CFTC fines FXCM UK $140,000 for acting as a counterparty to US retail forex clients

Update: FXCM published a statement which explains why this happened - basically FXCM was caught between CFTC's and FSA's rules

Update: FXCM published a statement which explains why this happened – basically FXCM was caught between CFTC’s and FSA’s rules whereas CFTC required FXCM to shut down US accounts, FSA required FXCM to provide sufficient notice.


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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 has been causing a major stir for US based FX brokers. FXCM one of the worlds largest FX brokers by volume and client assets has been fined by the CFTC for failing to be registered with the Commission.

The U.S. Commodity Futures Trading Commission (CFTC) today filed and simultaneously settled charges that Forex Capital Markets Ltd. (FXCM Ltd.) of London, U.K. acted as a retail foreign exchange dealer (RFED) by conducting retail leveraged forex transactions with U.S. customers without registering with the CFTC under the agency’s regulation 5.3(a)(6)(i). FXCM Ltd. has never been registered with the CFTC in any capacity.

The CFTC order requires FXCM Ltd. to pay a $140,000 civil monetary penalty and to cease and desist from further violating CFTC regulation 5.3(a)(6)(i).

Today’s action stems from new regulations that the CFTC enacted on October 18, 2010, implementing certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The new regulations also require forex dealers to take steps to protect investors, including maintaining capital and records, to reduce risk and increase transparency. (See CFTC Press Release 5883-10.)

The CFTC order finds that, from October 18, 2010 through October 29, a period of 11 days immediately following implementation of the new regulations, FXCM Ltd. acted as an RFED counterparty to U.S. customers who were non-Eligible Contract Participants in connection with leveraged retail forex transactions without registering as an RFED.

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The CFTC’s order emphasizes that the CFTC’s registration requirements for commodity professionals are “a cornerstone of the regulatory framework enacted by Congress to protect the public.” Registration is the “linchpin of the CFTC’s ability to perform its statutory functions of monitoring and enforcing” the Commodity Exchange Act (CEA), and the CFTC has recognized that the operation of an unregistered entity is a “serious violation” of the CEA and a “threat to the integrity of the industry,” according to the order.

This is not the first time FXCM has been in the limelight, back in 2005 the NFA fined them for $110,00 for distributing misleading promotional material. Recently a case was filed against FXCM by customers claiming that they used unfair trade practises.

The Dodd-Frank Wall Street Reform is being lobbied by brokers as these reforms are driving the business away. Since the new FIFO and leverage guideline the major US based brokers have open house in other major financial centres like London and Sydney.

LONDON – 3, August 2011 – Forex Capital Markets Ltd (FXCM UK), the London based investment firm of FXCM Inc. (NYSE: FXCM), today announced that it has reached a settlement with the U.S. Commodity Futures Trading Commission (CFTC) regarding a 11-day delay in 2010 in the repatriation of accounts held by U.S. residents.

In accordance with CFTC registration requirements that became effective on October 18, 2010, FXCM UK had to shut down or repatriate accounts held by U.S. residents back to FXCM’s U.S. entity, Forex Capital Markets LLC (FXCM US). At the same time, the Financial Services Authority (FSA), FXCM UK’s regulator, required individual consent from each account holder before the Company could initiate a transfer. In seeking to comply with the FSA requirement and prevent disruption to clients’ open positions, FXCM UK missed the CFTC’s deadline for completing the process as it sought to properly notify affected clients and conduct transfers in a timely and orderly fashion.

As a result, FXCM UK was not in compliance with the CFTC’s requirement for 11 days between Oct. 18, 2010 and Oct. 29, 2010. Under the terms of the settlement, the Company has agreed to pay a $140,000 fine to the CFTC to resolve this matter.

“FXCM worked toward the most optimal solution to minimize client impact and ensure a smooth transition of accounts,” said Drew Niv, Chief Executive Officer of FXCM. “We worked diligently to communicate, educate and repatriate U.S. residents, and although we regret the brief non-compliance with the new U.S. regulation, we are pleased that we were able to provide our clients with a seamless migration.”

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