Hoch Capital Pays €260.000 to Settle Year-Long Regulatory Spat

Regulators in the UK and Italy went after Hoch Capital which was barred from providing services in both countries.

FX brokerage firm, Hoch Capital Ltd has reached a settlement agreement with Cyprus Securities and Exchange Commission (CySEC) to resolve charges that violated the Cypriot investment laws between January 2018 and April 2020.

Hoch Capital agreed to pay €260.000, which wraps up a long-running regulatory spat that culminated in the company’s decision in July to renounce its Cyprus Investment Firm (CIF) license.

CySEC has further explained that the settlement resolves allegations of non-compliance with several articles that cover multiple regulatory requirements, including conflicts of interest and information provided to clients.

Earlier in June, the Cyprus watchdog has partially suspended the licenses of Hoch Capital Ltd and a handful of other forex brokers that were caught up in promoting their products in the UK.

The UK’s FCA said Hoch Capital Ltd (trading as iTrader and tradeATF) and other firms used fake celebrity endorsements for their products on social media. Its Cypriot counterpart has taken notice and dropped the hammer on all these brands, having partially suspended their licenses for one month until they take corrective measures.

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At the time, the Cypriot watchdog provided a breakdown and specific details for the regulatory action, saying its decision was taken, based on possible violations of local regulations and for not acting honestly when approaching their potential clients. Further, these brands were flagged for non-compliance with authorization conditions stated in many articles, which mainly concern the appropriateness of their products offered to certain client segments.

The Cysec Circular Further Reads as Follows:

  1. Article 5(1) of the Law, regarding the requirement for CIF authorisation.
  2. Article 22(1) regarding the conditions for CIF authorisation. Explicitly, articles 9(2), 10(1)(a), 17(1), 17(2) and 17(6) of the Law, regarding the management body, the governance arrangements, the organisational requirements and the sufficiency of record keeping with which a CIF is required to comply.
  3. Article 24(1) of the Law, regarding the conflicts of interest.
  4. Articles 25(1) and 25(3) of the Law, regarding general principles and information to clients.
  5. Article 28(1)(a) of the Law, regarding the CIF’s obligation to execute orders on terms most favorable to the client.
  6. Article 93(2) of the Law, regarding the obligation to submit correct, complete and accurate information.

Consob Was Also Worried about Cypriot Brokers

This past December, Italy’s regulator went after Hoch Capital Ltd which was barred from providing investment services in Italy.

According to Consob, the Cypriot intermediary continued to break laws even after Consob sent several complaints to its original regulator, Cysec, about its misconduct. The claims refer to non-compliant practices made by the brand’s operator, including promoting the contracts for difference (CFDs) to non-professional investors.

Moreover, the Cyprus broker violated the EU directive that mandates negative account protection, ensuring that customers cannot lose more than their trading stake. Furthermore, the Consob accuses their staff of exercising pressures on their clients to deposit more funds, though the current rules forbid bonuses and other incentives that may have encouraged overtrading in recent years.

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