The Cyprus Securities and Exchange Commission has announced the outcome of its long-running investigation of CommexFX. The company has been the subject of one of the most controversial cases on the island, after it initially got its license suspended in 2015 due to withdrawal delays.
In the aftermath of a two year investigation into the dealings of the brokerage, CySEC has outlined some additional measures that the regulator is taking against individuals connected with the case. The watchdog is going after a number of directors and relevant persons of CommexFX and is suspending their activities in the financial sector.
A total of €400,000 in fines has been imposed on connected individuals, including the manager and shareholder Abdel Rahman Alimari.
Other individuals who have been fined are relevant persons Mohab Mohamed Taghian Radwn, Amr Jamal Mohamed Hendawi, Executive Directors Stavros Hadjikyriakos and Anastasios Yiapanis, internal auditor Savvas Rigas and the firm’s Chief Financial Officer, Vladimiros Germanos.
The company itself has been fined €250,000 after numerous suspensions and the subsequent withdrawal of the broker’s operational authorization.
Mr. Alimari, Mr. Radwn and Mr. Hendawi have been banned from regulated activities for ten years and five years, respectively.
The management of the firm is said to have been contributing to or failing to prevent a shortage in client funds that was identified in June 2015. CySEC outlined in its announcement that the individuals in question are not fit to perform any function related to the financial services industry.
Attorney General Dealing with CommexFX Case
CySEC is referring the case to the Cyprus Attorney General to establish whether any criminal offences arise for the company and Mr. Alimari regarding the provision of false and/or misleading information and embezzlement of client monies.
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After the 6th of April, the regulator invited the company to pay its dues to clients and gave the company three months to do so. On the 4th of May 2017, the CySEC triggered the process of compensation payments to clients by the Cyprus Investor Compensation Fund (ICF).
Commenting on the regulator’s announcement today, CySEC Chair Demetra Kalogerou said: “CommexFX has persistently violated the laws we have in place to protect investors. The multiple fines imposed on the Company’s directors, and the ban of three directors from regulated activities concludes CySEC’s two-year investigation into the Company’s failings, and follows the withdrawal of its license to perform any regulated activities in 2016.”
“The initiation of the Investor Compensation Fund in May 2017 will ensure the swift remediation of any and all withdrawal of retail client’s monies, up to €20,000 each, in line with CySEC’s commitment to limit consumer detriment. CySEC will not hesitate to pursue regulatory action against current or former directors should they or their licensed company be found to be in violation of the legislation we consistently enforce,” Mrs. Kalogerou elaborated.
Can CySEC Collect the Fines?
The Cypriot regulator has been committed to establishing a strong reputation at a time when ESMA has been pressuring national regulators to adhere to the common European regulator framework.
Today’s move by CySEC can be seen as a warning to senior personnel that fail to act when certain operational irregularities are identified. With at least one of the individuals mentioned above serving a jail sentence in Egypt, the Cypriot watchdog is unlikely to be able to collect all the fines.
List of Executives Fined
Alimari, Radwn and Hendawi were each fined €50,000 for failing to safeguard client money. Alimari, Hadjikyriakos and Yapanis were fined €150,000, €25,000 and €15,000 for failing to perform the required periodic assessments of the business and ensure compliance.
Rigas and Germanos were each fined €10,000 because they failed to take appropriate actions to prevent the shortage of client money, after seeing audits of the company’s 2014 figures.
Lastly, Hadjikyriakos, Rigas and Germanos were fined €20,000, €10,000 and €10,000, due to failure to inform CySEC about the suspected violations at CommexFX during the investigation.