Forex Capital Markets LLC Ordered to Pay More Than $14.2 Million

Discussion in 'Forex Brokers' started by JamesL, Oct 3, 2011.

  1. JamesL


    Forex Capital Markets LLC Ordered to Pay More Than $14.2 Million to Settle CFTC Charges Relating to Its Failure to Supervise Customer Accounts

    Firm also sanctioned for failing to promptly produce certain records to the CFTC’s Division of Enforcement.

    Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges that Forex Capital Markets LLC (FXCM) failed to supervise diligently its personnel’s handling of more than 57,000 customer accounts that traded on FXCM’s forex trading platforms. FXCM is a registered retail foreign exchange dealer and futures commission merchant headquartered in New York, N.Y. The order also settles charges that FXCM failed to produce certain records promptly to the CFTC’s Division of Enforcement during its investigation.

    The CFTC order requires FXCM to pay a $6 million civil monetary penalty and restitution of $8,261,937 to its customers and former customers. In addition, the CFTC order requires FXCM to retain, at its own expense, a monitor to review for three years: (1) its trade execution practices and policies as they relate to the change in price between the time the customer places the order and the time the order is executed by FXCM; and (2) its compliance with its restitution obligation.

    According to the CFTC order, from at least June 18, 2008 until December 17, 2010, FXCM failed to supervise diligently the handling of customer accounts traded on the FXCM platforms by its officers, employees, and agents with respect to changes in price between order placement and execution on both market orders and margin liquidation orders. The order finds that FXCM’s failure prevented its customers from receiving the benefit of price movements in customers’ favor, but allowed its customers to suffer detrimental price movements. The CFTC order finds that had FXCM diligently supervised its personnel, FXCM would have discovered these problems with its trade integrity and would have had the opportunity to correct them before its customers were deprived of, and FXCM benefitted by, approximately $8,261,937.

    Further, the CFTC order finds that FXCM failed to produce certain records promptly in its capacity as a CFTC registrant and thereby required the CFTC to issue a subpoena to attempt to obtain required records from FXCM.

    The CFTC thanks the National Futures Association (NFA) for its assistance. On August 12, 2011, the NFA issued a Decision imposing a $2 million monetary sanction against FXCM in settlement of an NFA action (NFA Case No. 11-BCC-016) involving some of the same practices identified in the CFTC order.

    CFTC Division of Enforcement staff members responsible for this case are Charles Marvine, Christopher Reed, Rachel Hayes, Stephen Turley, Rick Glaser, and Richard Wagner.
  2. JamesL


  3. nice to see " the punishment " has started.

    a fairly hefty slap up the side.

    next up........

    the fxcm class action is " on deck..." for your viewing pleasure.

  4. Jason Rogers

    Jason Rogers ET Sponsor

    Hi James,

    The settlement between FXCM and the CFTC was anticipated and previously disclosed on August 11, 2011, during FXCM’s Second Quarter Earnings Conference Call. At that time, the company established a reserve of $16 million in anticipation of the fines associated with the CFTC ($6 million) and the NFA ($2 million) settlements as well as restitution ($8,261,937) credited to affected clients. To date, the NFA fine has been paid and restitution to affected clients has been credited. The NFA and CFTC fines as well as restitution are all covered under that reserve, resulting in no negative impact to the net income of FXCM Inc.

    Our full statement can be found here FXCM US Reaches Settlement with the CFTC for $6 Million

  5. ORLANDO, Fla., Feb. 10, 2011 (GLOBE NEWSWIRE) --

    The Business Trial Group of Morgan & Morgan, P.A. filed a class action lawsuit today against Forex Capital Markets, LLC (FXCM) (NYSE:FXCM) alleging fraud and racketeering by the nation's largest Forex dealer.

    The lawsuit, filed in the United States District Court for the Southern District of New York (Manhattan Division), alleges that FXCM has bilked thousands of customers out of hundreds of millions of dollars using deceptive and unfair trade practices, including falsely portraying its Forex trading platform as a fair, transparent and true foreign currency exchange, when instead it is a "rigged game" designed to systematically separate customers from their money.

    The Plaintiff, William H. Sanders, of Muscogee, Oklahoma, brought the action on behalf of himself and all other similarly situated FXCM customers, accusing FXCM of fraud by misrepresenting itself as a trading platform that is free from dealer intervention or manipulation. Instead, Sanders alleges, FXCM uses a number of devices and tricks, including software applications, designed specifically to interfere with customers' trades.

    The Complaint further alleges that FXCM engaged in a pattern of racketeering activity by collaborating with its software developers and programmers to develop a "diabolical" software application that provides FXCM with a myriad of tools and system commands with which to interfere with customers' trades, including routing trades to "slow" servers and sending false "error" messages when customers attempt to close out profitable trades.

    Finally, Sanders alleges in the Complaint that FXCM lured thousands of customers to its trading platform by promoting a "demo account" which was touted as providing customers with a true market trading experience. Instead, he claims, once "live" trading commences, FXCM deploys specially designed software to manipulate customers' trades.

    Lead Trial Counsel Tucker H. Byrd, of the Morgan & Morgan Business Trial Group of Orlando, Florida, stated, "We are proud to be representing Mr. Sanders in this action, which we believe will be an important step in bolstering accountability in an industry that has been largely unregulated since inception. We believe, as the Complaint alleges, that Forex Capital Markets, LLC has taken advantage of the trust placed in it by its customers, causing substantial financial harm to this group of people, and we are committed to working to recover those losses."

    FXCM is the nation's largest Forex Dealer Merchant. The company recently went public and trades on the New York Stock Exchange.

    grab some popcorn and get a front row seat for this one.



  6. Lol. FXCM pays the fines (over $18,000,000 in fines) and they come up with a canned response, which admits no guilt and you move forward. Business as usual.

    If FXCM was innocent, there's not a shot in the word they would have paid millions (over $18 million, wow!) of dollars in fines to the NFA and CFTX.

    But they pay millions of dollars (over $18 million in fines) and made the matter go away. All in all, it was a profitable situation for them (FXCM).

    Good for them. FXCM did well.

    But to the unsuspecting customers or potential future FX traders, I think it would be better if they went with Oanda or another FX broker that didn't gladly settle with the NFA and CFTX and pay over $18,000,000 in fines (wow!) to make the matter go away.

    Shame on FXCM.