Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

FCA fines forex firm £4m over 'unfair profits'

FCA fines forex firm £4m over 'unfair profits'

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.

‘We expect all firms to put customers at the heart of their business, and we have taken action to ensure clients of FXCM UK will get redress.’

The FCA is conducting a thematic review of firms’ execution practices, including the way services are described to clients and arrangements for order execution and review. The FCA expects to publish the results by the end of second quarter of 2014.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Brewin's Gutteridge: Yuan direction

Brewin's Gutteridge: Yuan direction

This week Brewin Dolphin's research head chats to Fidelity Asian Investment Directors Jenny Lee and Gary Monaghan about the big changes in China.

Play On the Road Challenge: horsing around on the polo pitch

On the Road Challenge: horsing around on the polo pitch

Libby Ashby takes to the polo pitch with Stuart Leigh-Davies from Redmayne-Bentley for an 'On the Road' challenge.

Brewin's Gutteridge: where Miton's Godber sees value

Brewin's Gutteridge: where Miton's Godber sees value

This week Brewin Dolphin's research head talks to George Godber, co-lead fund manager of the Miton UK Value Opportunities fund, about value investing.

Your Business: Cover Star Club

Profile: what tempted Brewin's Glasgow team over to Rathbones?

Profile: what tempted Brewin's Glasgow team over to Rathbones?

Rathbones’ Glasgow office has only been open for three months but the team, led by Angus Kerr, has already attracted new clients

Wealth Manager on Twitter