Hong Kong’s Securities and Futures Commission (SFC) fined FXCM Asia Limited (HK FXCM) (now known as Rakuten Securities Hong Kong Limited) HK$4 million ($515,579) for holding on to its clients’ trading profits from favourable price movements, while passing on losses in full, the SFC said in a statement.
Between December 2006 to December 2010, the firm and its affiliates took about US$1,452,926.69 of retail clients’ profits generated by favourable market movements that occurred between the time the orders were received and executed by HK FXCM. By contrast, any losses were passed to clients in full – a practice known as asymmetric price slippage.
In a very similar case, FXCM UK was hit in 2014 by fines and refunds totalling $16.7 million to settle allegations by the UK FCA that the company withheld profits from clients and failed to inform British authorities that it was under investigation in the US.
FXCM Asia also failed to check that its order execution systems were effective, and whether its order execution polices complied with the SFC’s rules on best execution.
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These rules require firms to take reasonable steps to secure the best possible deal for their clients. The SFC also expects firms to treat their customers fairly – FXCM Asia fell short of both of these standards.
The SFC further found that: “HK FXCM did not have proper internal policies and controls in place to ensure its order execution practice effectively complied with all regulatory requirements applicable to a licensed corporation.”
Under the terms of the settlement, HK FXCM has agreed to pay fines totalling HK$4 million to the SFC and to provide approximately US$1,452,926.69 in restitution to the affected clients.
In deciding the sanctions, the SFC took into account that: “HK FXCM is now under new ownership of which 100% shares are held by Rakuten Securities, Inc. in Japan from September 2015 and the failures were attributable to the former management of HK FXCM which has been replaced.”
HK FXCM’s clients will be fully compensated, with credit automatically paid into their accounts within 30 days. Rakuten Securities will also temporarily reopen accounts to reimburse clients that have left and will notify them to claim their funds.