The Cyprus Securities and Exchange Commission (CySEC), has wrapped up 2013 with its latest administrative fine of EUR 5,000 given to one of its Cypriot Investment Firms (CIF), iForex Ltd.(Cyprus), according to a notice published on the CySEC website today.
After what had been a busy 2012 for the Cypriot Government and the economy of Cyprus, and its recovery phase during the post 2013 bail-in, the regulator overseeing domestic financial services companies within its territory, CySEC, has stepped up its administrative processes and overall operational efficiency as its seeks to compete and harmonize its efforts with that of modernized regulatory agencies in order to maintain its country’s status as an attractive financial center.
Fine Related to Banner Ad Unbalanced and Missing Risk Disclosure
Following a review of the company’s websites iforex.gr on May 24th and May 28th by CySEC, a decision was arrived at by its council on November 11, 2013, and a fine of 5,000 Euros was imposed on iForex in connection with a lack of certain risk disclosures on specific online banner advertising, and unbalanced communications, which have since been rectified as the firm aims to better comply with its regulatory obligations as a CIF. The compliance issues were related to meeting the conditions of paragraph 6 (2) of Directive DI144 – 2007- 02, as per the CySEC press release.
Accordingly, in order to meet its obligations iForex has removed the content considered to be unbalanced by CySEC from specific pages, and added under each banner ad in question a short risk notice stating: «Trading Forex and /or CFDs and /or Binary Options carry a high degree of risk and may not be suitable for all investors » online ‘ read more ‘ (redirecting to a link that refers to a detailed description of the risks of transactions in Forex / CFDs).
iForex Cyprus Driving the Company’s European Growth
Forex Magnates spoke with persons familiar with the matter and close to the company who confirmed that steps have already been taken to fix the issues that were out of compliance – as mentioned in the CySEC announcement -and how the items were minor (also as can be seen in the size of the fine) in the scope of the firm’s overall compliance obligations and established regimen.
According to Forex Magnates’ sources, iForex has experienced significant growth with the Cyprus office driving its success in Europe, and as part of its parent company group structure.
For a regulator that can impose fines of up to to 350,000 Euros, clearly the administrative fine given in today’s announcement could be more comparable to an expensive parking ticket rather than to comparable fines which were given over the last year to certain financial services conglomerates (some totaling in the billions).
KVB PRIME Strikes UK with Influential Finance Summit SponsorshipGo to article >>
As the regulator becomes more efficient in its oversight and supervisory and surveillance monitoring, such fines may be more commonplace as CySEC reviews online content that its member firms are responsible for.
Administrative Compliance Comparisons and Role of Regulators
In the US, where the NFA has required certain firms to submit such content to NFA’s “art” department for review and/or in advance of publication, most NFA member firms under the obligation to keep related messages balanced in their “communications with the public” already know the potential monetary penalties and administrative fines that can be imposed in relation to these – if such communications fall out of applicable guidelines.
This is indeed one way to help ensure firms stay balanced in the scope of meeting their regulatory obligations. Often times, during an audit or review a firm may be given time to fix an issue if it’s a one-time event and limited in scope, whereas a firm with repeated violations could receive greater reprimand and less mercy from the regulator especially if the severity of the issue is of grave importance.
Brokerage Retail Advertising Under Regulator’s Eye
Each case is unique to a certain degree, but it’s clear that in these types of administrative cases, the regulator is catching what the broker missed, even if it’s one miss out of a hundred, a fine can still be imposed.
The key for brokers is to try to ensure that all communications are balanced with respect to potential profits and potential losses, since referencing both isn’t always enough as over-emphasis might be indirectly given to potential profits, whereas risks could be under-emphasized. This applies to discussing related benefits of trading FX and offered investment/trading services as part of promotional material and other such content whether electronically published or printed materials, and even the latest such rules applying to audio-recorded voice conversations (between dealers, clients, salepersons, etc..) that must be maintained by certain brokerages in certain parts of the world in wake of recent compliance related developments.
This often subtle shift in balance can be intentionally or unintentionally caused by writers, graphic designers and 3rd party media agencies as from time to time the scope of compliance obligations may or may not be under their respective awareness or area of responsibility – even if the ultimate responsibility falls upon the brokerage. Therefore, any comprehensive compliance strategy with regards to promotional related communications should include all steps of the content creation from start to final delivery.
As the new year approaches, Forex Magnates’ readers can stay tuned to our upcoming Industry Reports (and Quarterly Industry Report-QIR4 – for the fourth quarter of 2013) which are underway by our research team and editorial staff, as key insights from 2013, including the latest quarter that is about to close – will be instrumental in planning for a successful 2014 and beyond.