The US Commodity Futures Trading Commission (CFTC) recently settled enforcement actions against Gain Capital UK Limited. The company was onboarding US-based traders illegally.
Unauthorized offerings to US users
According to the CFTC, the firm was illegally soliciting investments from US-based customers. Gain Capital UK Limited is the London-based arm of GAIN, one of the largest retail forex brokers in the US. Gain UK will now pay a $250,000 civil penalty for illegally signing up users on its platform. It will also ay $241,671 in disgorgements of ill-gotten gains. The company will also “cease and desist” from breaching any regulations of the CFTC or the Commodity Exchange Act.
Gain UK was operating via the retail brand’s City Index and FOREX.com. One of its agents had also referred and accepted US clients despite never registering with the commission to offer its services to US clients. According to the allegations, the broker was working as a counterparty to US-based FX traders. It should have registered as an RFED to work in the US between February 2014 and March 2019.
What does the regulator say?
According to the settlement order, Gain UK was onboarding clients who had given obvious clues that they were located in the US. This includes the use of mailing addresses and other documents that suggested they were US residents. One of their customers even told a Gain UK employee that she was studying in a US university while applying for a trading account.
The CFTC has also accused the broker of system lapses in its supervisory systems which knowingly let an unregistered commodity trading advisor (CTA) solicit investments from US customers. The unnamed introducing partner referred clients to the broker. One of his clients made a $280,000 loss and his referrals made the broker gain $241,671 via commissions.
It further noted that the broker and its referring agents never disclosed that their IB business or the operators were not registered with regulators.