In a move that caught most industry leaders by surprise, international Forex broker, IronFx withdrew its membership from The Russian Centre for Regulation in Over-The-Counter Financial Instruments and Technologies (CRFIN SRO), the Russian self-regulatory body for its Forex industry.
The reason proffered by IronFx for its withdrawal from the organization is its need to consolidate its presence in the region, pointing to the Ukrainian equivalent of the Self-Regulatory Organization as being sufficient for the broker. With its membership in UCRFIN and an office in Kiev, IronFx feels it doesn’t need additional coverage in this region and has chosen to drop the CRFIN regulation.
According to its website, CRFIN’s main focus is to ‘develop and implement standards and regulations governing activities of the Partnership members.’ It was founded in December 2010 and received the status of a self-regulated organization in June 2011.
Interestingly enough, the IronFx website does not even mention its CRFIN regulation. It posts the following: ‘IronFX Global complies with international regulatory standards, and is authorized and regulated by FCA, ASIC, DFSA, FSB, UCRFIN and CySEC. The company is also an EU regulated and MiFID compliant firm.’
Furthermore, the website no longer mentions its registrations with Italian CONSOB, the German BaFin regulators or its New Zealand FSP registrar number.
No explanations are given by the company for these changes. This is curious to begin with and at a time when brokers are going out of their way to avoid losing whatever regulation they possess, opting out of any membership should put IronFx traders on the alert.
Russian Regulation
The Russian foreign exchange market is controlled by the Central Bank of Russia which issues special licenses to commercial banks and thus controls the internal foreign exchange turnover. It authorizes commercial banks to trade in foreign currency both internally and externally.
It is worth noting that on June 23rd , reports were posted that the Russian mega-regulator had introduced a new set of legal acts of the Bank of Russia. They include additional requirements to the standards of SRO of Forex-dealers. And since the only SRO currently in force is CRFIN, the latter has made a decision to establish three new committees under SRO and sign a number of agreements with strategic partners.
“Creation of the committees is necessary to provide specialized approach to the Forex market regulation that is currently being implemented in Russia”, the release stated. “CRFIN will create committees for legal matters of activity of Forex companies, for internal audit and for software and hardware provision of activity of Forex companies.”
These new standards may have been put in place as a result of decreasing foreign exchange reserves in Russia which dropped to a little over $3.5 million in April, 2015. Russian GDP shrank 2.2 percent year-on-year in the first three months of 2015 and although the unemployment rate decreased to 5.60 percent in May, it is still higher than 3.7 million a year earlier.
But the question remains: Could IronFX be exiting CRFIN in order to avoid compliance with these new regulations? Or is it really just the first move in tightening its business in non-core regions such as Russia and Eastern Europe?
IronFx Past Problems
This is not the first time IronFX has shown signs of instability and uncertainty. Last February, friction between the broker and the company’s Chinese customers and introducing brokers (IBs) ended up in a legal case. IronFX was accused of denying withdrawal requests to over 150 accounts which the IBs had introduced to the firm. The total amount of client funds mentioned in the claim was close to $1.25 million.
This came on the tails of a report that 160 complaints had been filed with the District Court of Limassol against IronFX in January of the same year.
There has been no official announcement by IronFx of its exit from CRFIN.
