On May 21, 2015, The Cyprus Securities and Exchange Commission (CySEC) fined Trademarker (Cyprus) Ltd, the parent company of SkyFX. The total fines were € 20,000 for violations of the Investment Services and Activities and Regulated Markets Law of 2007 (the Law). The fines were broken down as follows:
1) € 10,000 fine for failure to comply with article 28(1) of the Law requiring the company to meet its licensing conditions. The first applicable condition is described in Article 13. This requires that the management of the company be undertaken by at least two suitable shareholders. CySEC must be informed of the shareholders so that they can judge their suitability. Another applicable condition is set out on article 18(2)(d), which states:
“ensure, when relying on a third party for the performance of investment services or activities or operational functions which are critical for the provision of continuous and satisfactory service to clients and the performance of investment activities on a continuous and satisfactory basis, that it takes reasonable steps to avoid undue additional operational risk. Outsourcing of the above must not be undertaken in such a way as to materially impair the quality of its internal control and the ability of the Commission to monitor the CIF’s compliance with all its obligations; “
In failing to meet this condition, SkyFX may have incurred excess operational risk or impaired the company’s ability to monitor and control whether its licensing obligations were being met.
2) € 5,000 fine for failure to comply with article 34 of the Law. This article requires that the company inform CySEC of any material change to information or details that formed the basis for granting the authorization as a Cypriot Investment Firm. This requirement gives CySEC the opportunity to re-evaluate the information to determine the continued suitability of the company to operate. The changes in question were that SkyFX had outsourced some of the company’s investment services to a third party operating in Israel, as well as marketing activities to a third party.
3) € 5,000 fine for failure to comply with article 36 (1) of the Law. This lengthy article addresses the requirement of the company to act honestly, fairly, professionally, and in the best interests of their clients. CySEC did not specify the exact way in which SkyFX was in noncompliance with this article. However, they did reference that outsourcing services to the third party is the means by which the company was in noncompliance.
CySEC referred to considerations in determining the company’s penalty, which include:
- the seriousness of the violations
- the shareholders of the company at the time of the violations are no longer associated with the company
- the company has not committed similar violations in the past
So is SkyFX a scam forex broker?
Based on this regulatory action against SkyFX, one would not conclude that SkyFX are scammers, or even that they intentionally behaved detrimentally to their clients. SkyFX has the following features to provide protection to clients:
- As a forex broker regulated by CySEC, SkyFX is a member of the Investor Compensation Fund, which protects retail clients up to € 20,000 in the event the broker cannot fulfill its client obligations
- SkyFX allows high leverage of 300:1 on most currency pairs. This allows a forex trader to keep most of their trading capital with their own bank, and only provide a small margin payment to the broker. So a trader could place €5 000 000 trades (50 standard lots), while only providing a margin deposit of less than € 20,000, which is protected by the Investor Compensation Fund
- SkyFX claims on their website that client funds are segregated from the company’s operational funds, and supervised daily.
Author: Forex Scam Alerts Google+