FXCM Fined $6.7 Million for Withholding U.K. Customers’ Profits

Britain’s markets watchdog fined Forex Capital Markets Ltd. 4 million pounds ($6.7 million) for failing to pay out trading profits earned by U.K. customers.

The group withheld retail clients’ profits of about 6 million pounds between 2006 and 2010, while passing on losses in full, the Financial Conduct Authority said in an e-mailed statement. The firm also failed to tell the FCA that agencies in the U.S. were investigating another part of the group for the same behavior.

“Not only did FXCM U.K. 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,” Tracey McDermott, the London-based FCA’s director of enforcement and financial crime, said in the statement.

The foreign-exchange market has come under increasing pressure from regulators. Ten banks have turned over evidence to the FCA as part of an investigation into the manipulation of foreign-exchange benchmarks, Martin Wheatley, its chief executive, officer told lawmakers earlier this month.

FXCM U.K., the British arm of the largest retail currency broker in the U.S., placed foreign-exchange orders on behalf of customers to be executed by another part of the group and kept hold of “profits from favorable market movements,” the FCA said. The group failed to check whether its order-execution policies complied with U.K. rules.

“This settlement is a significant step in our efforts to put this legacy trade execution issue behind us,” Brendan Callan, FXCM U.K.’s chief executive officer, said in an e-mailed statement. “A recent analysis of trades over a six-month period demonstrates how our customers have benefited from our enhanced trading execution policy,” Callan said.

The FCA is conducting a wide-ranging review of firms’ execution practices, and is scheduled to publish its findings later this year.

To contact the reporter on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Lucy Meakin at lmeakin1@bloomberg.net

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