The National Futures Association (NFA) has ordered New
York-based forex dealer OANDA Corporation to pay a $600,000 penalty following a
series of compliance failures, including inadequate capital practices and
issues with client transparency.
The fine follows a formal complaint from the NFA’s
Business Conduct Committee (BCC), which cited multiple violations of financial
requirements and supervisory responsibilities. While OANDA settled the case without admitting or
denying the charges, the BCC found the firm at fault for several regulatory
breaches.
Capital Mismanagement and Affiliate Transactions
The most serious findings involve how OANDA calculated
its net capital, a core measure of a firm’s ability to absorb losses. According
to the NFA, OANDA failed to boost its capital by 10% of liabilities owed to
certain counterparties, as required.
The firm also miscalculated its exposure by improperly
offsetting transactions with an affiliate and did not collect the necessary
security deposits from that affiliate. These actions led OANDA to fall below the minimum
capital levels mandated under NFA Financial Requirements.
“The BCC charged OANDA with failing to increase the firm’s
net capital by 10% of all liabilities owed to an eligible contract participant
counterparty, improperly offsetting the foreign currency exposure on
transactions executed with an affiliate to determine net capital positions and
required capital deductions, and failing to collect required security deposits
from an affiliate on its forex transactions with the firm, which resulted in
OANDA failing to maintain minimum net capital,” the NFA mentioned.
Customer Protection and Supervision Gaps
Beyond capital violations, the BCC cited other issues directly affecting customers. For example, OANDA failed to collect appropriate
security deposits from retail clients in certain forex transactions.
The firm also faced criticism for a pricing display
error that impacted customer experience and for distributing promotional
material that did not meet NFA standards.
The BCC found that these failures reflected a broader
lack of oversight, concluding that OANDA violated several NFA Compliance Rules,
specifically concerning customer protection, covering promotional practices,
and related to supervisory obligations.
In addition to the $600,000 fine, the NFA ordered
OANDA to compensate affected customers. Details regarding the scope of restitution were not disclosed in the decision, but they highlight the regulator’s
intention to address harm caused by the firm’s missteps.
The National Futures Association (NFA) has ordered New
York-based forex dealer OANDA Corporation to pay a $600,000 penalty following a
series of compliance failures, including inadequate capital practices and
issues with client transparency.
The fine follows a formal complaint from the NFA’s
Business Conduct Committee (BCC), which cited multiple violations of financial
requirements and supervisory responsibilities. While OANDA settled the case without admitting or
denying the charges, the BCC found the firm at fault for several regulatory
breaches.
Capital Mismanagement and Affiliate Transactions
The most serious findings involve how OANDA calculated
its net capital, a core measure of a firm’s ability to absorb losses. According
to the NFA, OANDA failed to boost its capital by 10% of liabilities owed to
certain counterparties, as required.
The firm also miscalculated its exposure by improperly
offsetting transactions with an affiliate and did not collect the necessary
security deposits from that affiliate. These actions led OANDA to fall below the minimum
capital levels mandated under NFA Financial Requirements.
“The BCC charged OANDA with failing to increase the firm’s
net capital by 10% of all liabilities owed to an eligible contract participant
counterparty, improperly offsetting the foreign currency exposure on
transactions executed with an affiliate to determine net capital positions and
required capital deductions, and failing to collect required security deposits
from an affiliate on its forex transactions with the firm, which resulted in
OANDA failing to maintain minimum net capital,” the NFA mentioned.
Customer Protection and Supervision Gaps
Beyond capital violations, the BCC cited other issues directly affecting customers. For example, OANDA failed to collect appropriate
security deposits from retail clients in certain forex transactions.
The firm also faced criticism for a pricing display
error that impacted customer experience and for distributing promotional
material that did not meet NFA standards.
The BCC found that these failures reflected a broader
lack of oversight, concluding that OANDA violated several NFA Compliance Rules,
specifically concerning customer protection, covering promotional practices,
and related to supervisory obligations.
In addition to the $600,000 fine, the NFA ordered
OANDA to compensate affected customers. Details regarding the scope of restitution were not disclosed in the decision, but they highlight the regulator’s
intention to address harm caused by the firm’s missteps.
This post is originally published on FINANCEMAGNATES.
