Forex Licencing Struggles with Central Bank of Russia

December 28, 2018 | AtoZ MarketsRecently the largest Russian information agency announced that the Central Bank of Russia has revoked the licenses of the five largest Russian Forex dealers – Forex Club, Fix Trade, Trustforex, Alpari Forex, and Teletrade Group.

What Kind of Violations Caused Licenses Revoke?

The Central Bank began to regulate the activities of forex dealers only in 2017, this meant the “official launch” of the forex market in Russia. Companies that work on it should receive a license from the Central Bank. According to the official statement of the financial supervisor, the licenses are canceled starting January 27, 2019.The official representatives of the Central Bank stated that the licenses were revoked due to repeated violations during the year. The financial regulator further explained exactly which violations were discovered:

  • failure to fulfill or improper execution of orders of the Central Bank;
  • violation of the procedure for maintaining internal accounting;
  • violation of the requirements for the ratio of the volume of security provided by individuals to the company;
  • violation of reporting procedures and the provision of false reports; violation of the organization of the risk management system;
  • violation of the procedure for calculating cash;
  • disclosure of inaccurate information on the company website.

According to the Russian financial regulator, companies which licences had been revoked, are obliged to cease their professional activities in the securities market, with the exception of actions related to the termination of obligations to customers and to ensure the return of property to customers until January 27. The central bank also canceled the qualification certificates of the managers and general directors of these companies. According to a Russian news agency, the Central Bank revoked licenses from five of nine Russian forex dealers. Alpha-forex, VTB-forex, PSB-forex, and Finam-forex remained on the market. The obligations of the five largest Russian forex dealers lacking licenses amount to 35 million rubles ($ 505,000) and will be returned to customers in full by January 27, 2019, the head of the Central Bank department Larisa Selutina reported.“The total amount of liabilities to companies is approximately 3.7% of the total amount of money that Russian citizens deliver to licensed Forex dealers,” the official said.“These funds are in personal accounts. Before starting a business, forex dealers must open a personalized bank account to which customers will be credited. Dealer Forex will not have the right to dispose of such money, “- added Selutina.

How the Companies Reacted to the Central Bank Decision?

A representative of Alpari Forex, Andrei Loboda, stated to the Russian media that the company had not yet received a notice of cancellation of the license from the Central Bank and is still working. “We hope for a constructive resolution of the current situation together,” added Loboda.

The press service of TeleTrade Group reported that the cancellation of the license for them is “a complete surprise”. “This is very strange and completely unexpected. Yesterday, representatives of the Bank of Russia jointly participated in the work of the Committee on Financial Markets in the State Duma. There were all Forex dealers and discussed the prospects of this market, ”- added the company representatives.

One of the largest forex dealers in Russia, Alpari Forex, explained that after receiving a notice from the Central Bank about the revocation of its license, the company will appeal the regulator’s decision in court. “Upon receipt of the notification, the Russian legal entity will act in full compliance with the legislation of Russia and will appeal the decision of the regulator in the manner prescribed by law,” the representative of Alpari Forex, Andrei Loboda explained. In the meantime, “the material published on the website of the Central Bank of Russia does not give an understanding of why the Russian financial regulator intends to revoke licenses from all companies that are not subsidiaries of the banking structures, ” Loboda added.

Financial analyst Timur Nigmatullin believes that the cancellation of a number of licenses does not mean that “this type of business automatically becomes illegal.” According to him, “we are talking about the upcoming tightening of the rules of the game on the market.”

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