Closing Loopholes and the Forex Regulatory Map: Best of the Week

CySEC, ESMA and IKON Finance all appear in last week's most-read articles.

Last week was an eventful one in the financial markets. We saw new regulations and legislation published by ESMA and the Australian government, CySEC coming down hard on even more illicit businesses, and Finance Magnates Business Intelligence sharing with our readers invaluable information regarding forex regulation worldwide.


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Australian government closes loophole

The Australian government pushed forward legislation for the retail over-the-counter (OTC) foreign exchange (FX) and CFDs sector, solidifying rules surrounding client money and the segregation of funds. The impetus behind the directive was a loophole that allowing brokers to utilize client funds in a non-fully segregated fashion.

The legislation drew both support and condemnation. Matt Murphie, Director of the CFD and Margin FX Association, said in a statement: “We are extremely worried about the Federal Government’s drastic reforms because it will eliminate a large portion of industry players, not protect client money securely and will give mum and dad investors a false sense of security that the reforms have improved protection when statistics show the opposite,” he added.


Interview with Evgeny Sorokin

On Tuesday we featured an interview with Evgeny Sorokin, new head of the R&D department at Devexperts. The former CEO of Quotix explained to us what makes Devexperts one of the fastest growing technology companies in the industry, as well as what drew him to the firm:

“Such variety of offerings and projects require a strong technological foundation and development core. For 15 years the company has never lost its concentration on fintech. This focused approach was appealing to me. I realized that Devexperts is the place to be.”

World map of financial regulations

The Finance Magnates Business Intelligence department shared with readers some results of its research: a concise review of the regulatory status of forex in every country in the world, beautifully visualised in map form. 

This is vital information for budding brokers, as well as established brokers looking to expand overseas. For bespoke research work, please don’t hesitate to contact the Business Intelligence department at this link.


IKON voluntarily suspends business

FCA-regulated IKON Finance agreed to accept a voluntary requirement (VREQ) from the UK regulator to suspend client order processing for an unspecified period of time. It’s important to note that IKON Finance is not part of Multibank Exchange Group, which used to go by ‘IKON Multibank’.

A VREQ is typically a step which brokers take when making changes to their operations. Under the conditions, the license of the broker is not suspended,

Commenting to Finance Magnates, a company spokesperson said in a statement: “It is very important to note that customer funds were not affected in any way during this process and we are excited in continuing our business shortly. Customers have been able to withdraw or direct their funds at their request pending compliance of such transfers.”

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ESMA updates requirements

The European Securities Markets Authority (ESMA) has published a new addition to its regulatory Q&A, amending the doument to include a section that clarifies the supranational regulator’s stance on passporting and the cross-border provision of financial services to retail clients of foreign exchange, CFDs and binary options brokers.

The document is also addressing the use of affiliates by brokers and provides guidance to national supervisory authorities on how to oversee such entities.

Key takeaways include that companies cannot provide MiFID services via their representative offices in other countries. Brokers are only allowed to conduct market research and promote the brand of the firm.

National regulators of the EU member states are strongly encouraged to exercise supervision over the activity of the brokers outside of the home country where they are regulated.

The detailed clarifications can be found on pages 84 through 96 of the original ESMA document which is embedded at the bottom of this article.

CySEC continues crackdown

The Cyprus Financial regulator CySEC informed the public that it has handed down a suspension on the Cyprus Investment Firm (CIF) licenses of several forex and binary options brokers, according to the decisions being made at the meeting dated March 13, 2017.

CySEC imposed the punitive measures due to several alleged violations which may possibly endanger client/investor interests or more generally the regular operation of the capital market.

The named brokers have ten days to take the necessary actions in order to comply with the specified provisions. During this time, they cannot provide any services or enter into a business relationship with any person and take on any new clients.

The brokers are not allowed to execute any orders from clients for buying financial instruments or provide any investment services in or outside of Cyprus, and are also not permitted to advertise themselves as investment services providers

To see the firms in question, click here.



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