Release Date: 26th February 2014
To access the original FCA document, click here.
Summary
Forex Capital Markets Ltd and FXCM Securities Ltd (collectively referred to as “FXCM UK”) have been fined £4 million by the Financial Conduct Authority (FCA) for profiting unfairly from their clients and for failing to maintain transparency with the regulator. This fine was imposed after it was discovered that FXCM UK allowed the US-based FXCM Group to retain approximately £6 million in profits that rightfully belonged to FXCM UK’s clients. This misconduct occurred between August 2006 and December 2010 through practices such as asymmetric price slippage, where the FXCM Group kept profits from favourable market moves but passed losses to clients in full.
Furthermore, FXCM UK neglected to inform the FCA that the US authorities were investigating similar misconduct by another part of the FXCM Group. This lack of transparency violated the FCA’s requirement for firms to be open and cooperative with the regulator, known as FCA Principle 11.
David Lawton, the FCA’s director of markets, emphasised the importance of fair conduct in maintaining market integrity, while Tracey McDermott, the FCA’s director of enforcement and financial crime, expressed disappointment in FXCM UK’s failure to prioritise their customers’ interests and comply with regulatory standards. This includes the FCA’s rules on ‘best execution’, which mandate that firms must take reasonable steps to ensure the best possible deal for their clients.
In response to these violations, the FCA has ensured full compensation for affected clients, with automatic credits to their accounts. FXCM UK’s practices were part of a broader investigation by the FCA into firms’ execution practices and the ways services are communicated to clients. The results of this thematic review are expected to be published soon.
Key takeaways for other firms from this case include
- The importance of adhering to best execution practices.
- The necessity of a transparent relationship with regulators.
- Fundamental requirement of prioritising customer interests to maintain trust and integrity in financial services.
Firms are reminded of the heavy penalties for failing to comply with these standards, both in financial terms and in potential damage to reputation.
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