DawedaFX loses CySEC license for moving clients to BVI offshore entity
It has been a busy day for Cypriot financial regulator CySEC in the Retail FX space.
After un-suspending Retail FX broker ETFinance (as well as F1Markets), CySEC announced that it was withdrawing the license of Daweda Exchange Ltd which operated dawedafx.com, and suspending two of its directors for six months.
Although CySEC listed a number of issues, it seems as what mainly irked the regulator was the fact that Daweda was tricking clients into thinking they were opening an account with the CySEC-licensed entity, while in reality they were being shunted to an “offshore” company in the British Virgin Islands (BVI), home to many-an-offshore-broker.
As noted, CySEC issued a temporary six-month ban against company executive directors Hamed Sepasdar Tehran and James Cabrera, during which time they may not exercise management functions in CIFs.
The full text of the CySEC notice follows:
18 June 2020
Announcement date: 18.06.2020; CySEC Decision date: 15.06.2020
Regarding: A. Daweda Exchange Ltd, B. Hamed Sepasdar Tehran, James Cabrera
Legislation: The Investment Services and Activities and Regulated Markets Law
Subject: Withdrawal of CIF authorisation; Violation/Administrative sanctions to members of the BoD
A. The Cyprus Securities and Exchange Commission (‘the CySEC’) announces that, at its meeting of 13 May 2020, decided to wholly withdraw the Cyprus Investment Firm authorisation of Daweda Exchange Ltd (‘the Company’), with number 289/16, pursuant to articles 71(6)(c) and 8(1)(d) of the Investment Services and Activities and Regulated Markets Law of 2017 (‘the Law’), due to the Company’s non-compliance with article 25(1) of the Law, as it did not act honestly, fairly and professionally when providing investment services to clients, in accordance with the best interests of its clients.
More specifically, the CySEC has reached the above decision, taking into consideration, inter alia, that the Company did not take the necessary steps to safeguard the privately owned URL (domain) of www.daweda.com, from being used by Daweda Ltd (BVI). Evidence supports that Daweda Ltd (BVI) was using the email address [email protected], in order to send to its clients their login ID and password information to connect to the MT4, thus giving the impression that they were clients of the Cyprus Investment Firm Daweda Exchange Ltd.
Daweda Ltd (BVI) and Daweda Exchange Ltd do not belong in the same group of companies.
Due to the wholly withdrawal of the Company’s authorisation, and in accordance with paragraphs 4 and 5 of CySEC Directive DI87-05 for the Withdrawal and Suspension of Authorisation, the Company should:
(i) Ensure it does not provide investment and ancillary services.
(ii) Immediately and without delay, ensure that all references in its websites and anywhere else, relating to the provision/carrying out of investment services/activities, as well as references to its licensing and regulation by the CySEC, are deleted.
(iii) Return all funds and financial instruments which belong to/are attributable to its clients, including any profits.
(iv) Examine and resolve any clients’ complaints/reports filed against the CIF.
B. Furthermore, the CySEC announces that, at its meeting of 13 May 2020, decided that the Executive Members of the Company’s Board of Directors, Mr. Hamed Sepasdar Tehran and Mr. James Cabrera, have not complied with article 10(1)(a) of the Law, since, at the material time and while they were members of the board of directors of the Company, they did not define the governance arrangements that ensure the effective and prudent management of the CIF, in a manner that promotes the integrity of the market and the interest of clients. In particular, they did not comply with the principle of article 10(1)(b)(iv) of the Law, since they did not supervise effectively the senior management of the Company.
For their non-compliance with article 10(1)(a) of the Law, the CySEC has decided, pursuant to article 71(6)(d) of the Law, to impose a temporary ban against Mr. Hamed Sepasdar Tehran and Mr. James Cabrera to exercise management functions in CIFs, and more specifically for a period of six (6) months.