For many months, law enforcement agencies as well as regulators in different jurisdictional regimes in the EU have been investigating Rodeler Limited, F1Markets, Hoch Capital and many other brokers registered and licensed in Cyprus with different approved brands. FinTelegram is aware of the relevant investigation files and activities. However, the authorities were still unable to end the suspicious activities. The legal and regulatory framework was inadequate. More recently, the Italian CONSOB, the UK FCA, and the Cypriot CySEC have taken measures that have set a limit to the EU passporting freedom from scammers and illegally greedy brokers. At last!
Italian CONSOB took action
In December 2019, the Italian regulator CONSOB was the first regulatory authority to take drastic and urgently needed measures to protect resident Italian investors from the CySEC-regulated brokers Rodeler Limited (link) and Hoch Capital Ltd (link). In a precautionary and preventive action, the Italian watchdog CONSOB for the first time revoked the EU Passporting regulation and has banned them from operating in Italy with their brands. At this time, their home regulator CySEC took now publicly-known action.
Passporting without supervision
The very essence of the EU Passporting is that a financial services provider licensed in one member state can also offer these services in the other member states, i.e. it is “passporting” the authorization.
It is assumed that each financial market supervisory authority effectively and efficiently supervises the financial service providers in their regulatory regime. At this point, however, a paradox arises. As a rule, the home regulator does not feel responsible for the activities of their “protégés” abroad, i.e. outside their regulatory turf. At the EU level, however, now enforcement agency is implemented to make sure that EU rules are complied with and thus investors protected. To make things worse, no EU Regulatory Rulebook is in place. Currently, the EU Commission is discussing such a regulatory EU regime to be created in the next few years (read FinTelegram report here).
Today’s regulatory configuration in the EU indeed creates a regulatory black hole, into which the money of retail investors vanishes for good.
Given the ongoing attacks from non-EU scammers and perpetrators, it should be urgently discussed at EU level whether passporting in its current form is unacceptable in the very best interest of the EU consumers and retail investors.
Moreover, it is very difficult for the respective law enforcement authorities in the EU to act across national borders. There is no EU law enforcement agency comparable to the FBI in the United States. In the absence on regulatory enforcment and law enforcement regulatory passporting is actually an invitation for non-EU perpatrators to attack European consumers.
