FXCM disclosed in a quarterly SEC filing that the U.K. Financial Services Authority (FSA) launched an inquiry into the firm’s past trade execution practices.
In the filing the company stated that: “Although we are in the process of complying with the FSA’s requests, we have not been formally notified whether or not the FSA intends to take any action against us with respect to our trade execution practices.”
The FSA investigation follows a similar probe by the U.S. regulator Commodity Futures Trading Exchange (CFTC) in 2011, in which the CTFC alleged that FXCM failed to change the price a customer received on a currency transaction if an exchange rate became more profitable for the investor while a trade was in progress. However, according to the CFTC, FXCM did amend the price if the rates shifted in FXCM’s directional benefit. FXCM in August 2011 agreed to pay about $14.2 million in a settlement related to those charges.
In Friday’s filing, FXCM estimated that its possible loss related to the FSA investigation and other claims or litigation could be up to $5 million, as of Sept. 30. Last week FXCM reported quarterly operating results in which third-quarter income increased 33% to $4.5 million on revenues of $114.9 million.