The Cyprus-regulated entity operating the IC Markets brand, IC Markets (EU), has been fined €200,000 by the Cyprus Securities and Exchange Commission (CySEC) for “knowingly and intentionally” violating leverage rules.

Violating Leverage Restrictions

According to the regulatory announcement today (Friday), the broker's Cyprus-regulated entity offered its customers up to 1000:1 leverage levels by onboarding them under an offshore entity. Within the European Union, FX and contracts for differences (CFDs) brokers can only provide leverage up to 30:1.

"CySEC takes any misconduct by supervised entities seriously and is determined to bring non-compliant operations to a halt in order to enhance investor protection and the responsible growth of the investment sector," said Dr. George Theocharides, Chairman of CySEC.

However, IC Markets has denied the basis of the regulator's decision, vowing to appeal the matter. A spokesperson from the company told Finance Magnates: "IC Markets (EU) Ltd categorically denies the basis of the Cyprus Securities and Exchange Commission's (CySEC) decision dated July 19, 2024, and will rigorously pursue an appeal. CySEC has disregarded irrefutable audited evidence and instead based its decision on information provided by a former employee, who was terminated for misconduct."

"This individual bullied and threatened the Company with regulatory involvement, claiming strong personal connections within CySEC. Furthermore, CySEC appears to have made assumptions without providing concrete evidence, resulting in a decision based on speculation rather than facts. This raises serious questions about the impartiality and integrity of the regulatory process."

The company added: "This reliance on biased testimony, while ignoring undeniable evidence, suggests a pattern of selective and disproportionate application of regulatory authority by CySEC, endangering transparency, market integrity, and fair competition. IC Markets is committed to challenging this decision through the appeal process."

Strict Rules Around Leverage

Headquartered in Australia, IC Markets offers leveraged trading with margin forex and CFDs of other asset classes. In addition to Australia and Cyprus, the broker is also regulated in Seychelles and the Bahamas, which are offshore jurisdictions that allow brokers to offer higher leverage levels to retail traders. It also entered Africa recently by obtaining a license in Kenya.

Unlike the offshore regulators, the European Securities and Markets Authority (ESMA) capped the offered leverage to retail traders at 1:30 in 2018, while the Aussie counter also introduced similar restrictions in 2022. The regulators cited protecting retail clients from taking risky leveraged positions as the reason for imposing leverage restrictions.

"In imposing the administrative fine, CySEC took into account, among other factors, the importance attached to ensuring that persons subject to its supervision fully comply with the provisions of the Law," the announcement by the Cyprus regulator stated. "IC Markets (EU) Ltd did not ensure the protection of its clients' interests, a matter to which CySEC attaches particular importance."

Interestingly, CySEC pointed out that IC Markets demonstrated "repeated behavior" with the violation, as the regulator intervened in similar breaches by the broker in 2021. At that time, the broker "assured CySEC of taking the corrective measures."