In what now seems like a regular occurrence, the US Securities and Exchange Commission (SEC) has announced more fines levied against broker-dealers. This time the regulator has announced the settlement of administrative litigation against two Canadian firms, which purportedly provided “incorrect order-marking information” for customer trades.

In essence, the two hedge funds mislabeled more than 200 sales (sell) orders from clients with the executing broker. The transactions, worth roughly $600 million were incorrectly labeled as long (buy) orders. The regulator indicated that both companies did not admit or deny the SEC’s findings and agreed to pay fines.

The SEC order “finds that Cormark and ITG Canada caused the executing broker‘s violations of Rules 200(g) and 203(b)(1) of Regulation SHO of the Securities Exchange Act of 1934. Without admitting or denying the findings, Cormark and ITG Canada each agreed to cease and desist from committing or causing any violations and any future violations of Rules 200(g) and 203(b)(1) of Regulation SHO. In addition, Cormark agreed to pay a penalty of $800,000, and ITG Canada agreed to pay a penalty of $200,000.”

This is the latest case of large fines being levied against online brokerages, dealers, and hedge funds by US authorities in 2020, which look to be going after alleged wrongdoing in an effort to boost the regulatory agencies’ coffers in light of massive funding shortfalls for federal agencies due to the Covid-19 pandemic.

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The Financial Conduct Authority (FCA) of the United Kingdom has announced today that they have fined the UK branch of a popular American equities broker Charles Schwab. This comes just days after the US Securities and Exchange Commission fined another popular equities broker – Robinhood for lapses in its efforts to provide customers with “best execution” of orders, among other things. The regulator, in this case, indicated that Charles Shwab failed “to adequately protect client assets, carrying out a regulated activity without permission, and making a false statement to the FCA.”

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said that “Charles Schwab UK failed to get the correct permissions from the FCA; then failed to be open with us and, finally, failed to put in place the necessary safeguards to ensure, if required, there could be an orderly return of client assets.”

The breaches occurred between August 2017 and April 2019, after CSUK changed its business model. Client money was swept across from CSUK to its affiliate Charles Schwab & Co., Inc. (CS&C), a firm based in the United States. The client assets, which were subject to UK rules, were held in CS&C’s general pool, which contained both firm and client money and which was held for both UK and non-UK clients.

It’s interesting that such lapses took place at a reputable and regulated brokerage firm, one with many decades of experience and history of serving customers and maintaining all necessary regulatory filings and licenses. As this situation shows, even the most respected online trading institutions can get into trouble.

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The US Securities and Exchange Commission (SEC) has announced an enforcement action against popular US equities broker Robinhood Financial, LLC relating to the execution of traders’ orders, which stipulates a fine of $65 million to be paid to the regulators to settle the matter. The enforcement action stems from “Robinhood’s failure to satisfy its duty of best execution” among other irregularities.

Among the notable issues, the SEC stated that “Robinhood’s customers received inferior execution prices compared to what they would have received from Robinhood’s competitors. For larger value orders, this price difference at Robinhood exceeded the commission its competitors would have charged. These inferior prices were caused in large part by the unusually high amountsRobinhood charged the principal trading firms for the opportunity to obtainRobinhood’scustomerorderflow. These payments are generally referred to as “payment for order flow.”

As such, it looks like the “zero commission” trading craze that took over retail US equities markets in the past year and a half has caught up with the industry – as brokers had to find new ways to generate revenue absent any traditional commissions for trading. Further in the SEC notice, the regulator noted that Robinhood knowingly misled the public “after media outlets raised questions about whether Robinhood’s payment for order flow rates negatively affected the execution prices that Robinhood customers received on their orders.” Robinhood responded by claiming as part of an FAQ page on its website that its order execution quality matched or beat that of its competitors. However, at that time, Robinhood had begun comparing Robinhood’s execution quality to competitors’ and was aware it was worse in many respects.

It remains to be seen how the execution of trades was handled by competitors during this time when many market participants were fighting over lucrative US retail equities traders during the stock market rallies of late 2019 and post-Covid 19 shocks in spring 2020.

The Maltese Financial Services Authority (MFSA) today announced a warning on its official website regarding an unlicensed firm called FXTrade Gains. The regulator indicated that the company’s “website is making unauthorized use and reference to the license number, registered address, and other company details of a Maltese licensed company.”

The regulator further reminded traders “not to enter into any financial services transaction unless they have ascertained that the entity with whom the transaction is being made is authorized to provide such services by the MFSA or another reputable financial service regulator. Investors should also be extra cautious when being approached with offers of financial services via unconventional channels such as telephone calls or social media.”

An investigation by Finance Magnates has revealed that the company purported to be licensed by the MFSA, but was actually copying the registration and licensing details of an authorized firm called ‘NSbroker,’ which operates under the brand NSFX Ltd.

Traders should beware of FXTrade Gains and employ means to check the regulatory status of their brokers periodically by using such means as our Check Your Broker directory and list of authentic international regulators.

Cyprus’ Securities and Exchange Commission (CySEC) announced today that it has settled allegations of violations by CIF license holder Maxiflex Ltd. to the tune of 370,000 Euros. The regulator indicated that the firm possibly violated Τhe Investment Services and Activities and Regulated Markets Law of 2017 during an investigation conducted by the regulator between January 2019 and September 2020.

Looking at the details it appears the broker did not diligently access individual clients’ suitability for trading financial instruments, as well as failed to provide all necessary information to customers upon their execution of an agreement to receive services. Furthermore, it is noted that the broker failed to execute trades for customers “on terms most favorable to the client” (best-execution).

We encourage all traders to check their broker prior to beginning trading or opening a trading account to ensure that they are dealing with a legitimate and reputable operation. Individuals can use our Check Your Broker Directory, as well as warning and alert lists from international regulators found here.

The Australian Securities and Investments Commission announced the cancellation of several financial services licenses last week. The licenses were revoked from Jels Financial Group Pty Ltd and Selectinvest Pty Ltd due to the lack of audited financial statements reporting, among other irregularities.

ASIC reported that in the case of Jels Financial Group the company failed to nominate a new “key person” under its license following the death of the already designated individual. Furthermore, the regulator stated that “Jels’ sole corporate authorized representative was also insolvent.”

For Selectinvest the regulator noted that the company “failed to maintain its external dispute resolution membership with the Australian Financial Complaints Authority (AFCA), and had failed to lodge its annual financial and audit reports since 2017.”

Interestingly, Selectinvest had held an AFS license since December of 2003, raising the question why it would become the target of enforcement actions now, having been in business and maintaining a license for so many years. Likewise, it remains a mystery as to why the regulator has waited for a considerable amount of time to cancel the license given that the alleged lapses in required activities took place as early as 2017.

All traders and investors are encouraged to check their brokerages using publicly available information to ensure their funds and trading accounts are safe.

Even authorities in heavily regulated jurisdictions have to deal with suspicious financial and investment activities, possible fraud, and scams. This week regulatory authorities in Texas announced a warning and emergency cease and desist order against what is described as an “aggressive online forex scheme”.

The Texas State Securities Board issued the order against TradeGo Forex Exchange and found that the company published more than 250 advertisements on craigslist, a popular online marketplace. The advertisements allegedly target residents of Dallas and Houston, as well as residents of other cities located throughout the United States. In the ads, the company touted a “trading program tied to forex, as well as oil, gold, and stocks.” The company claimed it is low-risk and will generate significant profits – as much as $1000 to $5000 per day.

The individuals running the company encouraged investors to deposit funds into accounts controlled by the alleged criminals, instead of to a genuine company account, in order to gain control of the investor’s funds. The regulator pointed out that these individuals were also “not registered with the Commodity Futures Trading Commission or the National Futures Association.”

All inventors and traders are advised to thoroughly check their brokers for licensing and registration information in order to ensure the safety of their funds. Always Check Your Broker!

The Cyprus Securities and Exchange Commission has announced more warnings against unregulated firms operating in its purview. In its message on the official website the regulator warns that the below listed websites and associated companies are either clones of previous active firms or are outright misleading the public on their affiliation with genuine CIF licensed brokerages:

Traders are advised not to open accounts or otherwise transact with these websites and companies in order to keep their funds and personal information safe. As always, one should diligently check an online brokerage’s regulatory and registration status to make sure they are dealing with a genuine firm. Check Your Broker today!

Italian financial regulator Commissione Nazionale per le Società e la Borsa, or CONSOB continues to aggressively pursue unauthorized online brokerages and financial firms from soliciting business from Italian residents using the so-called “Decreto Crescita” to block access to websites via Internet Service Providers (ISPs).

 

The latest round of warnings and restrictions concerns five firms, according to a press release from CONSOB:

 

With the blocking of these firms, the total number of companies sanctioned by CONSOB so far stands at 323, which is significant, considering that many more scams and possibly fraudulent firms are still active internationally. As always we advise all traders or those interested in beginning to trade to carefully evaluate their prospective broker, including checking regulator websites and such tools as the Check Your Broker directory. 

 

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The Securities Commission Malaysia (SC) has published a public warning today regarding the increase in clone firm scams affecting the country. The regulator indicated that “clone firms offer non-existent investment opportunities including in the shares of these PLCs, promising unrealistically high returns within a short span of time.”

The genuine PLCs or public listed companies have garnered investor interest during the COVID-19 pandemic. The targeted entities have lodged police reports and/or made a complaint to the regulator on the cloning of their corporate identities by unknown persons or organizations. 

The regulator also indicated that “other than the names and logos of these PLCs, the fraudsters also use corporate credentials, websites, and other details of legitimate entities when promoting these schemes via social media channels such as Facebook, WhatsApp, and Twitter.”

This type of fraudulent activity is unfortunately commonplace around the world and traders and investors are urged to proceed with caution when solicited for any investment opportunity online. To avoid putting yourself at risk, read our guide on How to Avoid Investment Scams

 

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According to the latest notice from the Australian Securities and Investments Commission (ASIC), the regulator has acted upon two “Ponzi schemes” and the Australian Federal Court has made restraining orders against two companies believed to be engaged in such Ponzi activity.

According to ASIC, the AU government has arrested Matthew Alan Beresford and has frozen the websites and bank accounts of Maxwell Financial Services and Asset Capital Holdings, which were reportedly founded by Beresford. The regulator says that both companies were operating without an Australian Financial Services License (AFSL), although one of the companies claimed that such licensing was granted.

The regulator also believes that Mr. Beresford allegedly raised investor funds using both of the firms and that “a significant amount of money raised from retail investors has been dissipated.” The regulator has instructed all investors who may have lost money associated with this matter to report misconduct to ASIC via ASIC’s website.

The Federal Court of Australia has announced a decision to fine several CFD brokers after numerous complaints from retail investors who lost money trading certain derivatives products, namely binary options contracts. The fines relate to  AGM Markets Pty Ltd (AGM), OT Markets Pty Ltd (OTM), and Ozifin Tech Pty Ltd (Ozifin).

Customers of the broker lost a reported $32 million AUD while trading with the firms and filed numerous complaints with the country’s financial regulator – the Australian Securities and Investments Commission (ASIC), which first took action against the brokers in February 2018, when it suspended AGM’s license. AGM Markets will pay a fine of $35 million AUD while OT Markets and Ozifin will pay $20 million AUD each.

According to the news report, the three companies will have to initiate a refund process to the affected 10,000 trading clients. The Federal Court also appointed liquidators for all three companies, as they will not be able to continue to do business as licensed Australian entities.

Traders should remember to always manage their trading risks and formulate a risk management strategy when choosing to trade Contracts for Difference (CFDs) or any other derivatives. For help, check out our Tips for All guide on how to manage risk during market volatility.

The Cypriot financial regulator – Cyprus Securities and Exchange Commission (CySEC) has announced warnings against more unauthorized firms and suspected scams. The regulator posted a warning on its website on Friday to announce that the following firms do not have Cyprus investment firm (CIF) registration and in some cases are clones of previously uncovered scam companies.

The regulator indicated that the following firms are not licensed to operate a brokerage business in Cyprus, nor are they affiliated with a regulated entity:

Traders holding accounts at these companies or those interested in trading with them should take extra caution as their funds may be at risk. Before making a decision to trade, investors should always check the status of their broker.

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Italian financial regulator CONSOB is on a roll – continuing its efforts to protect Italian citizens from possible scams and fraud by blocking the websites of unauthorized firms using the so-called “Growth Decree”. In its press release from October 16th, the regulator indicated that it has taken action against the following firms:

Traders should take note of the new regulatory actions to make sure their funds are not at risk if they had dealings with such firms and use the Check Your Broker directory to review the status of their online broker.

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Italian financial regulator Commissione Nazionale per le Società e la Borsa (CONSOB) announced the blocking of more unauthorized firms as part of its well-established campaign of protecting investors from scams and possible fraud related to online brokerages and trading.

The regulator announced that the following companies have been blocked in Italy by local Internet Service Providers (ISPs) as part of the ‘Growth Decree’ enacted since the summer of 2019:

The total number of firms already blocked by CONSOB, including the companies listed above now stands at over 300, highlighting the scope of the problem that both online brokerages and regulators are dealing with. Traders are always encouraged to check their broker prior to opening a trading account to make sure they understand all the risks. Check Your Broker today!

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