Case Closed: NFA and IKON Global Markets Settle

The US National Futures Association has entered into a settlement with IKON Global Markets and a senior director of the

FX brokerage IKON Global Markets has entered into a settlement with the US National Futures Association (NFA) with regard to a complaint that the regulatory authority filed against IKON Global Markets on April 18 this year, asserting that the company, along with its COO Diwakar Jagannath failed to cooperate with the NFA’s 2012 audit.

Permanent Withdrawal From NFA Membership

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Two days ago, the case was concluded as Mr. Jagannath and his company reached settlement with the NFA, with both Mr. Jagannath and IKON Global Markets voluntarily permanently withdrawing their NFA Membership.

This is not the first brush with the authorities that IKON Global Markets has experienced, having found itself on the wrong side of the regulatory standing in 2010 when it was prosecuted for using asymmetrical price slippage settings on its forex trading platform. The case was settled with the NFA, with IKON agreeing to pay $320,000 fine and refund customers the slippage amounts. The broker then exited the US as a forex broker, but held onto its FCM license until this year.

Proprietary Exposure

The complaint filed in April which was settled on Tuesday this week originates from findings by the NFA whilst conducting a routine audit of the company in 2012, during which the NFA alleged that IKON Global Markets failed to cooperate with the regulatory requirement of producing certain records that were required for the audit.

The NFA also alleged that IKON Global Markets had failed to properly calculate its Adjusted Net Capital as it failed to included “the firm’s proprietary exposure in computing the haircut charge on open forex call positions”. Including the ‘haircut’ would have resulted in a reduction of $3.3 million in its Adjusted Net Capital.

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Additionally, NFA alleged that a major IKON affiliate, Quasar FX, was not reporting margin correctly. The audit also found that certain IKON’s AML policies were lacking.

At the time, the company had a series of affiliate entities as its clients. Upon further investigation, it came to light that the affiliates shared common shareholders and that there were alleged irregularities in trading activities and deposit and withdrawal transactions.

The NFA then issued a final Complaint charging IKON Global Markets and Mr. Jagannath with failing to cooperate with the NFA by refusing to produce all bank records requested by NFA for IKON’s affiliated companies.

Final Ruling

The United States regulatory authorities are notoriously stringent when it comes to ensuring that market participants maintain full recordkeeping in order that each transaction and relationship between customer and broker can be accounted for and has been conducted according to the law.

Both IKON and Mr. Jagannath, having already voluntarily resigned their membership in January of 2013, made a voluntary offer of settlement agreeing not to reapply for NFA associate membership, or apply to be an NFA Member or act as a principal of an NFA Member at any time in the future, which was accepted by the NFA’s Business Conduct Committee.

When reached for comment by Forex Magnates, Ikon Global Markets stated: During our routine audit in 2012, we informed the NFA that we were winding down our US operations and would subsequently voluntarily withdraw our membership with NFA, both individually and as an FCM. Our decision was based in part on our lack of involvement in the US retail market and the diminished business opportunities in the US. If we wanted to continue to operate in the US and saw opportunities for expanding our business here, we would not have withdrawn our membership status and would have completed all the requirements of membership. Our decision to settle this matter rests in our belief that we do not now, nor in the foreseeable future see any opportunity for us to be involved in the US markets. We vehemently denied the allegations in the original complaint, all of which were removed from the final decision.

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