NFA fines Gain Capital for deducting $3M from customer accounts
The US National Futures Association (NFA) has filed and settled enforcement actions against Gain Capital Group LLC, the largest retail FX broker in the United States.
Gain Capital and its CEO Alexander Robert Bobinski were ordered to collectively pay a civil penalty of $700,000 for making changes to client accounts without permission. The industry self-regulatory organization said this action was against NFA Compliance Rule 2-43(a) (1), which prohibits forex dealers from adjusting customers’ orders to rectify certain situations that are beyond their control.
Spacifically, GAIN’s FOREX.com trading platform was impacted by a system malfunction between March 31 and April 1, 2021. During this period, some users were able place stop and limit orders in 14 currency pairs at prices that differed from those shown on FOREX.com’s platform. As a result, the broker incurred losses to the tune of $3 million.
To remedy the situation, Gain’s staff reviewed trade records and identified customers who executed orders at the off-market prices. Then, Gain immediately canceled pending withdrawals from their accounts and froze their accounts to prevent any future withdrawals or trading.
Later on April 1, 2021, Gain negatively adjusted the accounts of the seven most-affected customers, clawing back the profits they made. A day later, Gain also made adjustments to the accounts of other customers who had executed smaller trades during the system malfunction, crediting or debiting accounts down to a threshold of $10.
In total, GAIN deducted around $2.84 million from the accounts of 17 clients and added nearly $35,000 to the accounts of 33 consumers. Gain’s CEO Bobinski personally approved these negative and positive adjustments, as well as the threshold of $10.
The NFA said the actions taken by Gain Capital were inconsistent with its compliance rule that “prohibits Forex Dealer Members (FDMs) from cancelling an executed customer order or adjusting a customer account in a manner that would have a direct or indirect effect of changing the price of an executed order.”
The statement further states that the NFA emailed Bobinksi and Gain’s CCO and specifically reminded them of its prohibition on negative account adjustments. However, the firm delayed remedying its violations and did not reverse debits or provide still-pending credits to affected customers.
“In its Decision, the BCC found that Gain violated NFA Compliance Rule 2-43(a)(1) by improperly adjusting customer accounts, following a system malfunction; violated NFA Compliance Rule 2-36(c) by its treatment of customers affected by the system malfunction and Gain’s account adjustments; violated NFA Compliance Rules 2-5 and 2-36(c) by submitting inaccurate and incomplete information to NFA; and violated NFA Compliance Rules 2-36(e) and 2-9(a) by failing to supervise. The BCC also found that Bobinski violated NFA Compliance Rule 2-36(e) by failing to supervise,’ the statement concludes.
