The Financial Conduct Authority (FCA) has taken action to stop four Cypriot investment firms from continuing to offer high risk contracts for difference (CFDs) to UK investors.
This comes after the watchdog restricted the sale, marketing and distribution of CFDs and CFD-like options to retail customers in July 2019.
The UK regulator said that Hoch Capital (trading as iTrader and tradeATF), Magnum FX (Cyprus) (trading as ET Finance), Rodeler (trading as 24option) and F1Markets (trading as Investous, StrattonMarkets and Europrime) “used social media and webpages carrying fake endorsements from celebrities to entice consumers into the scams involving CFDs”.
The Cypriot-regulated firms, which were permitted to operate in the UK through passporting, must now cease all regulated activities with UK consumers.
It is the first time the FCA has used its power to remove passporting rights from a firm.
The firms are entitled to seek a review of the FCA’s order.
Details
The UK watchdog said an unspecified number of customers have collectively lost more than £100,000 ($124,719, €112,018) to the schemes.
None of the firms and their operators have any actual presence in the UK and the firms have addresses in Cyprus.
The FCA took action because:
- Consumers were not provided with sufficient information as to the nature of the investments;
- Some were pressured into making increasingly large investments in CFDs, which referenced bitcoin, foreign exchange, shares and indices; and
- Some were even encouraged to take out credit to make the payments.
It also appears that the firms had failed to pay money owed to investors, charged customers undisclosed fees and failed to tell them about the risks of trading CFDs.
Crackdown
Following the action and information supplied by the FCA, the Cyprus Securities and Exchange Commission (Cysec) has fully suspended the regulatory authorisations of Rodeler and Hoch Capital; and partially suspended Magnum FX (Cyprus) and F1 Markets.
The CySec action means that Rodeler and Hoch Capital must cease all regulated activities entirely.
Magnum FX (Cyprus) and F1 Markets may only provide investment services to their existing non-UK-resident clients, and must not promote the provision of their investment services or take on new clients.
They are also explicitly prohibited from providing investment services to existing or new UK resident clients
Mark Steward, FCA executive director of enforcement and market oversight, said: “The FCA has removed passporting rights for these firms which effectively stops them from continuing to provide these types of products in the UK.
“We welcome the further action taken by the CySec. The FCA’s investigations into the sector are continuing.”
