Illinois Federal Court Imposes $140,000 Civil Monetary Penalty on Foreign Currency Firm, FXOpen Investments Inc.

The U.S. Commodity Futures Trading Commission (CFTC) has obtained a federal court consent order requiring defendant FXOpen Investments Inc. (FXOpen), a foreign firm, to pay a $140,000 civil monetary penalty to settle CFTC charges that it illegally solicited members of the public to engage in foreign currency (forex) transactions and operated as a Retail Foreign Exchange Dealer (RFED) without being registered with the CFTC (see CFTC Press Release 5974-11, January 26, 2011).

The order, entered on December 22, 2011 by Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois, also orders FXOpen to close all U.S. customer accounts and return U.S. customer funds. The order also permanently bars FXOpen from engaging in any conduct that violates the Commodity Exchange Act (CEA) and CFTC regulations.

Specifically, the order finds that between October 18, 2010, and January 26, 2011, FXOpen acted as an RFED by taking or offering to take the opposite side of customers' forex transactions without being registered as an RFED, which is in violation of CFTC regulations. The order also finds that during the same time period, FXOpen solicited or accepted customer orders to place forex trades without being registered, which is in violation of the CEA.

In the forex market, entities known as RFEDs or Futures Commission Merchants (FCMs) may buy forex contracts from, or sell forex contracts to, individual investors. Under the CEA and CFTC regulations, an entity acting as an RFED or FCM must register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, recordkeeping, and compliance. Further, with a few exceptions, such an entity also must be registered with the CFTC if it solicits or accepts orders from U.S. investors in connection with forex transactions conducted at an RFED or FCM.

The CFTC strongly urges the public to check whether a company is registered before investing funds. If a company is not registered, an investor should be wary of providing funds to that company.