HF Markets (Europe) Ltd, a member of the HF Markets Group which owns the HotForex brand, has been fined €105.000 by the Cyprus Securities and Exchange Commission (CySEC). The decision by CySEC was announced by the CySEC board after their meeting convened in January 2016. This is during the timeframe in which new clients of HotForex were signing on with HF Markets (Europe) Ltd, and so affected retail forex trading clients of HotForex.
The fines imposed by CySEC were due to multiple areas of non-compliance with:
- the Investment Services and Activities and Regulated Markets Law of 2007 (‘the Law’)
- the Directive DI 144-2007-01 of 2012 of the Securities and Exchange Commission for the Authorisation and Operating Conditions of CIFs (‘Directive 1’),
- the Directive DI 144-2007-02 of 2012 of the Securities and Exchange Commission for the professional competence of Investment Firms and the natural persons employed by them (‘Directive 2’)
Details breaking down the fines are as follows:
- €10.000 for non-compliance with Section 28(1) of the Law, for not maintaining adequate business records. The records in question related to legal agreements, phone records, and service records provided by third parties to trading clients.
- €10.000 for additional non-compliance with Section 28(1), for not taking reasonable measures to manage risk related to the services provided by third parties to trading clients. The company did not ensure adequate supervision of the 3rd party, did not adequately measure the performance of the 3rd party, or put in place adequate procedures for evaluating the 3rd party performance. In essence, HF Markets (Europe) Ltd outsourced some of their client services to 3rd parties but did not ensure the 3rd party was doing a good job.
- €20.000 for non-compliance with Section 36(1) of the Law for failing to act in the best interests of its clients.
- €30.000 for further non-compliance with Section 36(1)(a) of the Law and Directive 2 due to improper and inaccurate communications made by the 3rd party to trading clients
- €15.000 for further non-compliance with Section 36(1)(a) of the Law and Directive 2 for not providing to clients an adequate communication of the risks and nature of the services being provided. In essence, trading clients where not provided with a clear enough understanding of what they were signing up for when they opened their accounts via the website.
- €20.000 for yet further non-compliance with Section 36(1)(a) of the Law and Directive 2 for not maintaining adequate records of the client agreement setting out rights and obligations of the parties to the agreement.
In reaching its decision to fine HF Markets (Europe) Ltd, CySEC considered:
- the seriousness of the areas of non-compliance
- corrective measures put in place by HF Markets (Europe) Ltd, CySEC, notably that it terminated its relationship with the 3rd party service provider
- this was a first time violation of the regulations by HF Markets (Europe) Ltd
So is HF Markets (Europe) Ltd or HotForex A Scam Broker?
While we cannot say definitively that HotForex is a scam broker, Forex Scam Alerts considers these regulatory violations to be very serious, and they potentially had a negative impact on forex trading clients and their trading results. Although the company took steps to correct the problems, these are problems that should not have happened in the first place.
It should be stressed that HotForex is no longer owned by HF Markets (Europe) Ltd, but a different company in St. Vincent & the Grenadine with less regulatory oversight. One has to wonder whether HotForex moved to this other company to avoid CySEC regulations that are designed to protect forex traders. What will happen to new clients of HotForex without CySEC to keep watch over them?
There are many forex brokers to choose from that operate in a stronger regulatory environment with a better regulatory record. We recommend that traders consider this when selecting their next forex broker.
About HF Markets (Europe) Ltd
HF Markets (Europe) Ltd is a member of the HF Markets Group. HF Markets (Europe) Ltd included retail spot forex trading clients of HotForex. New retail spot forex clients of HotForex must now open accounts with a related HF Markets Group firm, called HF Markets (SV) Ltd. This separate company is incorporated in St. Vincent & the Grenadine. It is not subject to the same or similar rules that CySEC imposes on forex brokers regulated by CySEC. It is the opinion of Forex Scam Alerts that clients of HF Markets (SV) Ltd are essentially dealing with an unregulated forex broker, and is not subject to forex or trading specific regulations designed to protect forex traders.
HotForex is a retail spot forex broker brand. It has been operating for over 6 years in retail forex. HotForex has serves hundreds of thousands of clients on over 222 languages. At the time of writing it had over 140 employees across the globe. HotForex offers a wide range of accounts types, trading conditions and trading platforms. Clients of HotForex can trade forex, metals, indices, share CFDs and commodity CFDs.
OptionTrade is a retail binary options broker owned by HF Markets (Europe) Ltd. Clients of OptionTrade can trade a wide variety of binary option types, pairs and expiry times with different account types to choose from. Clients of OptionTrade are protected by CySEC regulation.
Author: Forex Scam Alerts Google+