Complaints by Hungarian customers against a Cyprus investment firm

Budapest, 17 September, 2015 – A number of indications have been given recently to the MNB’s customer service against Cyprus-based IronFx Global Ltd, claiming that the firm, a provider of a platform for online trading, has not been executing payment orders, leaving customers without access to their funds. The MNB immediately notified the Cypriot supervisory authority.

Since March this year, the Magyar Nemzeti Bank (MNB) has received nearly 75 indications from customers, reporting that Cyprus-based IronFx Global Ltd has not been making any payment despite orders by customers, i.e. investors cannot have access to their funds despite having been required to do so. Responding to customers’ comments IronFx has referred to an ongoing internal audit and has informed that it has suspended the execution of payment orders until completion of the process.

Considering that the supervision of foreign entities providing cross-border services to Hungary does not fall within the competence of the MNB, the Bank immediately notified the competent financial supervisory authority of the firm’s home country (The Cyprus Securities and Exchange Commission, CySEC).

On the 6th August the Cyprus Securities and Exchange Commission announced (www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=c5b69085-0611-4a66-b15c-af61bcfb3af0) the following:

“As a consequence of media reports and the increasing number of complaints submitted by investors against the Cyprus Investment Firm IronFX Global Ltd, the Cyprus Securities and Exchange Commission wishes to clarify that there is an ongoing investigation against the CIF with respect to possible infringements of the Legislation. Upon completion of the investigation, the CySEC will publish its findings and/or will proceed with further announcements in the meantime, if deemed necessary.

The CySEC examines the complaints submitted to it by investors, against any supervised identity, in the context of its statutory mandate. For complaints against Cyprus Investment Firms that relate to possible compensation claims, the investors are encouraged to contact the Financial Ombudsman, which is the competent body to examine compensation claims via an extrajudicial procedure, at complaints@financialombudsman.gov.cy.”

Accordingly the MNB requests the investors affected to submit their complaints containing their claims for damages to the competent Cypriot Financial Ombudsman at the email address above.

In connection with this particular case, it is necessary to draw attention to the risks inherent in cross-border financial services, in view of the fact that foreign platform providers are under foreign jurisdiction and supervisory control and the Hungarian investor protection framework does not apply to them. In using cross-border financial services it is particularly important to check the authorisations and notifications required for the provision of a financial service in Hungary on the MNB’s website. In the absence of the required authorisations or notification, such activities are deemed to be conducted without authorisation or notification, which involves the high risk of causing damages to the investor.

Leveraged transactions, easily accessible on online trading platforms, where the value of a transaction may be ten or even one hundred times higher than the invested amount, require increased caution and responsible decision. Higher leverage is associated with higher returns, but all leveraged transactions involve the risk of the multiplication of losses, which investors often face too late.

In connection with online trading platforms, the Magyar Nemzeti Bank has already examined the domestic investment firms (Sajtóközlemény: Kiemelt jegybanki figyelem a magas tőkeáttételes FX online kereskedési platformoknál). In the future, the Bank will continue to monitor the normal, prudent and legitimate use of such platforms.

Magyar Nemzeti Bank