Forex Capital Markets (FXCM), US’ leading forex broker, denied the accusations of the US Commodity Futures Trading Commission (CFTC) that it had failed to timely report undercapitalization violation and that it had guaranteed against customer losses at the time of the crisis in January 2015 resulted from the unpegging of the Swiss franc (CHF) from the Euro (EUR).
On Friday, the CFTC issues a statement, saying that it has filed a civil enforcement action with a local court, charging FXCM with undercapitalization, failure to timely report its undercapitalization violation, and guaranteeing against customer losses.
In response to the CFTC’s complaint, the broker confirmed that it suffered a one-day regulatory net capital shortfall on 15 January, 2015, and noted that it solved the issue by the next day. The broker objects to the regulator’s accusations that its actions had given rise to the undercapitalization and customer losses. It said it had acted in swift manner and did everything to protect its clients and shareholders.
„The Company is very disappointed by the CFTC’s decision to file this complaint and attempt to punish FXCM who, like other market participants, was a victim of the SNB [Swiss National Bank] Event,” the statement read. “We are also disappointed in the CFTC’s intimation that the Company’s “seatbelt” system contributed to the FXCM’s undercapitalization during the SNB Event. To the contrary, the Company’s seatbelt system prevented FXCM and its customers from suffering additional trading losses that day,“ the text continued.
It said, however, that it had not failed to report the undercapitalization on time, as the regulator said in its complaint.
“FXCM […] promptly notified both the CFTC and the National Futures Association (NFA) of its net capital shortfall due to the unforeseen SNB Event. Within hours of that notification, teams of CFTC and NFA personnel were on site at FXCM’s offices,” the broker said.
In addition, FXCM noted that it had, regardless of what the US regulator says, repeatedly warned clients of the risks associated with forex trading and had not guaranteed customers that they would not lose money. In fact, it had required them “to acknowledge in writing that they received no guarantees of profit or freedom of losses from FXCM or its representatives”.
Whether FXCM or the CFTC is right is yet to be determined in court.
Following the CFTC statement, FXCM’s shares fell to $9.33 per unit on Friday. The company closed Thursday at $10.22 per share and opened the market at $9.85 per share.
FXCM is a registered futures commission merchant (FCM) and a retail forex dealer (RFED) with the US Commodity Futures Trading Commission (CFTC). It has units registered and regulated with the relevant authorities in the US, the UK, Australia, and France.