Yesterday, the list of Cyprus investment firms (CIFs) was amended to show some new additions, with Glistentree Holdings Limited among them. When viewing the details a little closer, it is evident that the trade name on the website of this entity is Mill Trade, the same name as that of a troubled FX broker that has recently halted all withdrawals for thousands of clients in Russia and CIS and is associated with FOREX MMCIS.
Formally, the Cyprus Securities and Exchange Commission (CySEC) issued the CIF license to Glistentree on November 3, 2014. This allows the company to offer investment services not only in Cyprus but also across Europe, in the countries where MiFID is adopted. The big question that looms is what makes it possible for a reputable jurisdiction to issue a license to a technically bankrupt broker? Let’s look at the possibilities:
1. This could be a different company.
The website of the Cypriot entity (Glistentree.com) presents a company with a logo that is different from that of the entity associated with FOREX MMCIS. Moreover, the business profile of Glistentree does not involve online trading: indeed, the description of the services offered does not mention “Forex” at all.
This is unlikely to be the case, however, as both companies including the troubled one and the one that just received its CySec license, have the same certificates of incorporation on the Marshall Islands. This is not entirely conclusive, however, as it is possible that one entity could have cloned another.
2. It may be the same company but CySec never knew about the problems associated with FOREX MMCIS.
It takes time for the administrative process of obtaining a license to progress and the problems with Mill Trade and its new owner – the ill-fated FOREX MMCIS, became evident not so long ago. It could be that the Cypriot watchdog was unable to respond in such a short notice, especially given that this is a regulatory issue, and therefore a month can be considered a short notice.
Another matter for consideration is that there was no way for CySec to obtain the data to perform the checks that are necessary. Mill Trade and Forex MMCIS are really active in Russian and CIS, but there are no Forex laws in the region and no regulator to provide the necessary data to the Cypriot authorities. There is also the issue of sanctions against Russian officials and business figures and Cyprus is known to implement these measures first in the EU. The certificate from the Marshall Islands hardly provides any detailed info about the real fortunes of the broker.
3. CySEC may not activate the license.
The Commission reserves the right to reassess its actions in assigning the CIF status to a broker that it deems unfit therefore the license may not get activated at all. There is a process of checks that every CIF passes to activate its license – during this time CySEC reviews the compliance of a given company with its requirements regarding capitalization, address, employees, etc. If Mill Trade fails, CySEC will not allow it to provide its services in Europe.
One of the most poignant matters is why troubled Mill Trade is silent about its Cypriot license. The websites of Forex MMCIS and Mill Trade have no announcement of the news, instead being replete with comments by traders on how to file an application for chargeback. As LeapRate has reported, FOREX MMCIS has some 50,000 clients in Russia, with all of them being unable to get their money back due to what the broker said was a crisis caused by its partners, DengiOnline in particular.
This case underlines the necessity of dialogue and useful communication between Forex regulators across the globe, a matter which is very high on the agenda of lawmakers and senior government officials in the G20 countries.