The Securities and Exchange Commission (CySEC) today announced the initiation of the process of compensating the clients of PFX Financial Professionals Ltd, which operates the brand FXFINPRO Capital.
The process involves the CySEC inviting clients to the claims portal for them to enter the necessary details and state their claims.
The Cypriot watchdog has wholly withdrawn the Cyprus Investment Firm (CIF) of FXFINPRO, and the company was forced out of business back in October 2018. FXFINPRO, which held registration number 193/13, had its license lapsed after CySEC raised concerns over practices by the company and its executives that the watchdog deemed potentially not compliant with its regulatory obligations.
In particular, the broker was initially flagged for non-compliance with section 28(1) of the Law which concerns persons who effectively lead its business, as well as an alleged violation of section 36(1) of the Law (Conduct of business obligations when providing investment services to clients). Further, FXFINPRO didn’t comply with section 114 with regards to submitting its financial accounts, as well as section 139(1), which requires regulated firms to provide the CySEC with correct, complete, and accurate information.
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Fortunately, FXFINPRO 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 FXFINPRO authorization. The company, however, is not expected to pay back its obligations in the near future, “for reasons directly related to its financial circumstances.”
The next step will see the ICF invite 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 last year, 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.