CySEC hits ET Finance and F1Markets with €300,000 fine

abdelaziz Fathi

The Cyprus Securities and Exchange Commission (CySEC) announced that it has fined Magnum FX Ltd (trading as ET Finance) and F1Markets Ltd (trading as Investous, StrattonMarkets and Europrime) due to shortcomings in their regulatory obligations.

Magnum FX and F1Markets agreed to pay €150,000 each to resolve charges that they violated the Cypriot investment laws.

The Cypriot watchdogs provided a breakdown and specific details for the regulatory action, saying its decision was taken based on possible violations of local regulations and for not acting honestly when approaching their potential clients . These brands were also flagged for non-compliance with authorization conditions stated in many articles, which mainly concern the appropriateness of their products offered to certain client segments.

In particular, Magnum FX was fined for conducting business or facilitating some activities not stated in its authorisation. Cypriot CIFs need to notify CySEC when they are providing their services in ‎third countries. Before they can deliver their product in a given country, they ‎need to get appropriate authorisation from the country’s regulatory ‎authorities first.‎

In addition, F1Markets was probed by Cysec for lack of compliance with regulatory requirements that govern the assessment of suitability and appropriateness of clients, as well as its obligation to execute orders on the most favourable terms to their customers.

Both firms were among a handful of Cypriot brokers that the UK’s FCA suspended their passporting rights. At the time, the British watchdog also barred the UK counterparts of Hoch Capital Ltd (trading as iTrader and tradeATF) and Rodeler Ltd (trading as 24option), amongst others.

The City regulator said these firms failed to pay money owed to investors and charged customers undisclosed fees whilst failing to disclose the risks of trading CFDs. The CySEC has also suspended several forex brokers that were caught up in promoting their risky products in the UK.

The FCA said some of these brokers used a variety of inappropriate techniques, including misleading financial promotions which appeared to offer consumers the opportunity to purchase real stocks while, in fact, they were merely trading CFDs.

Other brands used pressure tactics, described by one customer as ‘relentless’, to encourage them to invest ever increasing sums of money. Some customers were even encouraged to declare they were professional investors despite not meeting the necessary criteria for such categorisation.

CySEC ordered the companies to take corrective measures within a set framework, otherwise additional measures will be taken such as the imposition of new fines, or suspension and/or even the withdrawal of their licenses.

However, it is important to note that fines are usually issued within 6 months of an inspection, so at the point of the fine, the majority of issues should have already been resolved.

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