent poll shows that most Swiss are aware of the law, but the law is widely flaunted with impunity.

Until CySec deals with this coherently, it will continue to remain a severe moot point. Until now, they have no answer to our questions on the matter.

Image: The real Switzerland, as opposed to a rented office in Limassol with a Swiss flag over its front door.

 

#bdswiss, #Cifs, #cyprus, #cysec, #FINMA regulation, #Forex Brokers, #Switzerland

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