Few FX brokers have been engulfed in the level of drama seen at FXCM over this past week, however, following last week’s CFTC investigation, Kirby McInerney LLP is exploring claims against the firm’s Board of Directors. This is standard practice by a number of US law firms, but rarely do they get any material results.
The move comes after a force majeure event, which has been widely unpredictable by the financial markets until yesterday, when the European Central Bank (ECB) announced that it was going to purchase over €1.1 trillion of sovereign bonds until September 2016.
The Swiss National Bank decided to drop the peg just one week prior to the ECB’s announcement, realizing that it would have been directly financing the monetary expansion of the Euro area.
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FXCM was extended a $300 million lifeline from Leucadia National last week, which helped offset the large capital hit due to client negative balances that reached approximately $225 million.
Earlier this week, two US law firms publicly stated that they were investigating FXCM (NYSE:FXCM) for possible violations of the Securities Exchange Act 1934 10(b) and 20(a). Owners of FXCM shares are believed to be in discussions with the attorneys as investigations into the firm come on the back of the massive price drop on Friday the 16th, which saw the stock diving 90%.
The most recent investigation centers on FXCM’s Board of Directors, which is in reference to a possible breach of certain regulatory capital requirements. This is the third such instance against FXCM by a law firm, which only mires its present situation on the back end of last week’s lifeline.
Since the suspension of trading last week and its subsequent resumption earlier this week, FXCM shares have rallied to $2.62 a share at the time of writing, down -15.48% on the day.