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

Britain’s markets watchdog fined Forex Capital Markets Ltd. 4 million pounds ($6.7 million) for holding on to trading profits earned by U.K. customers, in the latest scandal for the foreign-exchange industry.

The group took about 6 million pounds of retail clients’ profits 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.

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. The agency has also begun a wide-ranging probe of how firms execute trades, with findings to be published later this year.

“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.

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.

Execution Issue

“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.

FXCM customers who lost more than $1 as a result of the firm’s execution practices will have their accounts credited within 60 days, the FCA said. FXCM U.K. will also reopen accounts to reimburse clients that have left. Any unclaimed funds will be passed to the FCA in addition to the fine.

The firm agreed to settle at an early stage of the FCA’s investigation, qualifying for a 20 percent discount. The fine would have been 5 million pounds without the discount.

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