According to the Cypriot regulator, Depaho Ltd. appears to provide the investment service and investment advice as a regular occupation, without the granting of prior authorization by the CySEC.
CySEC officials also said the Company does not appear to comply at all times with the conditions for authorization established in articles 17 (2) and (6) of the Law, regarding the organizational requirements.
What Rules Did the Company Infringe?
- The Company does not appear to take all reasonable steps to identify and to prevent or manage conflicts of interest between itself, including its managers, employees and tied agents, or any person directly or indirectly linked to it by control, and its clients.
- Article 25(1) of the Law as the Company does not appear to act honestly, fairly and professionally when providing investment services to clients, in accordance with the best interests of its clients
- The Company does not appear to provide information, including marketing communications, to its clients or potential clients that is fair,
clear and not misleading. - Article 25(5) of the Law as the Company does not appear to provide the information referred to in article 25(4) of the Law, in a comprehensible form, so that clients are reasonably able to understand the nature and risks of the investment service and of the specific type of financial instrument that is being offered and, consequently, to take investment decisions on an informed basis.
- The Article 26(3)(a) of the Law as the Company, when providing investment services other than those referred to in article 26(2), does not appear to ask the client to provide information regarding that person’s knowledge and experience, so as to enable the Company to assess whether the investment service or product envisaged is appropriate for the client.
- As the Company does not appear to have given to the CySEC written notice of the change in the information relevant to its branch in Spain.
- Article 42 of Regulation (EU) no. 600/2014 as the Company does not appear to comply with paragraphs 4(1)(d) and (5) of Directive DI87-05.
According to the report provided by Cysec, the Firm Depaho Ltd, the parent company of retail FX broker FXGM violated 12 articles of the current regulations.
What Should the Company Do Now?
Within two (2) weeks, the Company must take the necessary actions in order to comply with the aforementioned provisions. Also, for as long as the suspension of the authorisation is in force, as provided for in section 9of DI87-05 the Company is not permitted to
- Provide/carry out investment services/activities.
- Enter into any business transaction with any person and accept any new client.
- Advertise itself as a provider of investment services.
The Company, provided this is consistent with the wishes of its existing clients, may proceed with the below actions, without such actions being considered as breach of section 7(a) of DI87-05:
- Complete all its own transactions and those of its clients which are before it, in accordance with client instructions.
- Return all funds and financial instruments which are attributable to its clients.
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