Gain fined $459k for abusive market practices

NFA has accepted Gain Capital and its CEO’s offer of settlement and decided to end its case against the company

NFA has accepted Gain Capital and its CEO’s offer of settlement and decided to end its case against the company with only a $459,000 fine. Rumors in the market were that the estimated fine would be in the region of $2-3 million, so it seems Gain got out of it pretty lightly.

As a reminder – in July 2010 the NFA has charged Gain with many severe violations of its regulations, mostly specifically for usage of the infamous Virtual Dealer plug-in which made sure that market slippage was always in Gain’s favor.

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COMPLAINT:

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On June 30, 2010, NFA issued a Complaint against Gain and Stevens that cited Gain for engaging in margin and liquidation practices that had a detrimental impact on certain of Gain’s customers on certain slipped trades, failing to maintain records for certain unfilled orders that were placed on the MetaTrader trading platform prior to May 2009, failing to adequately review the activities and promotional material of Gain’s unregulated solicitors, failing to respond promptly to certain inquiries and requests made by NFA during NFA’s audit of Gain and, together with Stevens, failing to supervise the firm’s operations.

DECISION:

On October 27, 2010, NFA’s BCC issued a Decision accepting an Offer of Settlement submitted by Gain and Stevens, in which Gain and Stevens neither admitted nor denied the allegations of the Complaint and agreed to settle the case on the following terms: Gain agreed to refund to customers the amount of negative slippage they experienced on the trades that were placed in their accounts between May 1 and July 31, 2009 and which were attributable to the Virtual Dealer Plug-in that Gain used on its institutional and retail servers, Gain agreed to refund to customers the losses they incurred as a result of Gain’s practice of adjusting leverage and margin requirements on Fridays, as alleged in Count I of the Complaint; Gain agreed to pay $459,000 to NFA as a monetary sanction; Gain agreed that in the future any and all slippage parameters that Gain uses in determining whether a customer’s order will be executed or re-quoted, shall be symmetrical in nature and neither advantageous nor disadvantageous to the customer or to Gain; and Gain agreed not to reinstate its practice of adjusting leverage and margin requirements on Fridays, as described in Count I of the Complaint, which it has discontinued. The Decision made no findings with respect to Count V of the Complaint charging failure to supervise.

Read full documents here.

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