On September 24, 2015, the Cyprus Securities and Exchange Commissions (CySEC) announced that it was suspending the CIF license of Falcon Brokers Ltd. The suspension was due to suspicions that Falcon Brokers Ltd had violated section 18(2)(i) of the Investment Services and Activities and Regulated Markets Law of 2007. Section 18(2)i relates to the organization requirements of a Cyprus Investment Firm. Specifically:
“A CIF must…when holding financial instruments belonging to clients, to make adequate arrangements so as to safeguard clients’ ownership rights, especially in the event of the CIF’s insolvency, and to prevent the use of a client’s instruments on own account except with the client’s express consent;”
This suggests that Falcon Brokers Ltd either:
- did not make adequate arrangements to safeguard clients’ ownership rights
- used client funds or holdings for their own account
When client funds are not properly protected, they are at risk in the event of a broker going bankrupt. This has happened several times over the past few years alone.
CySEC ordered Falcon Brokers Ltd to take the necessary actions to re-establish compliance with section 18(2)(i) within 30 days. Until that time, the company is required to close all client positions and return their funds if requested by the client. Aside from that the company is prohibited from offering or providing any financial services.
So Is Falcon Brokers Ltd A Scam Broker?
The allegations made by CySEC are very serious. If true, and intentional, it would be strong grounds to label Falcon Brokers Ltd as a scam broker. Whether they are able to re-establish legal compliance within the next 30 days remains to be seen. However, other brokers in this position have not been successful. It should be noted that as a CySEC regulated broker, client funds of Falcon Brokers Ltd are protected up to EUR 20,000 by the Investor’s Compensation Fund. This fund protects client balances up to that level in the case of broker bankruptcy. As such, the risk to clients following the license suspension may seem low. However, if Falcon Brokers Ltd violated section 18(2)(i), could they have violated other sections of the regulation as well? Caution is advised. There are many other forex brokers to choose from who have a clean record with the regulators.
About Falcon Brokers Ltd
Falcon Brokers is an online broker for forex and CFDs. It is headquartered in Cyprus, and has held a Cypriot Investment Firm license. Its website specifies that it is also regulated with the UK’s FCA, and other European regulators. Falcon Brokers Ltd follows the market maker model. This broker offers fixed spreads with no commissions for forex, but the spreads start at 2 pips for the EUR/USD, and are higher for all other currency pairs. Trading platforms include MetaTrader 4, JForex, and the unconventional GWAZY platform.
Author: Forex Scam Alerts Google+