FXCM to Pay $180,000 Penalty for Unregistered Trades to Canadian Provincial Regulators

The NYSE listed brokerage has agreed to pay a penalty of $180,000, of which $22,000 will be paid to the

fcnbThe New Brunswick’s Financial and Consumer Services Commission (FCNB) announced on Friday that its local Financial and Consumer Services Tribunal has approved a settlement agreement between Forex Capital Markets (NYSE: FXCM) the Manitoba Securities Commission and the FCNB, which requires FXCM to pay administrative penalties for non-compliance with the local securities laws.

In Canada, the securities and derivatives industry is governed locally by provincial or territorial legislation and there is no national regulator. The regulation of FX products differs from province to province and territory to territory, the securities laws requiring a firm in the business of trading in securities to be registered with the respective Canadian provincial regulators.

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The FCNB explained that although Forex Capital Markets LLC (FXCM US) and Forex Capital Markets Ltd. (FXCM UK) were not registered to sell securities in New Brunswick or Manitoba, they were found to have facilitated trades for residents in these provinces. The regulators acknowledged that FXCM cooperated with both the FCNB and the Manitoba Securities Commission and transferred their accounts to a firm registered in Canada.

The company agreed to pay an administrative penalty of $180,000, of which $22,000 will be paid to the FCNB. The agreement was approved following a joint settlement hearing on October 14.

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The FCNB was established by the provincial government on July 1st, 2013, and is funded by the regulatory fees and assessments paid by the regulated firms. FXCM was aware of the change:

“We currently conduct our business in British Columbia through an arrangement with a registered investment dealer in Canada,” the firm described in its 2013 annual report. “In other provinces and territories in Canada, where we conduct the bulk of our Canadian business, we have historically provided our services directly from our U.S. facilities, without registering as a dealer in Canada.”

It added, “We are aware that local regulators in certain Canadian provinces and territories have begun to determine that FX trading services must be carried out through a registered investment dealer. Accordingly, we have entered an agreement with a registered investment dealer to address these regulatory developments.”

Speaking with Forex Magnates, FXCM explained that the fine is for its operations during the years of 2005 to 2012. “Since 2012 FXCM has had a relationship with a locally registered firm in Canada; All accounts are opened by and held with Friedberg Direct, a division of Friedberg Mercantile Group Ltd., a member of the Investment Industry Regulatory Organization of Canada (IIROC). Friedberg is also a member of the Canadian Investor Protection Fund (CIPF).” FXCM added: “we are happy to have this matter behind us.”

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