Earlier in the month we reported that CySEC regulated Safecap Investments LTD, the financial firm behind the trading brand Markets.com among others, has appointed a new CEO to lead its Cyprus operations. Coming to Safecap is Eyal Wagner, who was previously the CEO Leverate Cyprus, the technology firm’s CySec regulated Liquidity provider and broker. The appointment comes as indications from the broker’s partners refer to coming operational changes.
Potential changes occur as the broker has already had a busy twelve months that included the launch of its binary options brand, TopOptions, rebranding its main Markets.com site, and development of a broker neutral binary options platform provider, Keystone Trading Technologies. According to sources working with the company, the next major changes appear to be coming from the regulatory side of things as the firm is working on the launch of an Australian, ASIC regulated entity, as well as an off-shore unregulated brand.
Stricter EU Monitoring Leading to Off-Shore Businesses
Whether based on customer complaints, or the coming arrival of codified EU rules regarding asset managers, more and more Cyprus brokers have been reported to be dropping affiliations with unlicensed money managers. At the heart of MAM accounts are money managers trading on behalf of broker clients. Clients are often referred to managers by their introducing brokers, who benefit from volume-based commissions. As a result, high in demand are money managers that can both deliver steady volumes plus consistent performances to appease customers and broker partners.
The setup though, comes with potential conflicts of interest, as introducing brokers have incentives to refer heavy volume trading managers to their clients. In terms of Safecap, partners of the firm have told Forex Magnates that the broker was eliminating the use of unlicensed managers. Based on insider sources, this is in relation to investigations by CySec into Safecap’s relationship with unlicensed managers who were trading on behalf of account holders.
According to partners, the broker also alerted them of the pending re-launch of the Trade.com brand as an unregulated offshore subsidiary. Similar to moves from FXCM and Alpari, unregulated (or at least lightly regulated) off-shore subsidiaries provide brokers the ability to on-board clients from unregulated jurisdictions where there are laxer rules in terms of compensating partners. By migrating parts of its non-EU accounts out of CySec jurisdiction, it allows for greater flexibility in handling different needs of the broker's introducing brokers and white label partners.
In regards to Safecap's new hire, Wagner, the timing of his appointment appears to fit well with upcoming regulatory-based activity, as he comes to the firm with previous experience in legal and compliance matters. Questioning Safecap about Wagner's appointment and his future expected role, a senior executive answered Forex Magnates that they couldn't comment about Safecap’s future business strategies. However, he did verify that Wagner had been appointed as CEO of Safecap, stating that, “Safecap is always looking for the best and brightest talents, and an opportunity arose to recruit Mr. Wagner, who has years of experience managing regulated FX brokers in Cyprus – Mr. Wagner was previously CEO of Leverate (a regulated broker and Liquidity Provider based in Cyprus, and partially owned by Saxo Bank). Safecap took the opportunity and is happy to have Mr. Wagner as its CEO.”
KNF Warning
Corresponding with Safecap about the appointment of Wagner, we took the opportunity to speak with them about their Polish operations where the broker closed its representative office earlier this. Back in September, falling on the Public Warnings' list of the Polish Financial Supervision Authority (KNF) was Safecap Investments (Poland), a local marketing subsidiary of the Safecap. According to the KNF warning, the regulator stated that Safecap (Poland) “Do not have the KNF’s license executing agency services in scope of trading in financial instruments without the required entry to the register of investment firm agents, yet it is targeting Polish customers."
The inclusion on the KNF was interesting as Safecap is a CySec regulated broker, which according to MiFID and the KNF’s own rules, is entitled to open a local Polish office using its EU-wide license from Cyprus. However, the warning does come after customers have lodged complaints against the broker in relation to losses experienced in managed accounts. But, as indicated above, the KNF warning focused on licensing failure, and not on an investor warning against the brokerage practices of Safecap.
Responding about the KNF warning and the Polish office, Safecap legal counsel answered to Forex Magnates that Safecap no longer is operating an office in Poland and that, “We have an EU license which allows us to operate in Poland via the MiFID passporting laws,” thereby, “no need to be KNF approved.” Company representatives clarified as well that the KNF letter was not directed at Safecap, but towards their Warsaw-based marketing subsidiary which was “responsible to buy advertising in Poland, as well as recruit IB’s,” but wasn't involved with any financial activities. It was added that as financial services were being offered exclusively from Safecap’s licensed Cypriot entity, the “marketing entity was indeed not licensed, as it didn't need to be licensed.”
Regardless of the closure of the office, Safecap related that it continues to be partnering with local partners in Poland. Representatives from the firm didn't provide any details of whether there were any plans to open another local office in the country.
