The settlement agreement between CySEC and IronFX is for “reasonable suspicions of having committed possible infractions of the Investment Services and Activities and Regulated Markets Law of 2007.”
According to official information from CySEC, “IronFX has exercised the right to seek a compromise agreement under a provision in the law which states that supervised entities have the right to request a compromise agreement and CySEC may proceed with such a compromise for any violation or possible violation, action or omission, for which there is reasonable suspicion that it was committed in violation of the existing legislation, as long as supervised entities chose to exercise this right.”
The first point in the document released by CySEC, details possible violations in the Organizational requirements for Cyprus Investment Firms (CIFs).
The provisions of Section 18.2 of the law which the regulator cites as being taken into account when reaching the settlement follow below:
1. Establish adequate policies and procedures sufficient to ensure its compliance, including its managers, employees, tied agents and other relevant persons, with its obligations pursuant to this Law and the directives issued pursuant to this Law, as well as appropriate rules governing personal transactions by such persons;
2. Maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps designed to prevent conflicts of interest as stated in section 29 from adversely affecting the interests of its clients;
3. Take reasonable steps to ensure continuity and regularity in the performance of investment and ancillary services and activities, by employing appropriate and proportionate systems, resources and procedures·
4. Ensure, when relying on a third party for the performance of investment services or activities or operational functions which are critical for the provision of continuous and satisfactory service to clients and the performance of investment activities on a continuous and satisfactory basis, that it takes reasonable steps to avoid undue additional operational risk. Outsourcing of the above must not be undertaken in such a way as to materially impair the quality of its internal control and the ability of the Commission to monitor the CIF’s compliance with all its obligations;
5. Have robust governance arrangements which include a clear organisational structure with well defined, transparent and consistent lines of responsibility;
6. Have sound administrative and accounting procedures, internal control mechanisms, effective procedures for assessing the risks the CIF undertakes or may undertake, and effective control mechanisms; including appropriate administrative and accounting procedures and safeguard arrangements for information processing systems;
7. Arrange for records to be kept of all services provided and transactions undertaken by it, which shall be sufficient to enable the Commission to monitor compliance with the requirements under this Law, the directives issued pursuant to this Law and the Regulation (EC) No 1287/2006, and in particular to ascertain that the CIF has complied with all its obligations with respect to clients or potential clients;
8. To apply appropriate client identification procedures, record maintenance and internal reporting as provided by the Prevention and Suppression of Money Laundering Activities Law and by directives issued pursuant to the said Law or/and to section 20 of this Law;
Another two possible violation counts were mentioned in the announcement made by the CySEC. The first is Section 36 of the law which states that a Cyprus Investment Firm (CIF) has to act honestly, fairly and professionally in accordance with the best interests of its clients when providing investment and ancillary services.
The point mentions several complaints of the company’s clients wherein they allege that the brokerage hasn’t adhered to, in particular with the bonus policies of the company and attached conditions. In addition, the section of the law specifies that the marketing communication has to include all of the conditions attached to a particular promotion.
A number of IronFX’s clients have been complaining that their funds have not been released by the company, while IronFX claims that the traders have abused the bonus system implemented by the brokerage.
The next section of the law mentioned in the announcement is Section 38, relating to best execution practices. According to the provisions in the law, “A CIF must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.”
Apparently, this point was also identified by the regulator as a factor when making the decision to settle with IronFX. No information regarding pending client withdrawals has been provided by CySEC for the time being.
News Source: Finance Magnates