cysec fine

The decision by the Swiss National Bank to ditch it’s cap on the CHF, led to much turmoil in the FX industry as we covered here in previous articles (Francogedden, Alpari UK files for insolvency).

Following the fallout, CySEC issued an order to all CIF’s (Cypriot Investment Firms), to ascertain the extent of any damage that the volatility in the Swiss Franc may have caused their business. Following, this consultation with all listed CIF firms, the regulator has discovered that out of the 182 firms regulated by CySEC, a vast majority of these firms experienced no negative affect on their capital adequacy. It was reported that 158 firms or 86% of firms regulated in the small Mediterranean island came through the débâcle relatively unscathed.

Despite, this another 24 firms experienced significant losses in client accounts or negative balances which amounted to a total of $47.9 million dollars. According, to the regulator despite these significant losses, which average in at a total of $1.9 million dollars per affected firm, the 24 affected firms still maintain the requisite equity and capital adequacy to maintain operations as pursuant to Cyproit security laws.

CySEC has not issued any additional statements regarding, as to how these brokerages will recover the significant losses experienced during the period of extreme volatility in the CHF or whether the regulator will take measures to ensure that brokerages are better protected going forward. Presently, the regulator has no concerns regarding the possibility that brokerages regulated in the jurisdiction will be at any risk of breaking any minimal capital requirements. Those with funds with brokers in Cyprus may be disappointed to know that the information from the regulator contains no information regarding which firms were affected. This presumably to present any runs on brokerages, who had experienced losses during the period of extreme volatility in the CHF.

In the past has CySEC has received critcism for what is considered by many it’s light touch approach to regulation, so it is interesting to see that no firms regulated on the island ran into serious difficulty. Where as firms regulated in jurisdictions which are often deemed to be tougher regulators were forced into administration or had to be bailed out as in the case of FXCM. It will also be interesting to see whether CySEC introduces any new mandates on brokerages, in order to protect firms and clients against future black swan events.

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