It is not that unusual and typical to hear the news that a Forex Broker is being investigated for regulatory infractions. Many times these investigations result in a finding of some sort of violation and a fine. When we hear the news that that particular Forex Broker has had their accounts frozen by the regulator, this is usually is the last nail in the coffin for that broker. The Financial Conduct Authority of the UK indicated that Plus 500 was not conducting it’s required anti-money laundering checks and was opening accounts regardless of if prospective clients would pass these checks. Forex Brokers play a critical role in being the first level of defense in their AML procedures. The benefit of listing the Forex Broker as a member of one of the primary regulators being NFA, FCA, and ASIC means that AML compliance must be adhered to.
Plus 500 originates from Israel where the reputation among Forex Brokers is not always the best. When brokers establish themselves, they then look to get usually regulated more for marketing purposes rather than having the clients’ interests in mind. In an unusual twist Plus 500 immediately were onboarding clients to their Cyprus regulated entity. Plus 500 spokesman cites commercial reasons for the move in allowing their customers to start trading again.
The most prominent question remains as to whether or not Plus 500 will survive their UK regulatory issues. Shares in London had taken a big hit earlier in the week but have rebounded nicely. There are competing opinions as to the direction of the company and the stock price. Many US-based Hedge Funds including Valliant Capital and Cable Car Capital think that the company is in a great deal of trouble as it has lost the confidence of customers and that regulatory flair ups usually never end well. There is a UK based hedge fund Odey Asset Management which has upped its stake in Plus 500 to 19%. It will be fascinating to see if Plus 500 can pull off their account transfers to Cyprus and if their clients lose confidence or if they can retain the loyalty of the UK and Non-UK accounts.