CYSEC and FCA take joint action against four Cypriot Investment Firms

On 1 June 2020, the Cyprus Security and Exchange Commission (CYSEC) and the UK Financial Conduct Authority (FCA) announced simultaneous actions for suspected breaches of investor protection rules under the Markets in Financial Instruments Directive against four Cypriot Investment Firms: F1 Markets Ltd (trading as “Investous”, “Stratton Markets” and “Europrime”) Magnum FX (Cyprus) Ltd (trading as “ET Finance”), Rodeler Ltd (trading as “24 Option”) and Hoch Capital Ltd (trading as “IT Trader” and “tradeATF”). The regulators’ actions are noteworthy due to their simultaneous and coordinated nature and because of the actions taken by a UK regulatory authority against firms based overseas with no physical presence in the UK. Significantly, the FCA reached the view that the firms contravened MiFID “as implemented under Cypriot law”; a finding that perhaps oversteps the FCA’s competence as a UK regulatory authority and which might not have been reached without a significant degree of communication and cooperation with CYSEC.

CYSEC exercised its powers under section 71(6)(c) L87(I)/2017 to fully suspend the authorisations of Hoch Capital Ltd and Rodeler Ltd and to partially suspend the authorisations of Magnum FX (Cyprus) Ltd and F1 Markets Ltd. The FCA exercised its statutory early intervention powers under sections 55L, 55N and 55P and 196 of the Financial Services and Markets Act 2000 to prevent the firms from continuing to offer their services in the United Kingdom. This is the first time the FCA has used its early intervention powers to remove a firm’s passporting rights.

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Our firm has significant experience in dealing with CYSEC as well as prior experience of FCA enforcement related matters. We have also assisted with compensation claims against investment firms, with applications for compensation to the Financial Ombudsman, and advising on compliance with MiFID requirements. Please do not hesitate to contact one of our Investment Services lawyers for any assistance.

[This article was prepared by associate Costas Mavrides].