The Financial Conduct Authority has fined Forex Capital Markets Limited and FXCM Securities Limited £4m for making “unfair profits” and not cooperating with the regulator.
According to the FCA, the US-based FXCM Group withheld approximately £6m of profits which should have been passed on to FXCM UK’s clients.
FXCM UK also did not tell the FCA that another part of its parent group was under investigation by US authorities for the same misconduct.
David Lawton, director of markets at the FCA, said: “When consumers lose out because of poor conduct it undermines confidence in the integrity of our markets.
“The FCA will use all the tools at its disposal – supervision, rule-making and enforcement – to ensure that firms do not exploit conflicts of interest or the trust placed in them by their clients.”
The regulator said that between August 2006 and December 2010, the FXCM Group kept profits from favourable market movements between when client orders for foreign exchange transactions were given and when they were actually executed.
However, the company still passed any losses on to clients in full, a practice known as asymmetric price slippage.
Clients of FXCM UK will be fully compensated, with credit automatically paid to their accounts.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “Not only did FXCM UK fail to treat its customers fairly or correctly apply our rules, I am particularly disappointed that it was not transparent in its dealings with the FCA. We expect all firms to put customers at the heart of their business, and we have taken action to ensure clients of FXCM UK will get redress.”
The FCA is conducting a thematic review of firms’ execution practices, including the way services are described to clients and arrangements for order execution and review. The FCA expects to publish the results by the end of June 2014.