Foreign currency exchange firm Forex Capital Markets and FXCM UK have been fined £4 million for failing to pass profits from currency movements to customers.
The Financial Conduct Authority (FCA) says the firms owe customers in Britain around £6 million.
At the same time, another company in the same group was under investigation for similar financial misconduct in America, but the British directors failed to tell the FCA.
After an investigation, the companies have agreed to pay compensation to British customers, who will have their bank accounts automatically credited.
David Lawton, the FCA’s director of markets, said: “Failing to follow the rules undermines customer confidence in the financial markets. The FCA will make sure that companies cannot exploit conflicts of interest or customer trust.”
Losses charged to customers
The FCA inquiry revealed FXCM UK handled ‘over the counter’ foreign currency exchange transactions – termed ‘rolling spot forex contracts’ in the industry – for customers that were carried out by another company in the group.
Between August 2006 and December 2010, the FXCM Group banked the profits from favourable currency market movements between the time customers placed orders with FXCM UK and they were executed by the FXCM Group.
Meanwhile, any losses were fully charged to customers – a practice known in the industry as ‘asymmetric price slippage’.
The FCA also accused FXCM UK of failing to make sure the best possible deals were found for their customers.
In July 2010, an investigation into FXCM’s business was triggered by US regulators.
Although senior managers of the FXCM Group also acted for FXCM UK and knew about the investigation, FXCM UK failed to tell the FCA.
Warnings about bogus advisers
The FCA has also issued these warnings about bogus firms posing as regulated financial advisers:
Dealing with an unregulated firm
If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.
Checking if a firm is regulated
Go to the Financial Services Register to check if a firm is regulated in the UK.
Reporting a suspected bogus adviser
Find out how to report unauthorised advisers on the FCA web site
