FXCM faces two investigations for alleged securities law violations

It seems like many parties were waiting on the lines for FXCM to go public as now there’s a plethora

It seems like many parties were waiting on the lines for FXCM to go public as now there’s a plethora of lawsuits against the forex broker. Morgan Business Trial Group launched a class action suit against FXCM couple of weeks ago and now two more investigations of FXCM were announced. This time both investigations focus on FXCM’s IPO itself and investigate claims on behalf of investor allegations that certain statements issued by the Company regarding FXCM’s business, operations and financial performance were materially false and misleading. This is due to the Citi’s earnings downgrade for FXCM’s stock price from $18 to $14 only 3 months after the IPO. On the day of the downgrade the stock fell 13% and many investors may have felt that the IPO price did not reflect the actual status.

Investigation 1:

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Kahn Swick & Foti, LLC (“KSF”) and Former Attorney General of Louisiana, Charles C. Foti, Jr. announce the commencement of an investigation into FXCM, Inc. (“FXCM” or the “Company”) (NYSE:FXCM – News) to determine whether it has violated federal securities laws by issuing false and misleading statements to its shareholders.

Only 3 months removed from the Company’s IPO, shares of FXCM closed down 13% today – to a low of $12.05 on heavy volume – following the release of results from last month that were “substantially” below expectations according to one analyst. William Katz at Citi wrote in a note that “the data calls into question our 2011-12 … growth assumptions and begin to suggest greater maturity in the business than previously contemplated.” Moreover, today’s decline comes on the heels of a lawsuit filed by an FXCM customer last week alleging fraud and racketeering, claiming that the Company has bilked thousands of customers out of hundreds of millions of dollars using deceptive and unfair trade practices.

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Investigation 2:

Law Offices of Howard G. Smith announces that it is investigating potential claims on behalf of purchasers of the securities of FXCM Inc. (“FXCM” or the “Company”) (NYSE:FXCM – News) concerning possible violations of federal securities laws. FXCM is an online provider of foreign exchange – or FX – trading and related services to retail and institutional customers globally.

The investigation focuses on allegations that certain statements issued by the Company regarding FXCM’s business, operations and financial performance were materially false and misleading. On February 16, 2011, FXCM shares fell to their lowest level since the Company’s initial public offering in December 2010. Citi Investment Research analyst William Katz cut his earnings estimates for the Company for 2011 and 2012, and lowered his price target for the stock from $18 to $14. Katz wrote in a research note that the year-to-date data have raised questions about growth assumptions for the Company, and “begin to suggest potentially greater maturity in the business than previously contemplated.”

Update: FXCM had this to say: “”FXCM does not comment on the activities of plaintiffs’ firms who are apparently seeking to solicit clients. No lawsuit has been filed and this should not be mistaken for a government investigation.”

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