The old boy network succeeded in causing 8 months of pain for Plus500 UK. Will they do the same in Australia?

Today, some 8 months after Plus500’s UK division was ordered to freeze account activity including deposits, withdrawals and trading by the Financial Conduct Authority, the company has begun onboarding customers to its British operations once again. The period between May 2015 and today has not been easy for Plus500 Ltd (LON:PLUS) which was the subject of […]

Today, some 8 months after Plus500’s UK division was ordered to freeze account activity including deposits, withdrawals and trading by the Financial Conduct Authority, the company has begun onboarding customers to its British operations once again.

The period between May 2015 and today has not been easy for Plus500 Ltd (LON:PLUS) which was the subject of far more regulatory interference than is ever carried out by Britain’s Financial Conduct Authority (FCA).

It is widely recognized in the FX industry that the FCA does not usually insist that any of the entities in its jurisdiction cease operations and freeze accounts should it have concern over client onboarding processes and the systems in place with which firms carry out anti money laundering (AML) and know your client (KYC) procedures.

Usually, the FCA is a very passive government department, which conducts no compliance inspections and if a complaint is made, rarely visits the premises of the firm concerned, instead sending a letter to the company stating what has been alleged and that if the firm wishes to have the file closed, a discounted amount can be paid and that is usually the end of it. Indeed between 2010 and 2014, 97% of all cases involving complaints to the FCA were closed in this manner, without even a visit from an FCA official.

FinanceFeeds research deduced that the singling out of Plus500 by the FCA was as a result of the ‘old boy network‘ in London wanting to see off foreign competitors, and therefore the use of contacts within the regulator was enough to prompt such action, which crashed Plus500’s share prices overnight back in May last year.

Plus500 had been a much vaunted success story, especially with regard to its highly effective digital marketing methods which enabled it to remain relatively small in size, yet rocket in value, reaching a market capitalization of $1 billion in the Spring of 2015.

Seeing off foreign competition is the preserve of London’s giants, which have been established in the city for, in some cases, over 30 years and the damage done to Plus500 was substantial.

The company did not give up, however, and is now back to onboarding clients at its British operations, however this comes at a time at which Australian firms are now the target of a lobby group, largely led by the very same British old-stagers that were behind the regulatory pillorying of Plus500.

As reported by FinanceFeeds earlier this week, lobbyists from the industry had joined with government officials to form a new entity in Australia in order to pass a new law which would prevent smaller, domestic FX firms from hedging by using client funds, instead having to place all funds in a trust account, perhaps knowing that most smaller firms will not have the financial means to be able to conduct their businesses in this manner.

This is very clever, because on paper it makes absolute sense, as it protects customers, something that we are all completely in favor of, however it is most certainly open to debate as to what the real motives for encouraging such a law are.

Last year it may have been competition on home territory in London that was in the firing line, however this year, it may be extended to other commonwealth nations.

 

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