In relation to the fine, CySEC said the violations related to non-compliance with the Directive DI144-2014-14, and in particular with the authorisation conditions laid down in the articles 5 (1), 24, 25 and 26 (3). According to the watchdog’s statement, these terms concern certain authorisation conditions and organisational requirements with which a CIF is required to comply.
CySEC has further explained that the settlement resolves allegations of non-compliance with other articles that cover multiple regulatory requirements, including conflicts of interest and information provided to clients.
In addition, FXBFI was probed by Cysec for lack of compliance with regulatory requirements that govern the assessment of suitability and appropriateness of clients, as well as its obligation to execute orders on the most favourable terms to their customers.
To stay on top of compliance, Cypriot brokers have to gain insights into the financial situation of the client, including his investment knowledge, experience, and objectives. The genesis of these requirements lies in Markets in Financial Instruments Directive (MiFID II) regulation.
FXBFI is regulated by CySEC and therefore has to comply with Cypriot regulations in order to maintain its CIF trading license, which enables the broker to offer its services across Europe.
As a result of the CySEC’s audits conducted between February to August 2020, several types of violations were found in five compliance areas. The following hierarchy of problems running from most common to least common was observed, according to the watchdog:
- Article 5(1) of the Law regarding the requirement for CIF authorization.
- Article 24 of the Law regarding conflicts of interest.
- Article 25, sections (1) and (3), of the Law regarding the general principles and information addressed to clients.
- Article 26(3)(a) of the Law regarding the assessment of suitability and appropriateness and reporting to clients.
- Paragraph 21(g) of the Directive DI144-2014-14regarding the variable elements of remuneration
Following such settlements, CySEC often orders the company to take corrective measures within a set framework. However, the regulator confirmed that FXBFI already paid the settlement fees and since such agreements are usually announced within six months of an inspection, the majority of issues should have already been resolved.
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