Forex Blogs TenkoFX representative blog by Max Vladov

[Pharaoh]

So far, I see ZERO evidence of the IFSC having taken any action against a regulated company other than throwing a few extremely bad ones out. I am sure this could inconvenience a company, but:

1. It takes a lot for this to happen.
2. It doesn't get 1 cent returned to clients.
3. If the company has any warning at all, it's easy to register elsewhere in the Caribbean and move the money before it happens.

I am happy to see the IFSC is improving it's standards, but until they also add a proper enforcement arm (capable of fining brokers and handling major client disputes), I don't see them as a serious regulator.

 

[Max Vladov]

Hi AsstMod, we have checked the details of how the client review has been submitted. It turns out that client is on vacation in an exotic country. Obviously, location and ip mismatch has occurred. In any case the links explaining the review moderation process have been helpful. Thank for taking your time to explain. Cheers.

 

[Max Vladov]

So far, I see ZERO evidence of the IFSC having taken any action against a regulated company other than throwing a few extremely bad ones out. I am sure this could inconvenience a company, but:

1. It takes a lot for this to happen.
2. It doesn't get 1 cent returned to clients.
3. If the company has any warning at all, it's easy to register elsewhere in the Caribbean and move the money before it happens.

I am happy to see the IFSC is improving it's standards, but until they also add a proper enforcement arm (capable of fining brokers and handling major client disputes), I don't see them as a serious regulator.

Hi Pharaoh, you've asked me to cite examples of whether IFSC acts in response to client complains. I did respond to share real life experience with you. So, ZERO evidence is a very categorical thinking that doesn't reflect the reality. I am not here to say that IFSC has the best dispute resolution mechanisms. There are things that clients might not like, just as equally things that companies don't like. But you surely can't claim that there is no regulation in IFSC, simply doesn't reflect the reality. Now coming to your 3 points.

1. License revocation is a long process with any regulator and rightly so. I am strongly convinced that is should be used as a last measure only and carefully considered as it is not in client interests in the first place. To give you an example of Alpari UK bankruptcy by FCA (UK). FCA a benchmark of regulation, among other few, isn't it? A year has passed since then. Did anyone get their money - I believe none. All due to lengthy legal and auditing processes. And funny thing, if I am not mistaken the company had around 10 mln USD in cash, which could have been distributed to clients in proportion to their deposits. However, before clients start to get paid, all legal, accounting, auditing (combined bankruptcy fees) have to get paid first. And again from info that is circulating out somewhere around 70% of the remaining cash money have been eaten up by the bankruptcy procedure alone. It is funny and also said what ridiculous results a regulation could lead to. How does this serve client interests?

2. About returning about the client money, in addition to the above. Remember the case of Ironfx, was CySec regulated. Did clients get their cents back? I believe that there deposit insurance scheme in place as well. Again claiming a penny from CySec takes a life time. We have first hand experience on that. Our clients have gone through this process. Result is ZERO. Having said this one need to give credit to FPA, as you guys did better job warning clients well ahead of regulator action))

3. Issued warning is never a reason for jurisdiction change. Never would a company shift balances because of that.

All in all, regulation is all about being more of it or less of it. Biggest scam preventing barrier is not to grand any license in the first place. And IFSC is moving aggressively on that. Capital is being increased 5 times just as license fee as such. This is aggressive, I am sure there will be significant outbound migration of brokers.

Otherwise all this licensing by a "more reputable" regulator is more of a prestige game that brokers use to distinguish, market themselves and point finger at "not cool" brokers ))
The ultimate end result of this regulation is highly disputable as shown by real life examples that I gave.

 

[Pharaoh]

1. I have seen a revocation or two. What I don't see is fines and orders to pay money back.

Revocation isn't all that scary to some brokers. Look at the examples of brokers walking away from NZ regulation instead of facing a handful of financial dispute resolutions. Look at how some of the Cysec brokers are quietly getting "backup regulation" in Belize (and probably elsewhere).

Laws can't prevent bankruptcies and bankruptcy resolutions take time. Obviously, the UK needed better regulations regarding segregation of client funds to keep those safe from this sort of thing. Do you think the IFSC would have done a better job? (and did you notice that there's a branch of Alpari registered in Belize?) If it was up to me, this would be standard across all financial regulators.

2. IronFx is under Cysec, which only recently added the Cyprus Financial Ombudsman to deal with settling client disputes. Since it's fairly new, the Cyprus Financal Ombudsman is an unknown factor. We should start seeing some rulings one way or another on IronFx cases soon. Cysec at least fines brokers, which puts them above the IFSC - and which may explain Banc de Binary getting IFSC registrationed. Do you expect the IFSC to provide better protection to BDB clients than Cysec did?

3. Perhaps I slightly misworded item 3. IFSC warning are usually for companies registered in Belize (or pretending to be) who don't have the required license. If the IFSC began seriously investigating a registered company, there are plenty of other ports of call in the Caribbean where they can get even less regulated. As above, getting kicked out or walking away didn't seem to stop quite a few brokers that abused New Zealand's lax laws.

A "more reputable" regulator isn't a prestige game. It's a client protection game. The CFTC even steps in to deal with offshore brokers who rip off US clients. The CFTC and NFA can and do fine US brokers and require repayments owed to clients. The UK FCA fines UK brokers which break rules and the UK FOS can and does order repayment of money owed to clients. Even NZ can and does order repayments (but discourages sharing the rulings publicly), at least for the brokers that don't run away.

If the Belize IFSC will start openly engaging in the same methods to enforce its rules via fines and can order repayments to clients, then they will quickly become a more reputable regulator. Until then, it doesn't qualify a broker as being "well regulated" in my book.