Recently, the National Futures Association (NFA) issued a $700,000 fine on a company called GAIN Capital Group LLC. The company is an operator of two retail forex brands. The company was investigated after a system malfunction of one of those brands, known as Forex.com, and the investigation revealed signs of supervisory failures and compliance violations.
GAIN was not the only one that was blamed for the incident, however, as its CEO also took a portion of the blame.
GAIN-operated platform suffered a 10-hour malfunction
The penalty was announced on Thursday, December 8th, following a system malfunction on the trading platform Forex.com. The system malfunctioned on March 31st, 2021, at 2:55 pm, and it lasted until April 1st, 2021, at 1:00 am. During this 10-hour period, Forex.com’s users were still able to execute limit and stop orders for 14 different currency pairs, but the platform was unable to display the current published price.
The malfunction led to an estimated loss of $3 million, according to GAIN. Furthermore, the company’s CEO, Alexander Bobinski, issued approval for negative adjustment on accounts belonging to 17 different users by around $2.84 million. On top of that, he also issued a positive adjustment for accounts belonging to 33 other customers by $35,000.
The incident was investigated after GAIN and Bobinski submitted a settlement offer, which led the NFA’s Business Conduct Committee to issue a fine involving the company. It should be noted that neither the company nor its official admitted or denied any of the allegations.
GAIN and its CEO were accused of multiple violations
NFA’s Committee blamed the firm and its CEO for violating compliance rules and adjusting customer accounts improperly, as well as for improper treatment of the users who were affected by the malfunction. Account adjustments were not conducted in compliance with an established protocol, which is how the company violated regulatory rules — by submitting incomplete and inaccurate information to the NFA.
Bobinski and GAIN were then held for supervisory failures while Forex.com continues to operate. The platform is actually one of the few retail forex trading platforms that exist in the US. However, the other platform that GAIN was managing, known as City Index, was previously acquired by another firm called StoneX Group. This happened in 2020, and GAIN sold it for $236 million.
Despite the incident, it would appear that Forex.com continues to thrive, and it is even in the process of expanding its services. In 2021, the platform managed to enter several Latin American marketplaces, where it continues to offer trading of CFDs and FX, thanks to the fact that it obtained a license from the authorities of the Cayman Islands, which is accepted in Spanish-speaking countries of South America.