The Cyprus Securities and Exchange Commission (CySEC) today announced it would shortly conclude its formal investigation into the alleged violations of its regulations concerning AFX Capital Markets Ltd, the Cypriot arm of AFX Markets Ltd.
According to the notice, the regulator also continues to assess the client’s money position as part of their ongoing investigation. Although the process remains in the early stages, the initial view suggests that there is likely to be a material deficit in the client money.
“At this stage, no decisive conclusion can be reached with regards to the size of this deficit which is subject to CySEC’s ongoing investigation,” it further explains.
Of note, special administrators of AFX’s UK arm disclosed to the regulator the company was in terrible financial difficulty and that it had a heavy shortfall in client money of more than £7.0 million.
AFX has been ordered by regulators in Cyprus and the UK to cease any activities that would involve releasing client money and securing its books and records for future inspection.
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The watchdogs previously identified AFX’s lack of necessary safeguard procedures to protect client assets and raised concerns about its ability to hold sufficient funds in its coffers to settle obligations.
The CySEC also reminded that the CIF license held by AFX Capital Markets is still suspended. This suspension also applies to AFX-owned subsidiary STO, which uses the same authorization (DI87-05).
Regulatory woes on all fronts
The process involves the CySEC inviting clients to the claims portal for them to enter the necessary details and state their complaints against AFX. Specifically, AFX clients can submit their complaints through the respective websites without a unique reference number (URN).
AFX’s collapse was also expected as it had problems earlier with its UK operations. In August, the British watchdog confirmed the appointment of special administrators at the AFX Markets, which was ordered to cease its trading activities after the FCA found serious problems in its operations.
A month earlier, the CySEC has temporarily suspended AFX Capital Markets Ltd, which was also fined by the Cypriot regulator in 2017 after they broke another law regarding misleading information.
AFX Group is the second-largest European subsidiary of AFX Markets, and according to reports it submitted to the FCA, some 1200 client accounts that hold assets worth £7.5 million were transferred to close-only mode.