Following its recent decision to impose several fines on investment firms in its jurisdiction CySEC was praised by many who saw this move as a tangible toughening of the regulator’s stance. Indeed, according to the Chairwoman of CySEC herself: “The ultimate goal of onsite checks conducted by the Cyprus Securities and Exchange Commission (CySEC) is to ensure investor protection and the fair functioning of the securities market as a whole, through the improvement in Cyprus Investment Firms’ (CIFs) compliance with the necessary laws.
CIFs must operate at all times within the legal framework of the securities market and have a responsibility to their investor-clients. Where these duties are breached, as we have seen with these firms, the CySEC will impose fines as provided for by the Law. The CySEC will indicate to CIFs to take corrective measures within a set framework, otherwise additional measures will be taken such as the imposition of new fines, the suspension and/or even the withdrawal of their licenses.
CySEC will continue to closely monitor Cyprus investment firms and will have no hesitation in taking further action against firms that fail to comply with the rules that are designed to protect investors.”
However, the issue that caused the most discussion following CySEC’s decision was the settlement reached with IronFX. Considered one of the country’s most high profile and successful ventures IronFX has nevertheless been accused for months by clients and associates of withholding their funds and not paying up bonuses etc. The company’s stance has long being that those investors had managed to manipulate the bonus system in place fraudulently and that thus their claims were unsubstantiated.
Although a settlement between a regulator and a regulated entity is not an uncommon practice, this decision by CySEC has been criticized by many as concealing a problem under the carpet once again. Before making some further comments on this, let us see the official wording of the CySEC announcement on the matter:
“CySEC, under article 37(4) of the Cyprus Securities and Exchange Commission Law of 2009, has the power to reach a settlement for any violation or possible violation, act or omission for which there is reasonable suspicion that a person has committed in violation of the provisions of CySEC’s supervised legislation.
Pursuant to the abovementioned article and following a request by the Cyprus Investment Firm ‘IronFX Global Ltd’ (the ‘IronFX’), a settlement has been reached with IronFX for which there was reasonable suspicion of it committing possible violations of the Investment Services and Activities and Regulated Markets Law of 2007 (the ‘Law’) and of the Directives issued pursuant to the Law. More specifically, the possible violations under investigation, for which the settlement was reached, involved assessing the Company’s compliance with, amongst others:
1. Article 28(1) of the Law, according to which a Cyprus Investment Firm (a ‘CIF’) must, at all times, comply with the conditions under which authorisation was granted as laid down in Part III of the Law and in particular, with the conditions laid down in articles 18(2)(f) and (j) of the Law.
2. Article 36(1) of the Law relating to conduct of business obligations when providing investment and ancillary services to clients.
3. Article 38(1) of the Law, according to which a CIF must take all reasonable steps to obtain, when executing orders, the best possible result for its clients.
The settlement reached with IronFX, for the possible violations, is for the amount of €335.000.
The Company has paid the amount of €335.000.
It is noted that the amounts due from settlement agreements are calculated as revenue (income) to the Treasury of the Republic and are not calculated as an income for CySEC.”
It can easily be deducted from the above that the decision does not adequately answer or resolve the associated issues and questions arising. Did CySEC settle to save face because it was unable to find proof to substantiate its suspicions and was thus unable to impose a fine, like it did in other cases? Or is it perhaps that the IronFX people were fast and clever enough to evoke the relevant legal provision and request a settlement to avoid being “convicted” and damaging their brand?
It is true that through settling the dispute IronFX can still go around claiming that no wrongdoing on its behalf was actually proven and that it still remains a firm that hasn’t been fined by any regulator, anywhere, while it can also continue to maintain that the “war” against it is orchestrated by “jealous competitors”.
The client complaints against them though still remain and are not at all fictional. The fact that the company was able to immediately pay the settlement amount may indicate that it is not in such a tight financial corner after all, although some fear that they may have used client funds to make this payment. That being said, it is reminded that the jurisdiction of Cyprus does offer instruments for dealing with complaints and disputes with brokers in its jurisdiction.
Therefore, and although CySEC did not rule that IronFX is guilty, all investors feeling that IronFX has wronged them should seek compensation by presenting their complaint to the Financial Ombudsman (http://www.financialombudsman.gov.cy), for claims up to €170,000. Alternatively, they may also take legal action in the Cyprus courts, although cases there seem to take very long to be completed.
It would perhaps have been preferable if CySEC would have reached a more clear and definite decision with regards to IronFX that would have clarified the circumstances around this broker and given a better direction to clients. It appears however almost certain that this saga still has episodes to unfold and as always binaryoptionswire.com will remain vigilant and report on matters accordingly.