FCA on Delivering financial services digitally in its perimeter report

FCA Regulator

The FCA (Financial Conduct Authority) recently published its first annual Perimeter Report, in which it comments on the limits of its responsibilities towards the UK citizens. The perimeter is basically the legal boundary determining what the FCA regulates (and therefore also what it does not regulate).

In the report, the FCA says it might push internet service providers (ISPs) to take down misleading or unfair financial promotions, in order to improve consumer protection. The regulator also stated it might ban certain cryptoassets falling outside its regulatory perimeter.

“Digital channels enable firms to create, market and sell financial services products very quickly. This means that the speed at which harm can be caused by a misleading or unfair financial promotion has greatly increased. Internet or social media adverts reach millions of people in an instant, challenging our ability to detect and act against misleading adverts. Historically, we asked traditional media to voluntarily remove adverts we believed to be fraudulent. This is harder to achieve with internet service providers. We address this with warnings on our own website, but this is clearly not as effective as taking down promotions.”

It is the main reason why the FCA will seek greater regulatory control over ISPs and push them to remove fraudulent content & social media ads. The British regulator also said that it is developing and deploying automated tools for detecting online products or practices that pose potential risks to consumers.

The report also spoke about retail products, especially when it comes to binary options, which are sold by foreign brokers. The agency keeps a close eye on the companies that do this, as well as dangers which may come from such behavior. Further, they regularly update their warning list in regards to such firms and their products.

Over £27 million reported lost to crypto and forex investment scams

FCA Regulator

The Financial Conduct Authority (FCA) and Action Fraud are warning the public to be wary of investment scams carried out via bogus online trading platforms. This warning comes as cryptoassests (crypto) and forex investment scams reports more than tripled last year to over 1,800. Fraudsters promise high returns from investments in crypto and forex, with victims losing over £27 million in total in 2018-19.

Fraudsters often use social media to promote their “get rich quick” online trading platforms. Posts often use fake celebrity endorsements and images of luxury items like expensive watches and cars. These then link to professional-looking websites where consumers are persuaded to invest.

Investors will often be led to believe that their first investment has successfully made a profit. The fraudster will then contact the victim to invest more money or introduce friends and family with the false promise of greater profits. However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact.

Action Fraud reports show that on average, victims were each scammed out of £14,600 from forex and crypto scams in 2018-19.

As part of the FCA’s ScamSmart campaign the FCA will be running advertising to raise awareness of online trading scams. Running on social media, the ScamSmart adverts aim to make consumers more sceptical of “get rich quick” trading scams promoted online.

Director of Action Fraud, Pauline Smith, said:

“These figures are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms. It’s vital that people carry out the necessary checks to ensure that an investment they’re considering is legitimate.

“Action Fraud is pleased to be partnering with the FCA to raise awareness of online trading scams, and we hope it will help prevent more people falling victim. Remember, if you think you have been a victim, contact Action Fraud.”

FX trader Argentex announces partnership with Professional Cricketers’ Association

Argentex , a foreign currency exchange service provider has teamed up with Professional Cricketers Association. PCA is the representative body of past and present-day first-class cricketers in England and Wales. English cricket is going to have a busy schedule for this summer with ICC World Cup 2019 and Ashes Series coming up.

The partnership will allow the cricketers to have access to the foreign exchange service of Argentex. For a number of occasions like conversion of prize money, transfer and exchange of lump sum sponsorship deals its services may come handy to the members of association.

The Co-CEO of the group, Harry Adams said in a statement, “members of the PCA and current players are still adjusting to some of the more lucrative aspect of the sport. This summer we want the England team to focus their performance on the pitch, rather than the performance of the pound. Instead, they can trust that the Argentex understand the unique FX requirements of professional sportspeople who are performing on the global stage, having worked with sports management firm for years.”

Jofra Archer, England and Sussex Cricketer and Argentex Client commented, “Since my first overseas contract, Argentex have helped me move foreign currency around the world. The global nature of the tournament cricket means that as a player you need support and assistance around the clock. Having the expertise of Argentex means that I am free to concentrate on my cricket, whilst they work in the background to ensure that my foreign currency earnings are managed in the most effective and timely manner.”

Argentex LLP provides foreign exchange services to clients across the globe. It offers voice broking, online, and consultancy services for corporate, institutional, and private clients. Argentex LLP was founded in 2011 and is based in London, United Kingdom with an additional office in Dubai, United Arab Emirates.

FCA wins case against unauthorised forex firm

FCA Regulator

Following an application by the FCA, the High Court, on 14 May 2019, declared that Xcore Capital Limited (Xcore) and Jonathan Chitty had carried on an unauthorised investment scheme. The scheme took in at least £1 million from investors but only a small amount of the investors’ money was ever used for trading.

Consumers gave money to Xcore in return for a 6% annual return. They were led to believe that Xcore would be trading their money on forex and equity markets. Instead, however, the majority of the money was used to fund an office in Mayfair, brokers’ wages and Chitty’s lifestyle. The Financial Conduct Authority (FCA) said Chitty’s personal spending included £102,000 on cryptocurrencies, £24,000 on a Rolex, £20,000 on his wedding and a further £58,000 on luxury goods.

The court found Xcore ran a deposit-taking scheme without the necessary authorisation from the FCA and that Chitty was knowingly concerned in the scheme. It further requires Xcore and Mr Chitty to pay the FCA £917,231 which is the full value of all outstanding sums owed to consumers. The FCA will distribute to consumers any funds it is able to recover from Xcore and Mr Chitty.

On 20 November 2018, following an application by the FCA, a Judge in the High Court had previously imposed a freezing order on Xcore and Jonathan Chitty’s assets, and ordered to stop selling investments regulated by the FCA. This order remains in place until further order of the Court.

ASIC bans former Kaz Capital adviser for six years

The Australian Securities & Investments Commission (ASIC) has just announced the imposition of a six-year ban on David Stephen Cornford, a former adviser at Kaz Capital Pty Ltd. Mr. Cornford was employed as an adviser at Kaz Capital Pty Ltd between 2014 and 2017.

The Australian regulator is concerned that Mr Cornford bought and sold listed securities on clients’ accounts without the authorisation to do so; and traded Contracts for Difference (CFDs) in a personal capacity, in a manner that conflicted with the interests of his clients.

ASIC found that Mr Cornford had taken part in transactions that had, or were likely to have, the effect of creating or maintaining an artificial price for trading in shares; and did acts that had, or were likely to have, the effect of creating, or causing the creation of, a false or misleading appearance with respect to the market for, or the price for trading in, shares. He had also provided  a financial service when the Australian financial services licence of Kaz Capital, where Mr Cornford was employed at the time, did not cover the provision of the service.

On 16 January 2019, ASIC imposed licence conditions on Kaz Capital following concerns about the adequacy and effectiveness of its compliance framework. The conditions require Kaz Capital to appoint an independent expert to review the effectiveness of its implementation of recommendations for remediation made by another external consultant. The independent expert will report to both ASIC and Kaz in June 2019.

Hong Kong’s SFC fines and bans ex-CGIS director Wang Canfor 30 months

The Securities and Futures Commission (SFC) has banned Mr Wang Can, a former licensed representative of China Galaxy International Securities (Hong Kong) Co., Limited (CGIS), for 30 months for misconduct.

Wang was licensed under the Securities and Futures Ordinance to carry on dealing in securities and advising on corporate finance regulated activities and was accredited to CGIS from 9 April 2013 to 6 February 2016.  Wang is banned from 16 May 2019 to 15 November 2021.

The SFC found that Wang asked his friend to open a securities account in September 2014 and conducted personal trading in that account for at least nine months.

Wang became privy to information regarding a proposed acquisition of Linmark Group Limited (Linmark) in November 2014 when he assisted CGIS to prepare pre-engagement documentation for a potential client. He went on to purchase shares of Linmark through his friend’s account and sold them two days after Linmark announced the proposed acquisition on 3 December 2014 and made a profit of $7,800.

Wang breached CGIS’ staff dealing policy by failing to disclose to his then employer his personal trading activities and beneficial interests in his friend’s account.  He also breached CGIS’s staff dealing policy in that employees are prohibited from trading on the basis of price sensitive information or confidential information related to its clients or potential clients.

Wang was fined $7,800, equivalent to the profits that he gained from trading in the shares of Linmark.

In deciding the sanction, the SFC took into account all relevant circumstances, including Wang’s remorse and willingness to accept the SFC’s disciplinary action.

AFS licensees may be breaking overseas laws

ASIC has warned Australian financial services licensees that offer over-the-counter derivatives to retail investors located overseas could be breaking laws abroad, with Chinese authorities having alerted the watchdog that some online platforms have engaged in illegal activity.

Many jurisdictions (such as Europe, Japan, North America and China) had restricted or prohibited the provision to retail investors of certain OTC derivatives. These included binary options, margin foreign exchange and other contracts for difference (CFDs) to mitigate harm to retail investors.

AFS licensees are on notice that in addition to overseas consequences of potential breaches of overseas law. ASIC will also consider whether AFS licensee are making misleading or deceptive statements about the scope or application or effect of an AFS licence.

According to our source, Rakuten Securities Australia has informed its oversea (non-Australian) clients to close their accounts by the 17th of May.

In particular, Chinese authorities have informed ASIC that: ‘some online platforms are illegally engaged in forex margin trading activities.’ AFS licensees with China-based clients may be conducting unlicensed or illegal activities in China if they are providing margin foreign exchange products to retail clients in China.

Temporary product intervention measures have recently been extended in Europe by the European Securities and Markets Authority (ESMA). Authorities in the United Kingdom and Germany have announced permanent measures.

ASIC is concerned that some OTC derivative issuers that hold AFS licenses (or their agents) may be marketing or soliciting clients located in China, Europe and other jurisdictions to open accounts with Australian-based AFS licensees on the basis doing so will avoid the overseas intervention measures.

Premier League Football Clubs Signed Advertising Deal With eToro

Global investment platform eToro has secured partnerships with seven different Premier League soccer clubs. These deals are especially unique because they were paid using the world’s leading cryptocurrency, bitcoin. The deal could be worth somewhere between £4 and £5 million.

The seven Premier League clubs who have agreed to set up a digital wallet with eToro include Brighton & Hove Albion F.C., Cardiff City F.C., Crystal Palace F.C., Leicester City F.C., Newcastle United F.C., Southampton F.C., and Tottenham Hotspur F.C.

eToro’s UK MD Iqbal V. Gandham has commented on the deal: “As a global multi-asset platform where you can purchase the world’s biggest cryptoassets alongside more traditional investments, we are excited to be partnering with so many Premier League clubs and make history by being the first company ever to pay for a Premier League partnership in bitcoin.”

These partnerships mark the first step in bringing the opportunity offered by bitcoin and cryptoassets to football. eToro believes that crypto, and the technology, namely blockchain that underpins it, can improve football and the world of sports. In the future, this could include addressing issues of ticket touting, problems with transparency, and providing a guarantee of authenticity for merchandise.

eToro is regulated in Europe by the Cyprus Securities and Exchange Commission and regulated in the UK by the Financial Conduct Authority. eToro empowers people to invest on their own terms. The platform enables people to invest in the assets they want, from cryptoassets to stocks and commodities. You can read our full eToro review here.

UK and Australia enter post-Brexit agreement

FCA Regulator

The UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC) today announced they have agreed two Memoranda of Understanding to ensure there is continuity once the UK leaves the European Union. The MoUs cover trade repositories and alternative investment funds (AIFs).

These agreements will provide reassurance by ensuring arrangements are in place for cross-border cooperation between the FCA and ASIC. The FCA and ASIC also support the continuity of existing equivalence decisions to provide certainty to businesses post-Brexit.

Commenting on the news, the Chief Executive of the UK FCA, Andrew Bailey, said: “The FCA and ASIC have always had a strong relationship, which will continue after Brexit. The MoUs we have agreed today will ensure the FCA and ASIC have an uninterrupted exchange of information and can supervise the cross-border activity of firms. They provide a strong signal to the markets that the UK will continue to play an important role after Brexit. The MoUs will also provide much-needed assurance to our regulated stakeholders.”

These MoUs will enter into force on the date EU legislation ceases to have direct effect in the UK. This will occur when the UK leaves the EU, or at the end of the transition period if a Withdrawal Agreement is in place.

ASIC remains committed to take steps to provide, where appropriate, for continuing recognition post-Brexit of the equivalence of the UK’s regulatory and supervisory regime in relation to UK-based foreign financial services providers and market operators that operate in Australia under licences and exemptions or are otherwise recognised for the purposes of the Australian regulatory regime.

SFC reprimands and fines BOCI Securities HKD10 million

The Securities and Futures Commission (SFC) has reprimanded and fined BOCI Securities Limited (BSL) HK$10 million over BSL’s internal system and control failures in its investment product selling practices.

BOCI Securities Limited is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 5 (advising on futures contracts) regulated activities.

The disciplinary action followed an investigation which found that BSL had failed to comply with various regulatory requirements concerning client profiling, product due diligence and suitability assessment in its sale and distribution of investment products, including bonds listed under Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The company specifically failed to do the following:

– properly assess and determine its clients’ risk tolerance level and investment strategy in certain cases;

– ensure the investment recommendations and/or solicitations made to its clients were reasonably suitable in all the circumstances;

– ensure the clients had sufficient net worth to be able to assume the risks and bear the potential losses of trading in derivative products and/or leveraged transactions;

– conduct proper and adequate product due diligence on certain investment products.

(SFC) of Hong Kong is the independent statutory body charged with regulating the securities and futures markets in Hong Kong. The SFC is responsible for fostering an orderly securities and futures markets, to protect investors and to help promote Hong Kong as an international financial center and a key financial market in China.