By: A.G. Paphitis & Co Law Firm
We are thrilled to announce yet another Litigation success in the field of Forex scam and fraud.
On 04/07/2022 we have succeeded in obtaining a judgment by consent, in favor of our clients, in a group action of 53 claimants (our clients) against a Cypriot Investment Firm (a Forex & Market Maker broker whose license has been suspended and later withdrawn by CySEC) and its foreign shareholder.
Following a litigation battle before the District Court of Limassol for over nine years, having also applied for and successfully obtained a freezing injunction against the Defendants to the action, whose bank accounts were frozen since 2014, we are glad to see this case coming to an end with the Defendants bringing money from outside Cyprus in order to compensate our clients and their costs.
Background
Our clients had trading accounts with the Defendant broker, a Cyprus Investment Firm licensed by the Cyprus Securities and Exchange Commission for FOREX investment trading, with authority from our clients through power of attorney towards the broker and/or towards a related and/or group company to the broker, to trade their funds on our clients’ behalf. While our clients’ accounts were accumulating profits with significant deposits, overnight all our clients’ accounts were zeroed without any excuse. Our clients’ funds were taken without any reasoned or justifiable excuse by the Forex broker.
This case was filed in Court as a forex scam and/or forex fraud case, against the Forex Broker company but also against its Directors and its Chief Compliance Officer (for negligence and/or breach of statutory duties) but also against its Shareholder for the purpose of returning any funds he received by way of dividends. Additionally, a court declaration for constructive and/or resulting trust against the shareholder was applied for.
Gladly, after nine years in Court, the shareholder of the company offered to settle by bringing funds from outside Cyprus in order to compensate our clients.
What are the statutory duties of the Directors and/or Compliance Officer of a Forex Broker?
Board of Directors
A CIF is required to, when allocating functions internally, ensure that its senior management, and board of directors, are responsible for ensuring that the CIF complies with its obligations under the Investment Services and Activities and Regulated Markets Law (‘the Law’). In particular, the senior management and the board of directors are required to assess and periodically review the effectiveness of the policies, arrangements and procedures put in place to comply with the obligations emanated by the Law and the Directive and to take appropriate measures to address any deficiencies.
Those arrangements must comply with the following principles:
- the board of directors must have the responsibility for the CIF and approve and oversee the implementation of CIF’s strategic objectives, risk and internal governance;
- the board of directors ensure the integrity of the accounting and financial reporting systems, including financial and operational controls and compliance with the Law and related standards;
- the board of directors must oversee the process of disclosure and communications;
- the board of directors must be responsible for providing effective oversight management.
The board of directors monitors and periodically assesses the effectiveness of the CIF’s governance arrangements and takes appropriate steps to address any deficiencies.
Compliance Officer
This role requires the preparation of a detailed compliance plan indicating how policies and procedures will be monitored to ensure they are effectively implemented into practice. The Compliance & AML Compliance Officer must also regularly review the policies and procedures followed by the employees to ensure compliance with the Internal Operations Manual of the Company.
Through a detailed compliance plan, the Compliance & AML Compliance Officer must also regularly review all core areas such as the AML & KYC procedures, Corporate Governance rules, the Brokerage Department. Once the reviews have been concluded, summary reports should be drafted and submitted to the BoD.
From the AML Compliance Officer’s perspective, he is responsible for ensuring that the Company applies and complies with the AML regulatory framework to detect and report suspicious activity, and ensures staff are informed of key regulatory changes and updates.
What is a constructive / resulting trust?
This is a trust that it is created by law without the express intention of the settlor. The constructive trust is a term used mostly in litigation when a person against whom there is a claim (i.e. the Defendant), he/she is holding money which may be the result of the victim’s (i.e. the Claimant’s) loss, should the Claimant’s action succeed. In other words, applying the said general principles to the above case, on behalf of our clients – i.e. the Claimants, we have requested an Order of the Court that should our clients’ claim against the Forex Broker be successful, then, any profits that the Defendant broker accumulated up to our clients’ losses, which then were distributed as dividends to its shareholder, be the subject to constructive and/or resulting trust that has impliedly been created by law in favor of our clients; and that such funds received by the shareholder as profits from the Forex Broker be held in trust, by an Order of the Court, for our clients benefit and to be returned.
Please contact us if you would like additional information relating to your case.
The information provided by A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.
