Cyprus financial regulator CySEC has issued a board decision bulletin indicating that CIF-licensed retail FX brokerage group Indication Investments Ltd, parent company of the Libertex brand, has settled on a €160,000 fine in regard to a number of violations.

The bulletin (see full text below) indicates that Libertex didn’t necessarily execute certain client orders on terms most favorable to the client, and had some flaws in its its organisational requirements.

Also, apparently Libertex was offering more than the maximum 30x leverage allowed to retail traders. One of the major regulatory changes made to the Retail FX and CFD sector in the EU over the past number of years was a cut in max leverage to 30x for major forex pairs (and even lower leverage allowed for other products such as CFDs of commodities, equities and cryptocurrencies).

Fines of this size from CySEC typically mean that the company’s transgression wasn’t purely an administrative issue, but on the other hand probably wasn’t an egregious violation of customer confidence or of key CySEC rules.

Libertex is the EU-licensed arm of Russia-centric broker FXClub.com. FX Club stopped taking Russian clients last year after losing its Bank of Russia license. The company has since gone offshore, with FX Club now domiciled in St. Vincent & the Grenadines. Michael Geiger acts as CEO of both Libertex and FX Club. Both companies share the similar double-lined logo.

The full text of CySEC’s bulletin follows:

29th May 2020

CYSEC Board Decision

Announcement date: 29.05.2020 (Board decision date: 09.03.2020)

Regarding: Indication Investments Ltd

Legislation: Τhe Investment Services and Activities and Regulated Markets Law

Subject: Settlement €160.000

Judicial Review: N/A Judicial Review Ruling: N/A

The Cyprus Securities and Exchange Commission («CySEC») would like to note the following:

CySEC, under article 37(4) of the Cyprus Securities and Exchange Commission Law of 2009, may reach a settlement agreement regarding any violation or possible violation, act or omission for which there is reasonable ground to believe that is in violation of the provisions of legislation used by CySEC to supervise its obliged entities.

CySEC reached a settlement agreement with the CIF Indication Investments Ltd («the Company») for possible violations of the Investment Services and Activities and Regulated Markets Law of 2017 – L.87(I)/2017 («the Law»). The investigation, which took place at the Company’s premises on the 9th of November 2018, related to the following regulatory requirements supervised by CySEC:

1. Articles 28(1)(a), 28(7) and 28(8) of the Law, regarding the CIF’s obligation to execute orders on terms most favorable to the client.

2. Articles 22(1) regarding the conditions for CIF authorisation. Explicitly, articles 17(3)(a) and 17(4) of the Law, regarding the CIF’s obligation towards its organisational requirements.

3. Article 40 of Regulation (EU) No 600/2014, regarding ESMA temporary intervention powers. Explicitly, ESMA’s Decision (EU) 2018/796, for the temporary restriction on contracts for differences in the Union in respect of retail clients. Specifically:

(a) ESMA’s Decision (EU) 2018/796, regarding the provision of maximum leverage to retail clients, up to 1:30, at specified products.

(b) Article 2 of the ESMA’s Decision (EU) 2018/796, regarding the margin close-out protection; a requirement to market, distribute or sell CFDs to retail clients.

The settlement reached with the Company, regarding the possible violations of its regulatory obligations, amounts to €160.000. The Company settled the amount of €160.000. All amounts payable relating to settlement agreements are considered revenue (income) of the Treasury of the Republic and do not constitute income of CySEC.