View the article online at http://citywire.co.uk/wealth-manager/article/a736367
FCA fines forex firm £4m over 'unfair profits'
by Michelle Abrego on Feb 26, 2014 at 10:07
The Financial Conduct Authority (FCA) has fined Forex Capital Markets and FXCM Securities £4 million for allowing the US-based company to withhold profits worth approximately £6 million that should have been passed on to the firm’s UK clients.
The regulator said FXCM UK also failed to tell it that the US authorities were investigating another part of the group for the same misconduct.
FXCM UK’s clients will be fully compensated with credit automatically paid to their accounts, the FCA said.
The firm placed ‘over the counter’ foreign exchange transactions which were then executed by another part of the FXCM Group.
Between August 2006 and December 2010, the FXCM Group kept profits from favourable market movements between the time the orders were placed by FXCM UK and executed by the FXCM Group, according to the FCA.
It found that any losses were passed on to clients in full, a practice known as ‘asymmetric price slippage’.
FXCM UK failed to check that its order execution systems were effective, and whether its order execution polices complied with the FCA’s rules on best execution. It also failed to treat its customers fairly.
In July 2010, the US authorities launched an investigation into FXCM’s business in the US. Senior managers who were involved with both businesses knew about the investigation but failed to alert the FCA, which breached the FCA’s requirement that firms are open and cooperative with the regulator.
Once it became aware of the investigation in August 2011, the FCA stepped in to review FXCM UK and secure redress for affected consumers.
Tracey McDermott (pictured), the FCA’s director of enforcement and financial crime, said: ‘Not only did FXCM UK fail to treat its customers fairly or correctly apply our rules, I am particularly disappointed that it was not transparent in its dealings with the FCA.
News sponsored by:
As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.
Today's top headlines
From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.