FXCM UK Fined £4 million by the Financial Conduct Authority

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In a press release today FXCM have announced that:

Its U.K. subsidiaries, Forex Capital Markets Limited and FXCM Securities Limited, [have] entered into a settlement with the Financial Conduct Authority (“FCA”). The settlement addresses trade execution practices concerning the handling of price improvements on FXCM UK’s offsetting orders from August 2006 – December 2010.

Under the terms of the settlement, FXCM UK has agreed to pay fines totaling £4 million to the FCA and to provide approximately $10 million in restitution to the affected clients. FXCM recorded a reserve $15 million in the third quarter of 2013 for this matter and will record an additional $1.9 in the fourth quarter to reflect the terms of the settlement and related expenses. All clients receiving restitution will be notified within 60 days. Of the approximately $10 million being credited under this settlement, the impact on individual traders was typically very limited and averaged $3.70.

Unfortunately it doesn't sound like I'll be receiving a massive windfall any day soon!  The FCA themselves have also issued a press release about the matter today, with a somewhat different emphasis to FXCM's. The FCA says that:

The Financial Conduct Authority (FCA) has fined Forex Capital Markets Ltd and FXCM Securities Ltd £4,000,000 for allowing the US based FXCM Group to withhold profits worth approximately £6 million ($9,941,970) that should have been passed on to FXCM UK’s clients.

FXCM UK also failed to tell the FCA that the US authorities were investigating another part of the FXCM Group for the same misconduct. The FCA has ensured that FXCM UK’s clients will be fully compensated, with credit automatically paid to their accounts.

According to Tracey McDermott, the FCA’s director of enforcement and financial crime:

Not only did FXCM UK fail to treat its customers fairly or correctly apply our rules, I am particularly disappointed that it was not transparent in its dealings with the FCA. We expect all firms to put customers at the heart of their business, and we have taken action to ensure clients of FXCM UK will get redress.

The FCA press release goes on to provide more details about FXCM UK's failure to treat its customers fairly, explaining that:

Between August 2006 and December 2010, the FXCM Group kept profits from favourable market movements between the time the orders were placed by FXCM UK and executed by the FXCM Group, while any losses were passed on to clients in full – a practice known as asymmetric price slippage.

As both FXCM and the FCA are at pains to point out, here in the UK at least there are rules about "best execution" that brokers are supposed to adhere to:

Brokers in certain markets, including regulated CFD and spread-bet firms and those offering Rolling Spot Forex contracts for difference, may be failing to recognise that their activities fall within the scope of the best execution rules.

Do you suppose that all those UK regulated CFD, spread-bet and FX brokers will now hastily correct any such failures?

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