Plus500 Ltd. said there’s “no evidence” the trading firm will be fined amid regulatory probes as investors criticized the way management disclosed frozen accounts to the stock market.
“There’s no provision at the moment because there’s no evidence that we need one,” Chairman Alastair Gordon said at the Israeli company’s annual meeting in London on Wednesday, when he was asked about possible fines. The “lesson learned” is that “regulatory and compliance procedures were not good enough,” he added.
The Financial Conduct Authority ordered Plus500 to freeze its customers’ accounts earlier this month as part of a review into anti-money-laundering controls that started in January. The British watchdog found “major failings” in how Plus500 collected documentation on its clients’ proof of residence and financial position, Chief Executive Officer Gal Haber said.
The shares rose for a second day, increasing 2.2 percent to
291.25 pence at 2:46 p.m. in London. They plunged 36 percent on May 18, the most since the company went public in 2013, bringing weekly losses to about 67 percent.
One investor said executives’ handling of the matter had enabled short sellers to drive down the share price. Plus500 disclosed the FCA review on May 22, at the end of a week where the shares plunged after clients were alerted about the frozen accounts. In retrospect, Plus500 could have suspended shares on May 18, when shares started slumping, the chairman said.
“I didn’t know what was going to be the outcome of that review,” Haber said of the FCA’s initial inquiries in January. “If I had a time machine,” I could have advised customers of the situation earlier, he said.
Plus500 provides online trading services to consumer clients wanting to buy and sell contracts for difference, which are derivatives on financial products such as stocks and commodities.
Haber said on the sidelines that he had “thought what we had was adequate” to meet customer checks for Britain’s anti-money-laundering rules, but that the FCA-imposed review found a “problem with how we’d done it that was pointed out.”
“We would extend apologies to our customers, obviously,” Haber said in an interview. “To shareholders, I’m a shareholder myself, so am I supposed to apologize to myself?”
Gordon said he wasn’t aware of any issues in other jurisdictions where Plus500 operates, including Cyprus and Australia.
Revenue fell by an estimated $4 million at the company’s British business over the past two weeks, the company said in a statement on Wednesday. The cost of clearing a backlog of frozen customer accounts and improving compliance systems is “conservatively” estimated at $2 million, it said.
The company said none of its directors would receive a pay increase this year until the U.K. business is “capable of trading normally again.”
“Regulatory and compliance procedures were not good enough, and we have got to get them right,” Gordon said.