CFTC Sues British Registered Broker

Fresh from agreeing a settlement with FXCM's UK subsidiary, the CFTC has stepped up its campaign in the courts against "unregistered" RFEDs by announcing that it is bringing civil actions against another 11 foreign currency firms. As in their first such sweep a number of those firms are based in far away places such as Belize, the British Virgin Islands and Cyprus. However two names stand out in the CFTC's blacklist of miscreants as being more "onshore" than the others, namely:

City Credit Capital, (UK) Ltd., a United Kingdom company;

and:

Enfinium Pty Ltd., an Australian company;

Both actions have been filed in "the United States District Court for the northern district of Illinois eastern division" rather than in the UK or Australian courts. Enfinium acquired Australian broker Vantage FX last year, and it is the Vantage name that the CFTC cite in their complaint. More recently a significant stake in Enfinium was acquired by China Private Equity Investments Holdings Limited who are listed on the London Stock Exchange's AIM market, and were thus happy to announce recently on the LSE's Regulatory News Service that:

The Board of CPE is delighted to announce that the title "Best Forex Broker in South East Asia" has been awarded to the forex broking arm of Enfinium International Holdings Limited ("Enfinium"), in which CPE recently acquired a 30% stake.

The prestigious accolade, won in competition against nearly 140 other international brokers participating in the 2011 IBTimes Trading Awards in New York City, went to Vantage FX, a Corporate Authorised Representative of Enfinium. VantageFX also collected a "Forex Broker Australia – Excellence Award".

The IBTimes Trading Awards claims to be the most comprehensive annual award series within the fast-growing retail forex market.

In both cases the CFTC alleges that:

Beginning on October 18, 2010 and continuing to the present (the “relevant period”), [the firm] solicits or accepts orders from non-ECPs located in the United States in connection with retail forex transactions and is, or offers to be, the counterparty to these retail forex transactions without being registered as an RFED with the CFTC, in violation of Section 2(c)(2)(C)(iii)(I)(aa) of the Act, as amended, to be codified at 7 U.S.C. § 2(c)(2)(C)(iii)(I)(aa) and Regulation 5.3(a)(6)(i), 17 C.F.R. § 5.3(a)(6)(i).

and that:

Venue properly lies with the Court pursuant to Section 6c(e) of the Act, as amended, to be codified at 7 U.S.C. § 13a-1(e), because [the firm] transacts business in this District and certain transactions, acts, practices, and courses of business alleged in this Complaint occurred, are occurring, and/or are about to occur within this District.

Whilst Vantage FX may not be registered in the U.S. as an RFED, they are registered with the Australian Securities and Investments Commission. The Vantage FX name is even registered here in the UK as well, although this is just a licence to use the brand and the two companies have no other legal connection. Whatever else they may be, CPE/Enfinium/Vantage are certainly not a run of the mill offshore bucket shop. Neither are City Credit Capital (UK) Ltd for that matter. They too are currently registered in the UK with the Financial Services Authority, and on their website they proclaim that:

The senior management team at City Credit have worked across the globe and have been drawn together from some of the world's premier financial institutions including HSBC, Citigroup and Société Générale.

It looks as though neither Enfinium or City Credit are rushing to follow in FXCM's footsteps and cough up a few hundred grand to settle matters with the CFTC. Meanwhile here at the Trading Gurus we're eagerly waiting to discover how these actions taken by the CFTC in the US courts might result in sanctions against offshore FX brokers that are properly registered within their own jurisdictions and who aren't so eager to reach a quick settlement. In their latest press release the CFTC has this to say about their first batch of court actions:

With respect to the similar actions filed in January 2011, 11 of the 14 defendants have either settled the charges or defaulted, and the charges against the remaining three are pending.

The CFTC strongly urges the public to check whether a company is registered before investing funds. If a company is not registered, an investor should be wary of providing funds to that company.