CFTC Sues Australian Broker Halifax Investment Services for Unlawfully Soliciting U.S. Customers

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It’s strange to see firms regulated in ‘normal’ jurisdictions still doing something as risky as soliciting US retail forex clients. After two major sweeps by the CFTC in 2011 where 35 foreign firms in total were sued for doing the same you’d think other firms will know better. Many of the sued parties have since settled with the CFTC.

The only ones currently openly accepting American traders are offshore binary option brokers. Since there’s no suit by the CFTC against any of these brokers (though some were rumored to have been warned) one can assume there’s a legal obstacle here. There’s obviously no such obstacle when dealing with forex brokers however: According to the CFTC Australian Broker Halifax Investment Services operating Logo_Halifax-Logo_TOPhttp://www.halifax.com.au/ with AFSL 225973 license was soliciting American traders.

On October 18, 20 10, the Commission adopted new regulations implementing certain provisions of the Dodd-Frank Act and the CRA. For the purposes of retail forex transactions, the new regulations, among other things, require RFEDs to register with the CFTC.

15. On information and belief, Halifax, solicits or accepts orders from U.S. customers who are not ECPs to open leveraged forex trading accounts through Halifax’s website, http://www.halifax.com.au.

16. Customers open trading accounts by submitting an online account application through Halifax’s website. There is nothing in the online account application stating Halifax does not accept U.S. customers.

17. Halifax’s website includes a Forex Product Disclosure Statement (“Halifax Forex PDS”) which states that “each transaction which is agreed and entered into with a client will be entered into by Halifax as principal.” The website also states that customers are “dealing with Halifax as counterparty to every transaction.”

Halifax’s online account application does not seek any information about prospective customers’ ability to send or receive actual delivery of foreign currencies or customers’ business need for foreign currency.

19. Halifax’s online account application does not inquire as to whether a prospective customer is an ECP or about a prospective customer’s savings and investments. The online account application does not inquire if a prospective customer has assets in excess of $5 million.

20. The Halifax Forex PDS also states that Halifax is not involved in the physical delivery of trades, disclosing that forex transactions are “OTC” (over-the-counter) derivatives which do not require the physical exchange of one currency for another.

21. On September 11,2010, Halifax applied for membership with the National Futures Association (“NF A”) and registration with the CFTC to become an introducing broker (“IB”) in order to introduce U.S. customers to an RFED registered with the Commission.

22. On September 17, 2010, NF A advised Halifax that in order to conduct forex business going forward, it would be required to be fully registered with the CFTC by October 18, 2010.

23. During the registration process, NF A learned that Halifax accepted customer funds. On October 30, 2010, NFA advised Halifax that because it was accepting funds from customers, and an IB cannot accept customer funds, Halifax would have to register as an RFED and create a separate entity to register as an lB.

24. On November 3, 2011, Halifax advised NFA that it would “postpone its application.” On December 10, 2011, Halifax withdrew its application. On September 30,2011, despite the NFA’s notice that Halifax was required to register with the CFTC in order to conduct forex business, Halifax responded to a prospective U.S. customer that he needed only to provide certified copies of his U.S. passport and driver’s license to open an account.

26. Thus, Halifax has been and is acting as an RFED and continues to do so by soliciting orders from and offering to act as counterparty to U.S. customers to trade forex.

27. By the date of the filing of this complaint, Halifax has not registered with the Commission as an RFED or in any other capacity.

28. Furthermore, Halifax is not exempt from registration.

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2 Comments on this post

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  1. Jon said:

    So will halifax continue with the solicitation, similar to FinFx, Traders Way and a few others that interpret US jurisdiction a bit differently?

    February 6th, 2013 at 5:40 pm
  2. Michael Greenberg said:

    if its AFSL is real and if it really white labels platforms from fxcm/saxo/etc like it seems – it would be hard for them as cftc may pull the plug on these things, but let’s see

    February 6th, 2013 at 5:41 pm

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