Why the ‘protest’ during CySec Chairman’s speech was a storm in a teacup

As with many instances of unrest, last week’s interruption of CySec Chairman Demetra Kalogerou’s keynote speech by a disgruntled individual during the closing hours of the iFXEXPO International conference in Limassol, Cyprus was most certainly an attempt to attract attention. The attraction of attention via disobedience is very rare indeed in this industry, however during […]

As with many instances of unrest, last week’s interruption of CySec Chairman Demetra Kalogerou’s keynote speech by a disgruntled individual during the closing hours of the iFXEXPO International conference in Limassol, Cyprus was most certainly an attempt to attract attention.

The attraction of attention via disobedience is very rare indeed in this industry, however during the past year, a series of high profile incidents involving clients and introducing brokers of one particular retail FX brokerage have amassed, culminating in a member of the audience mounted the stage and insinuated that CySec is not doing enough to restitute losses incurred by clients of IronFX, many of whom allege that IronFX is not adhering to right and proper practices.

Indeed, this particular individual, who purported to be a client of IronFX, did succeed in creating a media furore, however, it is indeed apparent that the attention has been focused on CySec, rather than the real issue at hand.

As with all business, in every sector, in every region, due procedure has to be followed when complaining, and that means taking it to the correct department or office that deals with specific complaints and has a procedure for them.

Whilst the protester was aiming his vitriol directly at the Cypriot financial markets regulator, and to some extent received the response that he had perhaps intended, the protest was indeed, a storm in a teacup.

We understand but there are ways and then some

It is very important to note that this particular disgruntled individual’s concerns have been taken largely out of context. One point to bear in mind is that CySEC does not have restitution powers so the only authority with the legal powers to act on the calls for compensation is the Financial Ombudsman, which is standard practice across Europe.

If a company in London, for example, goes out of business or engages in malpractice and clients lose their funds, the FCA would direct them to the Financial Ombudsman and the FSCS (Financial Services Compensation Scheme), the last high profile incident of this nature was when Alpari UK went bankrupt and the official receivers were called in, and clients were to deal directly with the receiver and the FSCS, and were not able to go to the FCA alleging risk management factors leading to corporate demise.

Recently. FinanceFeeds reported that many complaints have arisen and been directed towards various authorities when in fact clients have signed and agreed to terms and conditions that bind them to a contract. We maintain that reading all terms and conditions is vital for all IBs and traders.

Not one politician in any other jurisdiction has become personally involved in raising issues concerning the activity of brokerages, whereas in Cyprus, AKEL party leader Andros Kyprianou, who is chairman of the largest opposition party in Cyprus and has a mandate to become president if he is elected, has made two reports raising his concerns over the activities of IronFX. 

Research by FinanceFeeds concludes the following:

CySEC reached a settlement with IronFX for €335,000 following its inspection. The full details are here: http://www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=f3b8aa80-6679-4efa-9ede-6cb53097e8d5

·  Fines are NOT to be considered an “end-stop” action by CySEC, but part of its commitment to pursuing a fair, robust and proactive approach to supervision. To that end, CySEC has called for a number of corrective measures to be adopted by IronFX, in view of its overall compliance

·  IronFx has been and continues to be under close monitoring to ensure that all corrective measures are duly implemented and second that it will continue to duly comply with its obligations under the Laws governing its operations which fall under the supervisory competence of the CySEC.

·  To put this in context, the investigation is part of a wider thematic supervisory review into the investment firms, inclusive of those CIFs which offer trading in forex and financial binary options. CySEC’s risk-based Supervisory Action Plan prioritized 20 Cyprus investment firms for inspection, where a series of in-depth onsite checks were carried out to ensure market procedures, governance and risk processes, client onboarding and suitability requirements, and AML procedures were being complied with.

·  As a result of this intense scrutiny, CySEC issued a collective €2,072,000 million set of fines for related failings; suspended the operational license of three additional firms for persistent wrongdoing, and permanently revoked the license of one firm for serious violations.

FinanceFeeds covered Ms. Kalogerou’s speech in comprehensive detail, and discussions with many enior executives in many sectors of the industry including FX brokerages in Cyprus as well as the liquidity providers and prime brokerages that provide services to them have resonated that Cyprus is becoming not only the destination for retail FX and its entire support ecosystem, but CySec encouraged the the industry and is now setting in place the correct measures to ensure its longevity – those being top quality legislature and regulatory infrastructure.

Restitutions and settlements made directly to clients in Cyprus are not required to be reported publicly (in the US, NFA members must report publicly all restitution activity and settlements) therefore any firms which have provided restitution to clients as a result of advice or subsequent to a fine by CySec will not have published this, or the amount, therefore only a fine may be visible to a wide audience.

Most certainly, visible disruption is a method of gaining immediate attention, however it is equally important that attention is centered on the correct matter in hand.

Photograph: CySec, Nicosia, Cyprus. Copyright FinanceFeeds

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