It’s been more than two years since the Securities and Exchange Commission (CySEC) withdrew the Cyprus Investment Firm (CIF) license of Atlas Capital Financial Services, more known as ACFX.
Today, the Cypriot watchdog announced the initiation of the process of compensating the clients of the now-defunct FX broker after the company was forced out of business due to outstanding withdrawal complaints.
The process involves the CySEC inviting clients to the claims portal for them to enter the necessary details and state their claims.
ACFX had its license lapsed in 2017 after numerous complaints by its clients who claimed issues with withdrawals, and the Cypriot regulator confirmed the company did not hold sufficient funds in its coffers to settle obligations.
CySEC also identified ACFX’s lack of necessary safeguard procedures to protect client assets and raised concerns over practices by its executives including low-quality client support and monitoring risk-management. At one point, most employees left or were forced to leave, and only the company’s general manager Petar Gazivoda and a few other staff members were left around to deal with the issues.
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ACFX’s collapse was also expected as it had problems earlier with its Chinese clients, who were unable to withdraw their money for quite some time. At the time, the company claimed that they were scammed by certain Chinese traders, taking advantage of incorrect swap rates from the company.
Fortunately, ACFX is a member of the Investor Compensation Fund (ICF), which serves to protect the claims of covered clients and provide them with compensation in case a member couldn’t meet its financial obligations.
According to the CySEC’s announcement, the regulator initiates the compensation payment procedure after it has revoked the ACFX’s authorization which is not expected to pay back its obligations in the near future, “for reasons which do not concern a temporary lack of liquidity which can be dealt with immediately.”
The next step will see the ICF inviting covered clients to make their claims against the company, designating the procedure for filing compensation applications and the deadline for their submission. The fund will publish the details in at least two local newspapers, including the address at which investors may be informed about the progress of their applications.
The amount of the compensation payable to each client is calculated in accordance with the contractual terms governing his relationship with the faltering broker, but in general, the maximum amount doesn’t exceed €20.000.
Earlier this month, the CySEC has changed maximum compensation for valid claims to be either 90 percent of the cumulative covered claims or €20.000, whichever is lower. Therefore coverage = Min (90 percent Χ claimed amount, €20.000). This means that an investor who holds €50.000 with a CIF, which runs into trouble and is unable to pay, will get €20.000 from the ICF. However, if the claim is for €10.000, the coverage will be only 90 percent or €9.000, not 100 percent as previously calculated.