CySEC Bares Its Teeth: Trading Point Fined €5,000 For Infringement of Client Funds Regulations

Cypriot regulator CySEC today demonstrated its commitment to monitoring of the administrative and compliance procedures of brokers in its jurisdiction

The best interests of customers is one aspect that is very much at the forefront of the agendas of regulatory authorities around the world at the moment, and the protection of deposited funds which are held by FX companies is no exception.

Today, Cypriot regulator CySEC has announced that it has imposed a €5,000 administrative penalty on Trading Point of Financial Instruments Ltd for a transgression of Article 18 of the Investment Services, Activities and Related Markets Law of 2007 and an infringement of Directive DI144-2007-01 of CySEC’s licensing conditions.

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These offences related in particular to Trading Point’s failure to comply with the organizational requirements of the law to make sufficient provisions to protect and indemnify client funds whilst in the custody of the company. CySEC also cited that there were irregularities in the firm’s attention to the Anti Money Laundering (AML) procedure.

In other regions, there have been similar cases this year with regard to the regulators indicating a need to tighten the rules relating to the funds held by FX brokers which are deposited by clients for the purposes of funding trading accounts.

Examples of this focus on an international scale have been evident in Britain’s FSA (now FCA) having implemented a very detailed Client Asset (CASS) procedure backed up by the conducting of regular inspections, XCap having fallen foul of that two weeks ago, and last October’s considerations by Australia’s ASIC to increase the minimum requirement for capital adequacy.

ASIC then continued along these lines and made use of its installation of the First Derivatives Delta Stream surveillance system to unearth irregularities in City Index’s procedure for handling of client funds.

Cyprus Ups Its Game

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At this year’s Forex Magnates IFXEXPO in Cyprus, the Regulation Panel hosted a series of lawyers, during which conversation moved quickly onto the subject of CySEC’s willingness to crack the whip if procedures are not followed.

Panel moderator Jason Ballor asked the panel: “FSA fines a lot of people – CySEC seem to fining people. This is more in line with the FSA. Are they moving in that line?”

Advocate Angelos Paphitis, Founder & CEO at A.G.Paphitis & Co LLC added: “This is not to do with moving in line, it is supposed to be that way regardless. This is not to do with emulating the FSA, it is part of the job of the regulator.”

Marios Cosma, Owner at K Treppides & Co said “CySEC is a user-friendly organization, and has improved dramatically with time”.

During that day, Demetra Kalogirou, the Chairman of CySEC addressed the delegates by delivering a thirty minute long speech on CySEC’s commitment to evolving the regulatory structure in Cyprus to demonstrate the regulator’s commitment to creating further confidence in Cyprus’ FX industry following the country’s banking crisis, and to help secure its future.

Although a definite emphasis was placed on the regulator’s intention to support the industry, Ms Kalogirou made it clear that CySEC intends to be regarded as a world-class regulator and therefore takes action where necessary.

Demetra Kalogirou
Chairman, CySEC

With these factors in mind, it is becoming apparent that CySEC is on the lookout. According to Forex Magnates sources, CySEC has legal proceedings intended for other Cypriot companies in its sights during the week ahead, full details of which will be reported by Forex Magnates in the coming days.

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