The KNF has imposed a record fine for suspicious activities towards customers on the forex market leader: no less than 9.9 million PLN. The broker announces the appeal
New information on the irregularities in the activities of the X-Trade Brokers (XTB) brokerage business was published by "PB" in November 2017. The Polish Financial Supervision Authority (PFSA) unanimously decided, after a 10-month to impose a financial penalty on the largest forex trader in Poland in the unprecedented amount of PLN 9,9 million. This is the result of a "material breach" of the provisions of the law on trade in financial instruments and the provision of brokerage services "without taking into account the best understood interest of the customer".
What does the XTB management say? In the statement sent to us, "it fully confirms its earlier position and finds no reason for objections to the way the company operates." He adds that "the company acts in the interest of the company and its shareholders, and is guided by the well-being of customers, and that it wants to appeal against the decision of the regulator."
To understand what the PFSA sanction is about, we have to explain the XTB operating model. The broker is the so-called market maker, which means that it creates its own market based on data from reputable financial institutions, enabling customers in the vast majority of retailers to invest in derivatives based on underlying instruments such as currencies, commodities, shares or stock market indices. What is the most important? XTB is always the other side of the transaction with the customer and takes opposite positions. The profit of the customer therefore means the loss of XTB and vice versa: customer loss is the profit of XTB.
The main complaints of the KNF concern the fact that XTB used the so-called parameters on its transaction platforms. asymmetrical deviation (in 2014-15) and delays (in 2014-2016). In short and simplification: he allowed the price between placing the order by the customer and the time of implementation in favor of the broker (ie: to the detriment of the customer) in an unlimited way and accepted the changes on the other way, if not exceeded by XTB parameter. At the same time, for some investors – those who according to XTB used errors and imperfections in the company's IT systems – this parameter was usually 0, which meant that no changes were possible that benefited the customer.
At the time of purchase of the instrument, the open position could not be measured with the customer's theoretical profit, and if this could be done, with a small and theoretical loss (and the broker's profit) this could be significantly higher. At the same time, as underlined by the PFSA, XTB customers were not reliable, understandable and fully aware of the use by the intermediary of such and not other institutions.
XTB questions the KNF's claims. He assures that during the pre-supervisory procedure he gave him "extensive explanations and legal and quantitative expert opinions from independent entities confirming that XTB's use of the asymmetrical deviating mechanism is the principle of acting in the best interests of clients. has not violated and has had no influence on the transaction results of the customer ". The broker also emphasizes that the KNF comments on this mechanism for the years 2014-15, and the guidance on the need to use symmetric deviations was only issued by the regulator in May 2016 – almost a year after the company changed its own his IT systems had been implemented.
Robot for researchers
The huge fine for XTB is a result of the extensive inspection that the KNF carried out with the intermediary between March and September 2016. As a result, supervision identified nearly 50 different types of offenses against the law and internal XTB regulations and provided no less than 47 recommendations for post-audit. The most serious shortcomings with regard to the application of the parameters of asymmetrical deviation and delays in the exchange of February and March 2017 became the basis for the notification addressed to the public prosecutor's office by the federal tax administration. The Commission states that XTB has deceived its customers from PLN 8 million to PLN 23.5 million, and that six current and former members of the brokerage board are responsible for this.
As described in "PB", the investigation in this case was combined with another, from the notification of Krzysztof Kramarczyk, in the past one of the largest and most active customers of XTB. He accuses the broker of fraud at least PLN 7m by deliberately delaying his transactions, which are expected to start in early 2014. XTB refutes the accusations that "the only reason for the customer to bear losses was his wrong investment decisions". At the same time, the estate agent's parquet investigates the suspicion of blackmail from XTB by Krzysztof Kramarczyk. For the time being, no one has heard any accusations in any of the investigations.
For the first time we wrote about the KNF and the investigation of the prosecution in "PB" on November 13, 2017. The procedure for imposing the fine on XTB was started … one day later, although the authorization of the intermediary ended in September 2016 and the protocol was adopted in October 2016 r., so more than a year earlier. We then asked the KNF why the administrative procedure was only started in November 2017 and whether the supervision would decide if the whole case of allegations against XTB did not reveal the "PB"? We did not receive the answer.