In total FXCM will pay over $16.2 million to settle NFA and CFTC’s charges.
This is the continuation of the NFA’s fine back in August which charged FXCM with retaining gains derived from positive price slippage; failing to adopt or carry out adequate procedures to ensure the efficient execution of all customer orders; failing to treat all customers equally when giving price adjustments; and failing to adequately investigate suspicious activity in all customers’ accounts. The Complaint charged FXCM and Niv with failing to supervise.
In response to the $6m CFTC fine/settlement, FXCM had this to say: “The settlement between FXCM and the CFTC was anticipated and previously disclosed on August 11, 2011, during FXCM’s Second Quarter Earnings Conference Call. At that time, the company established a reserve of $16 million in anticipation of the fines associated with the CFTC ($6 million) and the NFA ($2 million) settlements as well as restitution ($8,261,937) credited to affected clients. To date, the NFA fine has been paid and restitution to affected clients has been credited. The NFA and CFTC fines as well as restitution are all covered under that reserve, resulting in no negative impact to the net income of FXCM Inc.”
Firm also sanctioned for failing to promptly produce certain records to the CFTC’s Division of Enforcement.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges that Forex Capital Markets LLC (FXCM) failed to supervise diligently its personnel’s handling of more than 57,000 customer accounts that traded on FXCM’s forex trading platforms. FXCM is a registered retail foreign exchange dealer and futures commission merchant headquartered in New York, N.Y. The order also settles charges that FXCM failed to produce certain records promptly to the CFTC’s Division of Enforcement during its investigation.
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The CFTC order requires FXCM to pay a $6 million civil monetary penalty and restitution of $8,261,937 to its customers and former customers. In addition, the CFTC order requires FXCM to retain, at its own expense, a monitor to review for three years: (1) its trade execution practices and policies as they relate to the change in price between the time the customer places the order and the time the order is executed by FXCM; and (2) its compliance with its restitution obligation.
According to the CFTC order, from at least June 18, 2008 until December 17, 2010, FXCM failed to supervise diligently the handling of customer accounts traded on the FXCM platforms by its officers, employees, and agents with respect to changes in price between order placement and execution on both market orders and margin liquidation orders. The order finds that FXCM’s failure prevented its customers from receiving the benefit of price movements in customers’ favor, but allowed its customers to suffer detrimental price movements. The CFTC order finds that had FXCM diligently supervised its personnel, FXCM would have discovered these problems with its trade integrity and would have had the opportunity to correct them before its customers were deprived of, and FXCM benefitted by, approximately $8,261,937.
Further, the CFTC order finds that FXCM failed to produce certain records promptly in its capacity as a CFTC registrant and thereby required the CFTC to issue a subpoena to attempt to obtain required records from FXCM.
The CFTC thanks the National Futures Association (NFA) for its assistance. On August 12, 2011, the NFA issued a Decision imposing a $2 million monetary sanction against FXCM in settlement of an NFA action (NFA Case No. 11-BCC-016) involving some of the same practices identified in the CFTC order.
CFTC Division of Enforcement staff members responsible for this case are Charles Marvine, Christopher Reed, Rachel Hayes, Stephen Turley, Rick Glaser, and Richard Wagner.