The CySEC declared on December 5, 2020, that a board decision had previously been made on October 5, 2020. It has to do with Israeli Roy Almagor’s Maxiflex Ltd. Maxiflex was required to pay the Republic of Cyprus Treasury €370,000. Although CySEC likes the phrase settlement money, reasonable people would refer to this as a penalty payment. As usual, the CySEC’s statement is incredibly evasive and fails to provide any context for the possible infraction Maxiflex may have committed. Lately, GlobalNetInt suspended the bank accounts of Almagor’s Maxiflex and Maxigrid after they were used as props in broker frauds.
In light of CySEC’s investigations, for potential infractions of The Investment Services and Activities and Regulated Markets Law of 2017, as these appeared between January 2019 and September 2020. More particular, the agreement agreed covered the evaluation of the Company’s adherence to:
- Article22(1) of the Law addresses the authorization conditions of article 17(2),17(3), and 17(6) of the Law regarding the organisational requirements that a CIF must adhere to;
- Article 24(1) of the Law addresses conflicts of interest; Article25, paragraphs (1) and (3) of the Law addresses general principles and information to clients;
- Article26, paragraphs (2)(a) and (3)(a) of the Law addresses the evaluation of suitability and appropriateness and client reporting; and
- Article28, paragraphs (1)(a) and (8) of the Law specify the duty to execute orders on terms that are most advantageous to the client.
A settlement of €370.000 has been made with the Company over potential infractions. The €370.000 has been paid by the Company. It should be highlighted that the sums payable under settlement agreements do not belong to CySEC and are instead regarded as revenue (income) of the Republic’s Treasury.
Maxiflex’s Infraction of the Law
Usually, an infraction is when someone violates a law, regulation, or agreement. Therefore, a country found guilty of breaking an international treaty will typically be required to pay a fine. A fee is the only punishment under federal law, where the offence is even less serious than a misdemeanour.
CySEC
Cyprus’s financial regulator is the Cyprus Securities and Exchange Commission, or CySEC for short. The European MiFID financial harmonisation law is complied with by CySEC’s financial regulations and operations as a member state of the EU.
A sizable portion of foreign retail forex brokers are registered with CySEC. Many binary options brokers had previously chosen CySEC as their regulator of choice before 2018.
As a public corporate organisation, CySEC was established in 2001 under section 5 of the Cyprus Securities and Exchange Commission (Establishment and Responsibilities) Law of 2001. CySEC joined the European MiFID regulation at the same time as Cyprus joined the EU in 2004, providing companies registered there access to all European markets. However, the financial regulatory structure that CySEC enforced for what was once thought to be a tax haven was drastically altered upon the EU’s membership and adoption of the Euro.
CySEC issued a regulatory change on May 4, 2012, pertaining to the categorization of binary options as financial instruments. As a result, platforms for binary options that are based in Cyprus—where the majority of them do—had to be subject to regulation. As a result, CySEC became the first financial regulator in the world to officially acknowledge and control binary options as financial instruments.
On July 10, 2019, CySEC permanently prohibited providing binary options trading to retail traders, following the implementation of a temporary ban on the products in July 2018.
Revocation of Maxiflex Ltd.’s authorization by the Cyprus Securities and Exchange Commission
In accordance with section 10(1) of Directive DI87-05 for The Withdrawal and Suspension of Authorization (“DI87-05”), the Cyprus Securities and Exchange Commission (“CySEC”) has notified the Malta Financial Services Authority that, as of October 15, 2021, it has completely suspended Maxiflex Ltd.’s authorization (“the Company”). This is because there are allegations of purported violations of:
- According to Section 5(5) of the Investment Services and Activities and Regulated Markets Law of 2017 (the “Law”), the Company appears to be conducting business, engaging in business, and/or facilitating business not specifically authorised by the Company.
- Article 22(1) of the Law since it appears that the Company does not always abide by the authorization criteria in sections 9(2) of the Law regarding the eligibility of management body members, 11(1)(b) regarding the suitability of shareholders, and 17(4) and (9) regarding organisational requirements.
As stipulated in section 9 of DI87-05 and for the duration that the suspension of authorization is in effect, the Company is not allowed to:
- offer or carry out investment services or activities;
- engage in any kind of business dealings with third parties and take on new clients;
- promote itself as an investment services provider.
The following measures by the Company may be taken without violating section 7(a) of DI87-05, so long as they are in accordance with the desires of its current clients:
- fulfil all of its clients’ and its own transactions that are in front of it, in compliance with client directives;
- refund any money and financial instruments that belong to its clients.
The CySEC ruling of October 15, 2021, which is available on the CySEC website, provides more information about the aforementioned.
