Category: Industry

In 2019, the FSMA (Financial Services and Markets Authority) imposed 13 administrative sanctions for breaches of financial legislation, for a total cumulative amount of € 2,249,602.

According to the official statement, since 2013 and the implementation of a new sanctions procedure, the FSMA has imposed no less than 73 administrative sanctions, for an amount that exceeds 18 million euros. Several of these sanctions concerned breaches of the law on market abuse.

In a recent report by ESMA (the European Financial Markets Authority), it also appears that under the new regulations on market abuse, Belgium is the European country that has imposed the most sanctions for insider trading in 2018. 7 of the 13 administrative sanctions imposed in 2018 in Europe for insider trading were in fact imposed by the FSMA.

When the FSMA finds breaches of financial legislation, it can impose administrative sanctions. If serious indications of the existence of a practice likely to give rise to an administrative fine are observed, the FSMA instructs the auditor to examine the file . Such a decision may be taken on the basis of indications transmitted by the FSMA supervisory services or, for example, following a complaint or a report. In 2019, 18 new investigation files were thus opened.

Within the European Union, Belgium is the country that has been the most active in the fight against insider trading. This is what emerges from a recent report by ESMA, the European financial market authority. This report, published in December 2019, provides an overview of the sanctions and other measures imposed in 2018 by the different member states of the European Union in application of the provisions on market abuse.

The Hong Kong Securities and Futures Commission (SFC) has announced that it has launched a two-month consultation on proposed changes to the Investor Compensation Regime (ICR).

The Securities and Futures Commission (SFC), is the independent statutory body charged with regulating the securities and futures markets in Hong Kong.

The ICR was first presented in 2003 in conjunction with the Securities and Futures Ordinance, and it gives the opportunity for retail investors to get the compensation from defaulting, non-compliant companies. These financial companies must be authorized or licensed in Hong Kong, and the investor should be trading in exchange-traded products.

The main points of the proposal are about increasing the compensation limit from $150,000 to $500,000 per investor. It also states that the non-mainland-based investors will still be able to get the compensation if they trade under the Stock Connect schemes.

The reason for this big leap is the rise in client assets. As the Hong Kong’s securities and futures markets has been growing and developing, so the value of the assets has also grown  significantly. The information about the total value of client assets held with the intermediaries in the period from 2014 and 2017 shows that the value has increased more than twice, from $598 billion to $918 billion.

This proposal would give the opportunity for the SFC to provide compensation payments in specific circumstances of the delays or any kinds of concerns. One of the goals of the regulator is to bring the ICR into the international level, as the compensation offered by ICR is substantially smaller than similar offers in the EU, UK, USA, and Canada.

One more opportunity for unregulated forex and CFDs brokers has been dismissed. Mastercard company has sent an email informing payment processors about the changes that will be applied to some of the trading companies.

Mastercard has mentioned forex cryptocurrency options, ICOs, CFDs and binary options under the mark "high risk". It means that any business that operates on financial market without a license or not being authorised will categorized with the highest risk and payment processors will pay a special attention to this category.

All of the mentioned brokers will be placed under the category of high-risk securities merchants and their transactions will categorized into a particular group under particular code. This code will mean that the chargebacks will still be possible within 540 days after the transaction.

These new changes are expected to put into action from the 12th of October, which means that the payment processors will have around half a year to revise this new set of rules and guidelines. Each payment processor who is processing the transaction from the high-risk security merchant will have to show the proofs from the legal authority. Such proof can be a license that was issued by the regulator agency or official authority and also the proof that the trading platform is also licensed. Payment processors will have to terminate the high-risk security transactions till the the needed documents are presented.

These new standards will affect all transactions globally, processed via Mastercard and its services Maestro and Debit Mastercard.

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.

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.”

A settlement has been reached with the Banc De Binary Ltd for possible violations of The Investment Services and Activities and Regulated Markets Law of 2007.

More specifically, the settlement reached relates to the assessment of the Company’s compliance, at the time it was authorised, with its CIF authorisation, compliance with the conditions under which an authorisation was granted, relating to the change in CIF information and details. 

Also, the firm didn't comply with the conduct of business obligations when providing investment and ancillary services to clients, the obligation to execute orders on terms most favorable to the client as well as the obligation to ensure the correctness, completeness and accuracy of the information submitted to CySEC.

The settlement reached with the Company, for the possible violations, is for the amount of €300.000. The Company has paid the amount of €300.000.

The Cyprus Securities and Exchange Commission, better known as CySEC, is the financial regulatory agency of Cyprus. It supervises and controls the operation of the Cyprus Stock Exchange, grants operation licenses to investment firms, including investment consultants, brokerage firms, and brokers, impose administrative sanctions and disciplinary penalties. You can read the detailed article about the Cyprus Securities and Exchange Commission here.