CySEC Fines Spot Capital Markets for Regulatory Violations

The €50,000 fine stems from breaches pertaining to unlawfully providing financial advice.

CySEC has fined Spot Capital Markets €50,000 for a lack of compliance with restrictions imposed by the European regulator.

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Spot Capital Markets has incurred the €50,000 penalty as a result of violations pertaining to its handling of client relations. As per the official CySEC statement, the violations stem from breaches that occurred between January and June 2016. €30,000 of the total fine can be attributed to the company “failing to communicate with customers and potential customers in an accurate, clear and non-misleading manner as required under the law.”

CySEC explained that the remaining €20,000 in penalties is a direct consequence of the “Company’s offering of financial advice.” The investigation by an internal auditor concluded that the advice given to clients was considered to be “against customers’ best interests.” Over the past few years, CySEC has become more strict in its restrictions as a result of increasing violations by regulated brokers, and a correspondingly growing number of complaints issued by customers.

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The tightening of the regulatory framework emphasized outlawing the providing of financial advice to clients for various reasons. Perhaps the most compelling factor is that there is a clear conflict of interest between many dealing-desk and market-maker brokerages, who benefit from their clients’ loss of funds. CySEC’s assessment of Spot Capital Markets’s breaches of regulatory compliance stated that “the company, its account managers and third-party telephone service operators were found to not be acting fairly, honestly and professionally to best serve the Company’s customers’ interests.”

Over the past few years, CySEC has been cracking down on violations of its regulatory confinements. Its complete ban on providing client advice has taken a front seat to other violations, since such activity can directly lead to client losses. The regulator has taken steps to mitigate the trend of providing financial advice, as well as inducing high-pressure sales tactics, in an attempt to promote higher trading volumes that can lead to increased risk for traders.

“With regards to Spot Capital Markets, this included giving false reassurances of promised or guaranteed profits, and inciting customers to deposit more money within the Company in order to cover potential losses. Finally, the Company and the service providers it contacts – and is responsible for – offered false guarantees of the safety of customers’ money.”

 

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