Ontario OSC Fines Caldwell $2 Million for Best Execution Lapses

Ontario Securities Commission (OSC) today said it had fined Toronto-based Caldwell Investment Management Ltd. (CIM) CAD $1.8 million ($1.35 million) for not getting the best execution price for its customer transactions and failing to properly supervise the process.

The provincial regulator also ordered the asset manager to pay a further CAD $250,000 to cover the cost of the OSC’s investigation involving its equity and bond trades. CIM, in a settlement with the OSC, admitted the regulator’s findings.

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According to a regulatory settlement, the disciplinary case stems from executing most of Caldwell clients’ transactions through an affiliated company rather than making efforts to find the best alternative.

OSC staff further explained that the company used an in-house system for directing most of its client trades through its own related investment dealer Caldwell Securities Ltd. (CSL), when in many cases unaffiliated venues offered better commissions and spreads.

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A clear conflict of interest

This pattern contrasts with the industry rules that require portfolio and investment fund managers to ensure that the transactions prices for customers’ trades are as favorable as possible amid the current market conditions.

The company not only overcharged its clients, but also provided misleading statements to the regulators while looking into the conflicts of interest allegations. Further, CIM provided conflicting information to the firm’s independent review committee (IRC) that was established to oversee its activities. The problems occurred between January 2013 and November 2016.

The enforcement order also states CIM didn’t live up to best execution requirements because it hadn’t a process in place to evaluate trades or collect information to determine if it was fulfilling its obligation.

“CIM’s failure to develop, document and enforce clear policies and procedures for best execution led to self-interest dictating how client orders were handled. These are serious lapses in oversight that will not be tolerated,” said Jeff Kehoe, Director of the Enforcement Branch at the OSC.

Societe Generale Now Supports Eurex FX Derivatives

Societe Generale has expanded its FX offering and now supports trading and clearing of Eurex foreign exchange (FX) futures for its clients. The move is designed to help drive and foster SG’s global FX business, part of a broader shift by the lender in the FX space.

The move means that the French bank’s clients can trade FX on Eurex Exchange, while its clearing unit now provides support for classic FX derivatives, as well as rolling spot futures which are now live on the exchange.

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The bank will clear Eurex-listed FX contracts for 11 currency pairs for its clients; namely, EURUSD, GBPUSD, AUDUSD, USDJPY, USDCHF, EURCHF, EURGBP, GBPCHF, EURJPY, AUDJPY, EURAUD, NZDUSD.

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The Eurex FX offering of classic FX futures and options in combination with the rolling spot future allows traders to manage their FX exposures with listed products. The move also expands SG’s OTC FX prime brokerage offering and can be integrated in their overall risk model offered to clients, as well as helping them build and maintain their FX positions at Eurex using its block futures and EFP capabilities.

A welcome addition and an important partner

Both firms added that Societe Generale support would expands the offering to enable clients trading in the exchange order book in Europe, whilst offers access to trading listed FX and OTC FX on Deutsche Börse’s 360T platform.

Carlo Kölzer, CEO of 360T and Global Head of FX at Deutsche Börse Group, commented: “Many clients have told us a catalyst for their increased use of FX Futures will be a tertiary pool of off-exchange liquidity to complement our strong orderbook proposition, so we welcome Chris’ trading desk as a primary off-exchange provider in the FX space. With clearing enabling important new trading relationships to be formed without the need for bilateral credit or operational agreements, and off-exchange being the bridge between OTC and listed markets, our clients now have choice over how to access our FX Futures liquidity for any given trade.”

FSB Amends Timelines for Policy Tips on SFTs Transactions

The Financial Stability Board (FSB) has amended its previously announced timelines for applying its recommendations on securities financing transactions (SFTs), such as repos, which aim to reduce counterparty risk and address its ‎widespread incidents. ‎

SFT transactions involve transferring certain assets between two parties at a specified price against the delivery of equivalent assets at a specified price on a future date.

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The international body, which monitors and makes recommendations about the global ‎financial system, has previously launched its work plan to develop 18 policy tips to address SFTs stability.

Plans for a new framework specifically address margins and haircuts on non-centrally cleared SFTs, which should spark a greater adoption of central clearing.

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Following the 2008-09 financial crisis, global regulators, including the Financial Stability Board (FSB), called for tougher rules of non-centrally cleared securities finance transactions (SFTs).

Central clearing has remained minimal

The FSB is looking at introducing minimum margins and haircut floors on both centrally cleared and non-centrally cleared derivatives and SFTs. A haircut is the difference between the market value of an asset used as loan collateral and the amount of the loan itself, while margins are a form of insurance that involve a transfer of cash or securities to partially cover exposures.

Specifically, OTC derivatives and other asset classes are now funneled through CCPs, which sit between buyers and sellers in a trade to mitigate the impact of a counterparty default. However, central clearing of securities lending and borrowing arrangements has remained minimal despite the regulators’ efforts.

The initiative follows on the heels of a series of high-profile misconduct cases that ‎came to light in recent years. The FSB identified several areas for further investigation ‎with the aim to prepare a toolkit for supervisors and financial undertakings in these areas.‎‏

The statement further explains: “SFTs such as securities lending and repurchase agreements (repos) play a crucial role in supporting price discovery and secondary market liquidity for a wide variety of securities. However, such transactions can also be used to take on leverage as well as maturity and liquidity mismatched exposures, and therefore can pose risks to financial stability.”

Social Media Forex Scheme Perpetrator Convicted

The US Commodity Futures Trading Commission (CFTC) has announced that the perpetrator of a social media forex scheme is going to have to pay a hefty fine and compensate over 400 victims. Kelvin Ramirez duped his victims people using Instagram and WhatsApp, convincing them to invest with him over $735,000 in total.

While he paraded to be enjoying a lavish lifestyle thanks to his earnings from trading foreign exchange, in reality, he never had any accounts opened with any brokerage.

The court found that Ramirez fraudulently solicited and misappropriated funds from clients in the forex trading scheme. Aside from reimbursing his victims, Kelvin Ramirez will have to pay a civil monetary penalty totaling $2.2 million. He is also barred from registering with the CFTC and trading in any CFTC-regulated markets.

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Ramirez is also permanently enjoined from engaging in conduct that violates the US Commodity Exchange Act.

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Managed Accounts and Signals

According to the court’s decision, Ramirez fraudulently solicited more than 400 clients to invest in commodity pools that purportedly traded in forex. The defendant was allegedly managing numerous accounts and the clients were subscribed to his forex trading education and signals services.

After misappropriating funds provided to him for trading purposes, Ramirez started boasting his lifestyle on social media using platforms like Instagram and WhatsApp, among others. He was claiming to be making hundreds of thousands of dollars weekly while trading the forex market.

He also claimed to have a multi-million dollar personal bank balance and a managed forex trading pool with millions of dollars in assets under management. The court found that all of these representations were false and that the defendant defrauded his clients of just over $735,000.

“The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable,” the US regulator outlined in a statement.

While no trading has been done, the CFTC is acknowledging the assistance of the St. Vincent and the Grenadines Financial Services Authority.

Exclusive: CPT Markets Upgrades FCA Licence to IFPRU €730k

CPT Markets UK, the trading name of UK brokerage Citypoint Trading Ltd, has received approval from the FCA to upgrade its permissions to full scope, “IFPRU €730k” license, according to a regulatory memo seen by Finance Magnates. The news was confirmed by Citypoint CEO Salam Alaswad.

The variation of permission to the higher licence level issued by the City watchdog allows the FX and CFDs broker to trade with its clients as principal without the matched limitation.

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CPT Markets was established in London in 2008, and its upgraded authorization ensures that it adheres to corporate governance, risk control measures and adequate liquidity levels. The company’s original license from the FCA was for a Limited License – matched principal broker.

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Salam Alaswad
Salam Alaswad, CEO of Citipoint Trading

Citypoint Trading, which has been offering FX and CFD products based out of London since it was incorporated in 2008, was acquired last year by Allen Market Limited, a UK based holding company. Since then, it has expanded its workforce, rebranded to CPT Markets UK and launched a new website.

What does it mean?

IFPRU €730k investment firms (where IFPRU refers to the prudential sourcebook for investment firms) are authorised to deal for own account in any investment instrument. This gives the firm added flexibility without the matched limitations.

Full-scope IFPRU €730k firm status is given to firms based in the UK, with own base funds of €730,000 (roughly $820,00), that must adhere to both the European Securities and Markets Authority’s (ESMA) Markets in Financial Instruments Directive and FCA regulations. Such firms are also subject to IFPRU 11 and are required to submit recovery plans to the FCA on a regular basis.

As Finance Magnates reported earlier, the FCA was considering forcing straight-through processing (STP) brokers to upgrade their licenses to those of full market makers. This is necessary to ensure that the companies manage to cover negative balances resulting from prospective client losses due to unexpected market moves.

CySEC Suspends License of AFX Capital Markets for 10 Days

The Cyprus Securities and Exchange Commission (CySEC) has announced that it is temporarily suspending the license of AFX Capital Markets for 10 days. The move comes almost a year after the company reached a settlement with the regulator about a different matter related to misleading information on marketing materials.

The decision is also affecting the firm’s STO brand which states on its website to be using both the CySEC and FCA licenses of AFX. In its decision, the Cypriot regulator is mentioning that the company could have violated regulations governing the safeguarding of client money.

“There are suspicions of an alleged violation of section 22(1) of the Law due to the Company’s possible non-compliance at all times with the authorization condition in section 17(9) (organizational requirements) of the Law, as specified in paragraphs 4, 6 and 9 of Directive DI87-01,” the CySEC’s statement reads.

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The decision has been taken to mitigate the risks arising from non-compliance with the law and the alleged violation “causes concern and risk relating to the protection of the company’s clients”.

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Commenting to Finance Magnates, a spokesperson for AFX stated that the firm is cooperating with the regulator and is working with its legal team to resolve the matter and address any concerns which the CySEC might have.

According to the Cypriot watchdog’s statement, within ten days, the company has to take actions to comply with the aforementioned provisions. During this period the company is not permitted to provide or carry out investment services and activities.

AFX Capital Markets can’t accept new clients nor enter into any business transactions. The company also has to suspend any advertisements that state that it is a provider of investment services.

If existing clients of the company demand so, the firm can complete all its transactions and those of its clients which have been placed before the decision and per client instructions. Should the firm’s clients request a return of all funds and financial instruments which are attributable to them, the company has to comply with the requests.

CFTC Investigating BitMEX for Services in the US

The United States Commodities and Futures Trading Commission (CFTC) is probing BitMEX, a cryptocurrency derivatives exchange, over suspicion of violation of regulations, Bloomberg reported on Friday.

The agency is looking if the exchange is offering its services in the United States, thus violating the laws of the jurisdiction. BitMEX has not taken any approval from the CFTC and is not allowed to provide derivatives trading services in the country.

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According to the unnamed source of the publication, the watchdog agency is investigating into the derivatives platform for a month.

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A mammoth in the crypto arena

Registered in Seychelles, BitMEX is one of the largest crypto derivatives platforms, onboarding traders mostly from Asia. It offers leverage up to 100x for its futures contracts.

According to its website, the platform handled $6.75 billion worth of trades in the last 24 hours while the volume for the last 30 days touched $208.98 billion.

Though BitMEX officially does not provide any service in the US, its chief executive Arthur Hayes revealed in January that it is possible for traders based in the country to spoofing their location to trade derivatives.

In January, reports surfaced that the exchange is closing down accounts of traders based in the US and Canadian province of Quebec amid the tightening of regulatory proceedings.

Meanwhile, Nouriel Roubini, an economist and crypto critic recently attacked BitMEX, accusing the platform of its involvement in “systematic illegality.”

“We continue to monitor all legal and regulatory developments around the world and will comply with all applicable laws and regulations; we reject any allegations of criminality, manipulation or unfair treatment of our customers, who are at the center of everything we do,” Hayes recently told Bloomberg.

GO Markets Begins Offering a-Quant’s AI-Based Trading Signals

The push for artificial intelligence (AI)-based trading signals continues to see traction around the retail industry. Per the latest move, GO Markets will now include a-Quant’s trading signals to select clients, helping traders optimize their risk/reward ratio.

AI-based trading signals are an increasingly popular offering, with many brokers looking to integrate this within their services suite. GO Markets has become the latest venue to adopt these services, which will now be available to clients at the Australian retail brokerage.

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“We’re very happy to include a-Quant’s services in our arsenal of trading tools. Our clients can now enjoy high-quality signals easily deployable to their trading and take advantage of cutting-edge artificial intelligence technology from a-Quant’s expertise,” explained GO Markets’s head of global operations, Yaazdee Jaunbocus.

Indeed, a-Quant is known for its advanced trading signals for the major FX pairs. The company specializes in portfolio optimization, developing and constructing asset portfolios as well as focusing on AI.

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GO Markets clients harnessing the power of AI

In particular, a-Quant’s trading signals are derived from machine learning algorithmic models and have an explicit form (entry price, stop loss, take profit). As such, these signals follow optimized Risk Management rules making them ideally suited to help the traders optimize their risk/reward ratio.

“a-Quant focuses on developing innovative and artificial intelligence-based algorithms, for retail and institutional traders, which enhance considerably their trading performance,” noted Thomas Papapolyzos, Founder and CEO of a-Quant in an accompanying statement.

“GO Markets is a knowledgeable and reliable broker, so we’re excited to offer our models to their clients in a signal service form,” he added.

The service integration is the latest move for GO Markets, which has had an eventful 2019. Earlier this year, the group also made headlines by expanding its multi-asset offering, whereby adding Australian Securities Exchange (ASX) stocks for trading on MetaTrader 5.

Israeli Hacker Charged for Stealing $1.7 Million in Crypto

The Israeli authorities have charged Eliyahu Gigi, a 31-year old Tel Aviv resident, for stealing over 6.1 million NIS (around $1.7 million) in several cryptocurrencies.

Gigi and his 21-year old brother were arrested last month by the Israeli police under the suspicion of stealing cryptocurrency through a phishing scheme, Finance Magnates reported.

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According to the local news agency The Globe, Gigi is charged with several crimes including theft, fraud, and money laundering.

The charges alleged that Gigi managed a number of websites which were used to defraud many foreign nationals to steal digital currencies which include Bitcoin, Ethereum and Dash. He is also charged for carrying out phishing attacks and distributing malware to victims computers to steal crypto.

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The report detailed that to hide the fraudulent activities and stolen funds, Gigi used remote servers and also used other applications and services to hide the tracks of ill-gotten cryptos. He also distributed the funds into a number of wallets and even converted them other currencies.

Scale down of the involved amount

Though at the time of arrest, it was suspected that the perpetrator was involved in $100 million worth crypto fraud, the amount drastically decreased in the filed charges.

The fraudster’s activity first alerted the authorities when they received lead of some spam links on digital wallet forums. The report detailed that the links posted by Gigi were redirecting victims to some fake wallet downloadable website. The phishing websites collected their credentials which Gigi later used to steal crypto from the wallets.

Meanwhile, in the United States, a former Microsoft employee was arrested over charges of stealing $10 million worth crypto. He was accused of stealing cryptocurrency gift cards that were redeemable against Microsoft products and then reselling them on the internet. The perpetrator even used the ill-gotten funds to purchase a $160,000 Tesla car and a $1.7 million lakefront home.

NAB Secures Former Head of RBS Ross McEwan as CEO

The National Australia Bank (NAB) has secured a new Group Chief Executive Officer and Managing Director – Ross McEwan, the company announced this Friday.

McEwan joins the NAB from the Royal Bank of Scotland (RBS), where he had been the CEO since 2013. 

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During his time with the bank, he led the organisation through a period of significant change and recovery, the statement released today said.

The New Zealand-born CEO is a former Australian banking industry executive. He announced his resignation from RBS in April 2019. 

He originally joined the Scottish bank in 2012 as the CEO of UK Retail, leaving the Commonwealth Bank of Australia, the largest bank in the country.

At Commonwealth, he had been the Group Executive for Retail Banking Services for five years and was previously the Executive General Manager.

He will commence his new position with NAB once his obligations to RBS have been discharged, which will be no later than April 2020.

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The appointment of McEwan is subject to regulatory approvals. He joins the Aussie bank with a rolling contract where either himself or NAB can terminate at any time and give the other party 26 weeks’ notice.

McEwan to help NAB to improve culture and reputation

Speaking on the appointment, NAB Chairman-elect Philip Chronican said the bank had recruited a senior, global financial services executive, who has extensive experience and knowledge of international markets and the Australian banking environment.

“Ross McEwan is the ideal leader for NAB as we seek to transform our operations and culture firmly around leading customer service, experience and products,” continued Chronican.

“Ross brings a compelling range of experience across finance, insurance and investment with a track record of delivering important and practical improvements for customers. 

“RBS has been through many of the same challenges which NAB now faces around culture, trust and reputation.”

Now that NAB has secured a CEO, Chronican, who is the interim CEO, will transition to the Chairman position in mid-November 2019, replacing Dr Ken Henry, who announced his intention to resign once a permanent CEO was appointed.

“It is a privilege to return to Australia and lead NAB at a crucial time for the bank, its customers, employees, shareholders and the broader community,” McEwan added.

“There are a number of areas where NAB can extend its lead, such as business banking, agriculture and health, and other areas where I believe we should consistently lead such as customer service. We must also meet and exceed the expectations of our many stakeholders.”