The popular copytrading platform ZuluTrade is facing new regulatory problems from the US National Futures Association (NFA), one of the regulatory bodies overseeing the forex and introducing brokers in the country.
According to a NFA complaint against ZuluTrade and its CEO Leon Yohai Giochais filed in the end of April, the company has failed to comply with NFA requirements as an introducing broker and is subject of disciplinary proceedings for violations.
According to the regulatory body, ZuluTrade has failed to comply with the minimum capital requirements. This was caused by fines totaling $180 564 imposed by the Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC) that in the end of 2014 remained outstanding. To compensate for the capital shortage, ZuluTrade received capital contributions from two of its affiliates, but they were improperly reported as current assets at a date before the actual contributions were made. Furthermore, ZuluTrade has failed to inform both the CFTC and the NFA of its capital being below the requirement between September 29, 2014 and February 2, 2015. ZuluTrade has also failed to properly report other assets and liabilities.
The second count of violations concerns failure to comply with US anti money laundering legislation and relying for customer identification on foreign brokers, two of which are not regulated in the US and not meeting the NFA requirements. For this reason the NFA charged ZuluTrade with violating NFA Compliance Rule 2-9(c).
According to the regulator, the company has also failed to comply with the NFA Bylaw 1101 and, because of its business model, does not monitor customer accounts for compliance with this rule. Instead it has relied on its forex dealers to perform such functions.
The NFA also noted that ZuluTrade does not perform intra-month reviews of the firm’s net capital position unless requested to do so by NFA, Zulu’s auditor, or when an unusual event occurs which may affect the firm’s capital position. “Yet, this lack of ongoing monitoring appears to be a major factor underlying the firm’s intra-month net capital shortfalls during 2015,” the regulator wrote.
The NFA has given ZuluTrade and its CEO Leon Yohai Giochais 30 days to respond to the complaint. Failure to do so would be considered an admission of guilt. The answer must be in writing and must address each of the three violations.
This is by far not the first time in which the Greece-located ZuluTrade has a run-in with the US regulators. In 2011 the NFA has issued a complaint against it for failing to maintain the required minimum adjusted net capital and failing to keep required books and records. Back then ZuluTrade settled the case by paying a fine of $10 000.
In September 2014 the OFAC took an enforcement action against ZuluTrade for introducing accounts for over 400 individuals from Iran, Sudan and Syria – countries with which Zulu was prohibited from doing business. The fine was $200 000.
Again in September 2014, the CFTC chargedg the firm with failure to supervise its anti money laundering program by not implementing its procedures for screening potential account holders to determine if they were from OFAC targeted countries. Zulu settled the CFTC case by agreeing to pay a $150 000 civil monetary penalty and disgorge profits of $80 000.
ZuluTrade has more than 1.2 million users in more than 240 countries worldwide.
The auto-trading platform allows trading in forex and binary options. It is available as a desktop widget and as a mobile app for iOS and Android devices, as well as for Windows Phone, Blackberry, and Kindle Fire.
ZuluTrade’s technology is supported by more than 70 Brokers worldwide, including AAAFX, FXCM UK, IC Markets, RoboOption, AvaTrade, Pepperstone, and Swissquote Bank.
ZuluTrade competes with social trading platforms eToro, Tradeo, and Tradency, among others.