Thai law enforcement authorities are indicating that they have arrested the alleged mastermind of a Forex-3D ponzi scheme that totaled a whopping $66 million. The Bangkok Post reported last week that Apiruk Kothi has been captured after nearly a year on the run.

The alleged scheme kingpin was in the process of selling property and luxury goods obtained with funds purportedly generated by the scheme, including a blue Lamborghini, which “he had repainted the orange supercar and planned to sell it on the grey market for 10 million baht.”

The newspaper indicated that “the DSI has received more than 8,400 documented claims from victims of the foreign-exchange scheme since the first group sought help from the Justice Ministry in November 2019. Most victims claimed they had not received the returns that were promised by the company. The damages are estimated to total 2 billion baht.”

As such, this is one of the biggest Forex-related Ponzi schemes in the world to be uncovered and highlights a success at bringing those responsible to justice. While it remains to be seen how victims of this fraud will be compensated in the near future, it is nonetheless a somewhat positive ending to a saga that started in November 2019.

Following the completion of Brexit negotiations and the “divorce” of the UK and European Union without clear guidelines on financial services cooperation, including passporting rights, the European Securities and Markets Authority (ESMA) published a notice today regarding reverse solicitation by financial firms of European residents.

The notice deals with “reverse solicitation, where the product or service is marketed at the client’s own exclusive initiative, have emerged. For example, some firms appear to be trying to circumvent MiFID II requirements by including general clauses in their Terms of Business or through the use of online pop-up “I agree” boxes whereby clients state that any transaction is executed on the exclusive initiative of the client.”

As such, the regulator is reminding firms of current MiFID II requirements “where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client”.

The regulator indicated that “regardless of any contractual clause or disclaimer purporting to state, for example, that the third-country firm will be deemed to respond to the exclusive initiative of the client”. As such, only firms licensed in the country or jurisdiction in Europe can solicit clients within mainland Europe.

It remains to be seen if any passporting rights or other provisions to ease the regulatory burden on UK and EU financial firms will be negotiated by governments in the near future to allay any current concerns and save time and resources for any possible license or regulatory approvals to continue doing business with EU residents.

NAGA GROUP, the Germany-based provider of the social network for financial market trading NAGA.com has reported its financial performance for 2020 and indicated growth in several key areas with positive guidance for 2021. The company booked EUR 25.9 million in sales for 2020 with an unaudited EBITDA of approximately EUR 6 million.

The broker and copy trading provider also reported that its trading volumes increased significantly last year, with EUR 40 billion in volume and 1.9 million transactions. For the full year trading volume came in at EUR 120 billion, as compared to EUR 44 billion in 2019. 2020 transactions totaled 6.3 million, which is at least double the 2.9 million achieved in 2019.

Given the improved performance of the brokerage, including doubling of active users and customer deposits in 2020, the company indicated that its sales guidance for 2021 has been updated to EUR 50 – 52 million with an EBITDA of EUR 13 million – EUR 15 million.

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According to a recent report from Finance Magnates, Contracts for Difference (CFDs) are having a hard time at adoption in younger regional regulatory regimes. The news portal reported that IG Group’s South African entity has had trouble bringing CFDs onboard for client trading primarily due to the fact that South Africa’s Financial Sector Conduct Authority (FSCA) does not regulate such financial products at the moment.

IG Group’s local entity is indeed licensed by the FSCA to provide execution only service, but it has not been able to receive any status to offer OTC derivatives – the category of CFDs. The broker has applied for such authorizations back in 2019, but was denied. Now the broker has filed an appeal and interestingly enough, the regulator has given IG Group a temporary exemption from “Regulation 2(1)(a) of the FMA Regulations”, meaning that existing customers may actually be able to trade CFDs for the time being.

During the exemption period the broker must disclose certain information and metrics relating to existing clients’ trading of CFDs. Nonetheless, it remains to be seen if the broker can achieve a breakthrough in getting authorization to provide CFD trading on a full-time basis, given the regulator’s current classification of CFDs as OTC derivatives “on a principal-to-principal basis”.

With CFD restrictions looming in Australia in the spring of 2021 and already existing regimes that have tightened restrictions on CFD trading in the UK and Europe, the current situation with IG Group’s South African entity could be a “make it or break it” moment for such OTC derivatives adoption in regional markets with relatively new regulatory regimes at a time when many retail OTC brokers are looking to such regions for expansion.

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The retail US Forex market saw mixed results when looking at retail client deposits – a metric provided by the US Commodity Futures Trading Commission. In November 2020 all registered US FX brokers gained only $1,810,875 in new retail client deposits. Newcomer IG US experienced a 3% rise, while veteran broker GAIN Capital Group slipped 2% or $5.2 million for the month.

The biggest gain was experienced by Interactive Brokers, which increased its retail FX deposits by a strong 20% with $11,857,929 added. Both OANDA and TD Ameritrade experienced slight dips of -2% and -1% respectively.

The lackluster growth in retail deposits during some expected market volatility around the US election and Covid-19 vaccine approvals suggests to us that US investors may have been more attracted to volatility in equity markets, which had gained immense popularity in 2020 with low-cost accounts offered by equity brokerages, including those with no trade commissions.

In a further sign of what impacts Brexit is having on financial service providers with no passporting rights left in place since the divorce of the UK and EU on December 31st, IG Group’s UK entity has informed its European clients that they must migrate their accounts to IG Europe in order to continue trading.

In a blog post on its website, the broker indicated that customers have to agree to transfer their accounts by January 8th, 2021, and provide KYC documents in order to confirm their identity and continue trading in a European domiciled account. At the same time, the broker is promising to re-establish any open traders or orders in the customers’ new accounts if they agree to the transfer.

Since client funds will be held in accordance with “BaFin’s client money rules” customers accounts are expected to be regulated by the German financial regulator and there is no word yet on any impacts to leverage, commissions, or other trade settings provided to customers when they were trading via the UK. Given that no passporting rights between the UK and EU exist at the moment, we expect more UK domiciled brokers to announce migrations of customers back to mainland Europe.

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In an effort to educate the public of the ongoing problem with online investment and trading scams, often highlighted by our organization, the Malaysian Securities Commission (SC) has published a note guiding citizens on how to approach any possible investment or trading advisors that may try to solicit business.

The regular indicated that it has seen an “increasing number of queries and complaints received regarding various social media, chat rooms and messaging applications that appear to be providing specific stock recommendations and/or investment advice to members of the public, who are given access to these recommendations and/or advice upon payment of a fee.”

Specific to Malaysian residents, the regulator said that “investors are reminded to verify the licensing status of platforms, companies, and individuals offering capital market services or products, including the provision of investment advice, before making any investment decision. Information on persons licensed or registered by the SC can be found at the Public Register of License Holders www.sc.com.my/licensed-registered-persons and List of Registered Recognised Market Operators www.sc.com.my/rmo.”

The regulator also reiterated stiff penalties for those individuals who are “carrying on a business of giving investment advice without a license”. Such offenses, the SC says  are “punishable with a fine not exceeding RM10 million or imprisonment not exceeding ten years or both, if found guilty.”

With the European Union and United Kingdom swiftly approaching the end of the Brexit transition period on December 31, 2020, and no immediate relief is provided in the so-called “Brexit Deal”, brokers licensed in the UK will lose passporting rights on January 1st and will not be able to service European traders vis-a-vis their UK operations.

IG Group, the major multinational brokerage announced to its European traders domiciled at IG’s UK entity several hours ago that it will not be able to continue to provide trading services following the end of 2020 due to the lack of passporting rights. The broker invited customers to transfer their accounts to “IG Europe to keep trading CFDs with IG. IG Europe is based in Germany and is authorized and regulated by BaFin and Bundesbank. It offers a range of financial products depending on your location, including CFDs, options, and turbos.”

The broker indicated that all open orders and positions after 31 December will be placed on closings only until the customer’s accounts are successfully transferred. The broker expects the transfer to happen in mid-January and there is no word on what approval process needs to take place to open accounts at IG’s german entity at this point.

Some may recall that several UK based brokers have registered new entities in European countries, including Pepperstone in Cyprus, in order to continue servicing EU traders with little to no interruptions. It remains to be seen if any relief will be provided by ESMA or other EU financial authorities in order to ensure smooth transitions for European traders.

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According to the Israeli technology news site Ctech, the social trading and multi-asset brokerage eToro is eyeing an initial public offering (IPO) in the second quarter of 2021 following stellar growth in 2020 with a doubling of revenue and addition of 5 million new customers.

The technology news site reports that eToro is looking to book Goldman Sachs as its leading bank for the offering. Founded in 2007 by two brokers, the company has grown into an international social trading and brokerage powerhouse. The company is reported to have booked revenue of $500 million during the difficult pandemic year and has experienced a sharp rise in the number of new customers.

If the brokerage does list on an exchange, it would join a long list of successful Israeli firms that have already done so or are also planning to list on US equities exchanges. At the same time, representatives of eToro signaled that the news is just a ‘rumor’ having commented to Finance Magnates, that “eToro does not comment on market rumors.”

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Interactive Brokers asks its Eastern European clients to transfer their accounts to the newly formed Hungarian subsidiary Interactive Brokers Central Europe Zrt.

The brokerage company is sending emails to its clients across Eastern Europe requesting their permission to transfer accounts from the UK regulated office (IBUK) to a new branch recently launched in Budapest (IBCE). The company attributed this move to the approaching expiration of the transition period for Brexit.

The message says that since IBUK’s “passport rights” expire at the end of the year, the service for its clients will be transferred to the European dealership starting from January 1, 2021.

Meanwhile, it is not yet clear whether such invitations are received by the clients of the European Union jurisdiction, or whether it is only about residents of Eastern Europe. Moreover, Interactive Brokers also has an active representative office in Luxembourg.

As a reminder, US trading giant Interactive Brokers Group, as part of its development strategy, launched a subsidiary in Hungary called Interactive Brokers Central Europe Zrt (IBCE) literally at the beginning of this month.

“The opening of an office in Budapest is taking place against the backdrop of growing demand in the Central European region,” the company said earlier.

“We plan to make Budapest the center of our operations in Central Europe to meet the increased demand for brokerage services in Western and Eastern Europe and around the world. We strive to bring knowledge and understanding of capital markets to our future clients throughout Central Europe,” added then Thomas Peterffy, Chairman of Interactive Interactive Brokers.

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The latest data for October 2020 from the Commodity Futures Trading Commission for Futures commission merchants (FCMs) and retail foreign exchange dealers (RFEDs) shows the continued success of IG US LLC – the recently launched US entity of London-based online trading juggernaut, IG Group. At the same time, the data shows a noticeable outflow of customer funds from Interactive Brokers (IBKR), which just yesterday experienced major trading outages affecting equities trading.

IG US was able to raise client funds in the amount of $2,036,138 or 9% month-over-month compared to September 2020. Meanwhile, Interactive Brokers lost $4,678,920 in customer deposits for the same period, or a drop of 7% MoM. Both OANA and TD Ameritrade experienced slight increases in customer assets up 2% and 1% respectively. GAIN Capital Group, now part of StoneX for its part experienced a non-material change in customer assets with a $612,429 decrease.

The overall customer assets picture did not change much from September, as a net $875,902 of new monies was deposited across all registered FCMs in the United States.

In what seems like a regular occurrence as of late, individual equities trading providers Interactive Brokers and Robinhood have experienced major trading outages this morning during the European and US sessions, as reported by FinanceMagnates. There has been a renewed demand for single stock equities by traders primarily in the United States and Europe in 2020, as the Covid-19 pandemic and now a rush to vaccinate major populations has continued to impact global markets.

Interactive Brokers reported to clients that “they experienced “a significant failure” in multiple segments of a highly resilient data storage system”  which lead to customers being unable to “connect through their web, mobile, and desktop trading platforms.” As of this post, some individual traders are reporting that things are returning to normal, while others are signaling that their online trading capabilities are still down.

While Robinhood did not provide any reported feedback to customers and their public-facing information states, many clients have reported that they are also experiencing server connection problems.

Traders are advised to employ traditional means of communication during such adverse events, including calling their brokerages directly or using online chat with customer support in order to manage trading orders and positions. Often times, it is the responsibility of the trader to ensure that they have ample margin and account balance to support any open trades or orders irrespective of access to their online trading platform.

Australia licensed broker USGFX has informed clients that it is unlikely to be able to return client funds as previously scheduled as part of its liquidation process, which began earlier this year. According to Finance Magnates, the issue stems from the migration of AU domiciled customers into the broker’s Vanuatu entity.

For reasons not disclosed by the broker, other than “restrictions imposed by the regulator on business” by Vanuatu financial authorities, customers of the troubled brokerage will unlikely see their funds by the end of the calendar year. Nonetheless, the broker has assured the public that operations at its Vanuatu branch continue as normal.

It remains to be seen if Australia’s Securities and Investments Commission will step in to provide any relief to AU domiciled clients who are experiencing a delay and why the issue of client withdrawals en masse has come up in the first place. With both jurisdictions have financial regulatory bodies tasked with resolving such situations in the interest of customers, little has been disclosed so far as to how the agencies are working to resolve the matters quickly for retail traders.

The Polish financial regulatory body KNF has begun conducting a survey regarding the possible reduction in maximum leverage allowed for conducting Contracts for Difference (CFD) trading in the country, according to Finance Magnates. One may recall that Poland rejected implementing such changes previously when the European Securities and Markets Authority (ESMA) provided a blanket intervention across Europe limiting leverage available to retail traders.

While the KNF did require brokers to change policies regarding the marketing and advertisement of trading products, it is only now acknowledging that further adherence to ESMA and MiFiR may be necessary. As such, the regulator has announced that it will collect feedback from market participants to gauge opinions and ultimately study the possible impacts of such an intervention.

Previously, the KNF issued an opinion that such intervention measures would possibly lead to traders abandoning their local online brokerages and moving to non-regulated offshore jurisdictions, which would present risks to client funds and accounts.

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Australian based online brokerage AETOS AU has warned existing and prospective clients regarding a clone website set up to fraudulently imposter the ASIC regulated broker. The company announced the warning via a pop-up on its website (see below).

AETOS
Click to enlarge

The broker noted that the attempted cloning of its official website is intended to help criminals commit fraud against customers in an effort to obtain customer funds from unsuspecting clients. The company provided their confirmed bank wire details in the message to ensure that any customers who are planning to send funds properly submit their bank wire forms.

AETOS also commented that “all communications should come from a valid AETOS email address (email suffix: @ aetoscg.com), and should not come from a web email address, such as Hotmail, Yahoo, etc. All companies and individuals who illegally use AETOS information for fraud, once verified, AETOS will take corresponding legal measures to pursue its responsibilities.”

We remind all traders and investors that such criminal activity remains elevated in many regions of the world, including Australia, resulting in millions of dollars worth of losses for unsuspecting victims. Before opening an account at an online brokerage, we encourage everyone to thoroughly check the regulatory license, company registration and other details to ensure they are dealing with a legitimate company.

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