FXCM Inc (NYSE:FXCM) announced today its decision to forgive approximately 90% of its clients who incurred negative balances in certain jurisdictions, on January 15, 2014 as a result of the Swiss National Bank announcement on that date. FXCM will notify the applicable clients and adjust applicable client account statements in the next 24-48 hours.
A particularly important factor with regard to this decision is that regardless of the terminology in client agreements, clearly FXCM stated in its 10-K report on page 11 that it maintains a policy that as a general rule clients could never lose more than they deposited.
In terms of those affected, it is likely that relatively small retail clients with accounts that were exposed to negative balances would not be expected to return them, this representing the majority of cases, thus the company will likely only pursue those with high balances.
“FXCM worked diligently to reach this decision and we are extremely appreciative of our clients for their patience and loyalty as we worked through this,” said Drew Niv, CEO of FXCM.
The SNB announcement, extreme price movements and the resulting lack of liquidity were exceptional and unprecedented events causing many market participants to incur trading losses. These events were unforeseen and beyond the control of FXCM.
FXCM will also notify certain clients (such as institutional, high net worth, and experienced traders who generally maintain higher account balances) requesting payment of negative balances, pursuant to the terms of the FXCM master trading agreements. This group represents approximately 10% of clients who incurred negative balances which comprises over 60% of the total debit balances owed.
For the official announcement from FXCM, click here.