______________________________________________________________


FIRST SUPERVISORY NOTICE

_______________________________________________________________

To:

FXBFI Broker Financial Invest Ltd

Reference Number:
802288

Address:

79 Spyrou Kyprianou


MGO Protopapas


Limassol


3076


Cyprus




Date:


27 April 2021

1
ACTION

1.1
For the reasons given below and pursuant to section 55L(3) of the Act, the
Authority has decided to impose the following requirements on FXBFI Broker
Financial Invest Ltd (“FXBFI”) with immediate effect:


1) FXBFI must not conduct any regulated activities with, or in respect of, any
client who is resident in the United Kingdom, except as is necessary to comply
with requirements 3) and 4) below.

2) FXBFI must not conduct any marketing activity to persons resident in the
United Kingdom.

3) By 3pm on 30 April 2021, in respect of all its clients who are resident in the
United Kingdom, FXBFI must close all open trading positions and liquidate the
positions into pound sterling balances (save for hedged positions which should
be netted off rather than closed individually). Any positive cash balance held
by a client resident in the United Kingdom must be paid to a bank or payment
account held in the client’s name as soon as practicable and, in any event, by
11 May 2021.


4) By 28 April 2021, FXBFI must notify all its clients who are resident in the United
Kingdom by email that it is no longer able to provide investment services to
them and will be taking all reasonable steps to return all balances held by FXBFI
on their behalf.


5) By 29 April 2021, FXBFI must provide the Authority with a copy of the text
used for the purposes of notifying clients under requirement 4) and a list of the
email addresses to which such notifications were sent.

6) By 28 April 2021, FXBFI must display on all websites used by it in the course
of providing regulated activities, including but not limited to www.fxbfi.com and
www.101investing.com, a notice of such size and prominence that all viewers
of the website will inevitably see and be able to read it, which states: “FXBFI
Broker Financial Invest Ltd, trading as 101investing, is not permitted to provide
regulated financial services to residents of the United Kingdom.”.

7) By 28 April 2021, FXBFI must display on its trading platform, at the point when
clients log into the trading platform, a notice of such size and prominence that
all users seeking to log into the trading platform will inevitably see and be able
to read it, which states: “FXBFI Broker Financial Invest Ltd, trading as
101investing, is not permitted to provide regulated financial services to
residents of the United Kingdom.”.


8) FXBFI must secure all books and records and preserve information and systems
relating to regulated activities carried on by it, and must retain these in a form
at a location, to be notified to the Authority in writing no later than 7 calendar
days after the coming into force of these Requirements, such that they (or, so
as not to hinder FXBFI’s performance of its business activities, true copies of
them) can be provided to the Authority, or to a person named by the Authority,
promptly on its request.


1.2
The Requirements shall remain in force unless and until varied or cancelled by
the Authority (either on the application of FXBFI or on the Authority’s own
initiative).

2
REASONS FOR ACTION

2.1
FXBFI is an investment firm registered in Cyprus. It trades as ‘101investing’. It
has a temporary permission under the TPR. It provides consumers with the
ability to trade CFDs using an online platform, accessible through its
website,www.101investing.com.

2.2
Trading in CFDs involves significant risks and can lead to substantial monetary
losses in short spaces of time. CFDs are not generally suited to retail investors
who are not sufficiently sophisticated to understand and manage the risks
involved. For that reason, the Authority has imposed rules which restrict the
marketing and sale of CFDs to retail consumers.

2.3
Since September 2020, the Authority has received 39 complaints or expressions
of concern about the activities of FXBFI. These complaints have increased in
frequency in 2021. The complaints disclose serious misconduct by FXBFI
including the use of misleading financial promotions, failures to inform

3


customers about the nature and risks of CFDs, applying pressure to invest
additional funds and failing to allow customers to withdraw funds.

2.4
As a result of FXBFI’s activities, some customers have lost very significant sums
of money.

2.5
In the circumstances, the Authority considers that the continuing provision of
regulated activities by FXBFI to UK consumers presents unacceptable risks. As
a result, the Authority considers that it is desirable to impose requirements on
FXBFI which prevent it from conducting regulated activities in respect of, and
marketing its products to, UK consumers and ensures that the effect of these
measures is brought to the attention of its current and potential future UK
clients.

2.6
This action is taken in order to advance the Authority’s consumer protection
objective.

3
DEFINITIONS

3.1
In this Notice:

“the Act” means the Financial Services and Markets Act 2000;

“the Authority” means the Financial Conduct Authority;

“CFD” means contracts for differences;

“COBS” means the Conduct of Business Sourcebook, part of the Handbook;

“FXBFI” means FXBFI Broker Financial Invest Ltd (FRN 802288), which trades as
‘101investing’;

“the Handbook” means the Authority’s online handbook of rules and guidance (as in
force from time to time);

“MiFID” means the recast Directive 2014/65/EU of the European Parliament and of
the Council of 15 May 2014 on markets in financial instruments and amending
Directive 2002/92/EC and Directive 2011/61/EU;

“the Principles” means the Principles for Businesses, rules of the Authority in the
section of the Handbook entitled PRIN;

“the Requirements” mean the requirements set out at paragraph 1.1 of this Notice;

“the RTC” means the Authority’s Regulatory Transactions Committee;

“the TPR” means the temporary permissions regime for firms previously operating in
the UK under European Economic Area passporting provisions; and

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).




4
FACTS AND MATTERS

Background

4.1
FXBFI is a company registered in Cyprus. It trades as ‘101investing’. From 28
February 2018 to the introduction of the TPR, it had the right to provide cross-
border services into the UK pursuant to EEA passporting provisions.

4.2
On 23 December 2020, FXBFI provided notice of its intention to enter the TPR
and was thus given a temporary permission when the TPR was introduced on 1
January 2021. The TPR was designed to be a temporary regime for former
passported firms until applications for full authorisation could be considered. The
effect of this is that FXBFI is deemed to be an authorised person but the
Authority has not yet assessed the ownership, internal controls and business
practices of FXBFI.

4.3
FXBFI’s principal activity is the provision of CFDs on a trading platform which is
accessed via its website www.101investing.com.

4.4
CFDs are complex financial derivative products which are used to speculate on
the movement in prices on a wide range of assets. They frequently involve high
levels of leverage which creates the risk of substantial losses in the event of
even small adverse price fluctuations in the underlying assets. CFDs present
significant risks to investors who lack the necessary experience, knowledge and
expertise to make appropriate investment decisions. As a result, they are
generally unsuitable products for inexperienced investors.

4.5
Under the terms of MiFID, investment firms are required to assess the
compatibility of financial instruments with the needs of its clients and ensure
that the financial instruments are offered or recommended only when this is in
the interest of the client. They are also required to ensure that their marketing
communications are fair, clear and not misleading, that they provide appropriate
information to clients and that they act honestly, fairly and professionally in
accordance with the best interests of its clients.


4.6
Although not subject to most of the Authority’s rules, firms in the TPR are obliged
to comply with the Principles which include, in particular, treating their
customers fairly and communicating information to them in a way which is fair,
clear and not misleading.


4.7
In addition, firms selling CFDs are subject to UK restrictions in respect of sales
to retail consumers, including limits on the leverage that may be used.

4.8
Since September 2020, the Authority has received 39 complaints or expressions
of concern from consumers about the business activities of FXBFI and
101investing.com. Of these, 24 have been made in 2021, while FXBFI was in
the TPR.

4.9
These complaints present a consistent pattern of serious misconduct by FXBFI
in the provision of its services to UK consumers.

4.10
This includes the use of misleading financial promotions to attract customers,
typically advertised online. These advertisements frequently used trusted
corporations to attract the interest of consumers, and, on occasion, made
promises of significant and unrealistic returns within a short period of time.

4.11
A significant proportion of complainants appeared to operate with a lack of
knowledge as to the nature of the investments they were trading and the risks
attached to trading in CFDs. Representatives of FXBFI, who typically engaged
with its clients by telephone, failed to ensure that these clients understood the
true position.

4.12
After consumers opened trading accounts with FXBFI, typically with small initial
sums, numerous complainants described how pressure was applied to invest
increasing sums of money, often through persistent and harassing contact with
the complainant. Several consumers were persuaded to increase their
investments using credit cards and others were instructed to make additional
investments to prevent further losses or the closure of their accounts. The
frequency and consistency of these reports demonstrate that this was a typical
and accepted means of business by FXBFI’s representatives.

4.13
FXBFI does not have regulatory permission to provide investment advice.
Despite this, some complainants described how FXBFI’s representatives
provided direction on the sectors in which to invest and advice on the tax
implications of investing. Three complaints reported that FXBFI told them that it
would help control their trading account or trade on their behalf.

4.14
17 complainants stated that FXBFI failed to comply with requests to return funds
to them. Some of these consumers were told that they needed to either pay a
fee, make a trade or deposit more funds in order to make a withdrawal.

4.15
As a result of transacting with FXBFI, some consumers lost very significant sums
of money. 13 consumers lost over £10,000, with three consumers losing
£50,000 or more.

4.16
Four complainants have been offered compensation or settlement agreements
by the Firm, for values substantially lower than their initial investment.

4.17
Three examples of FXBFI’s treatment of its clients are demonstrated by
Customer A, Customer B and Customer C.

Customer A

4.18
Customer A invested £11,200 with FXBFI in January 2021.

4.19
Customer A approached FXBFI looking to invest in a well-known company.
Having opened an account with the Firm, Customer A was informed that he could
not make his chosen investment. Instead he was told to invest in an alternative
sector. Customer A told the firm that he did not understand what was happening.
Although FXBFI was aware that Customer A had limited savings, the Firm put
pressure on him to invest using credit cards. Customer A made the £11,200
investment and was told he would have £28,000 at the end of the month.

4.20
When Customer A tried to withdraw his funds, this request was refused. He was
told to make further investments as his account was in danger.

4.21
In subsequent correspondence between Customer A and the Firm, the Firm
stated that Customer A lost £10,568 having invested £11,200 across 26 trades
and that a settlement of £2,000 has been agreed.

Customer B

4.22
Customer B invested £29,500 with FXBFI.

4.23
Customer B wanted to invest in stocks but was persuaded to invest in other
products. Customer B told FXBFI that he did not understand the investment. The
Firm replied that this was not a problem as he would have an account manager
who would control the trading account for him. Customer B was pressurised into
making more deposits with the promise of receiving high returns. When he asked
to stop trading and have his funds returned, the Firm informed him that his
funds were gone.

4.24
The Firm offered a £6,000 settlement agreement, which Customer B refused.
The settlement agreement terms included that the complainant would inform
any third party, including regulatory bodies, that have been made aware of the
complaint, that the Firm has dealt with the complaint to the full satisfaction of
the complainant.

4.25
Customer C invested £31,500 with FXBFI.

4.26
Customer C was guided how to correctly fill out the account registration forms,
as well as where and how to invest funds by his account manager. When some
of his trades closed because the margin level dropped too low, he was persuaded
to put more money into his account to help recover his losses.

4.27
He was pressurised to upgrade his account to gold status even though the Firm
was aware that he did not meet the criteria to do so. In order to make this
upgrade, the customer was compelled to deposit £16,000 of his savings and to
wrongly declare his trading experience and net worth. The Firm told Customer
C that he would not lose these savings and that once the gold account had been
opened, he would be able to withdraw these funds. However, Customer C was
unable to withdraw his funds.

4.28
Customer C complained to the firm. Following this complaint, the firm sent him
settlement agreements on 3 separate occasions: for £3,000 on 10 March 2021,
for £5,000 on 19 March 2021 and for £6,500 on 16 April 2021. Each such
agreement was declined by Customer C.

5
FAILINGS

5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in
the Annex.

5.2
From the facts and matters described above, the Authority considers that FXBFI
has acted in contravention of its obligations under MiFID and in breach of
Principle 7 of the Principles by failing to ensure that its marketing
communications are fair, clear and not misleading.

5.3
The Authority further considers that FXBFI has acted in contravention of its
obligations under MiFID and in breach of Principle 6 of the Principles by failing:

7


a)
to assess the compatibility of the financial instruments with the needs of the
clients to whom FXBFI provides investment services;

b)
to provide appropriate information in good time to clients or potential clients
with regard to FXBFI and its products;

c)
to act honestly, fairly and professionally in accordance with the best
interests of its clients by pressuring customers to invest money and declining
to action requests to return investment monies; and

d)
to handle complaints in an appropriate manner and to pay appropriate
redress to clients who had lost money as a result of FXBFI’s failure to comply
with its obligations.

5.4
The Authority further considers that FXBFI has acted in breach of its regulatory
permissions by providing investment advice to its clients without having
authorisation to do so.

5.5
The Authority considers that the ongoing provision by FXBFI of regulated
activities presents serious risks to the interests of UK consumers. As a result,
the Authority has concluded that it is desirable to exercise its power to impose
requirements to prevent FXBFI from providing any further regulated services to
UK consumers, to ensure that all monies held by FXBFI on behalf of UK clients
are returned as quickly as possible and to alert its UK clients to the imposition
of the Requirements.

5.6
This action is taken to advance the Authority’s consumer protection objective.

5.7
The Authority considers that the Requirements are an appropriate and
proportionate means to protect against the risks identified.

6
PROCEDURAL MATTERS

Decision Maker

6.1
The decision which gave rise to the obligation to give this First Supervisory
Notice was made by the RTC. The RTC is a committee of the Authority which
takes certain decisions on behalf of the Authority.

6.2
This First Supervisory Notice is given under section 55Y(4) and in accordance
with section 55Y(5) of the Act.

6.3
The following statutory rights are important.

Representations

6.4
FXBFI has the right to make representations to the Authority (whether or not it
refers this matter to the Tribunal). The deadline for providing written
representations and/or notifying the Authority that FXBFI wishes to make oral
representations is 13 May 2021 or such later date as may be permitted by the
Authority. The address for doing so is:

RTC Secretariat
Financial Conduct Authority
12 Endeavour Square
London
E20 1JN
Email: RTCSecretariatMailbox@fca.org.uk

The Tribunal

6.5
FXBFI has the right to refer the matter to which this First Supervisory Notice
relates to the Tribunal, which considers references arising from decisions of the
Authority. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, FXBFI has 28 days from the date on which this First
Supervisory Notice is given to it to refer the matter to the Tribunal.

6.6
A reference to the Tribunal can be made by way of a reference notice (Form
FTC3) signed by FXBFI and filed with a copy of this First Supervisory Notice. The
Tribunal’s contact details are: Upper Tribunal (Tax and Chancery Chamber), 5th
Floor, Rolls Building, Fetter Lane, London EC4A 1NL (telephone: 020 7612 9730;
email: uttc@justice.gov.uk).

6.7
Further
details
can
be
found
on
the
Upper
Tribunal’s
website
at

https://www.gov.uk/guidance/refer-a-financial-service-or-energy-market-
decision-to-a-tribunal.

6.8
A copy of Form FTC3 must also be sent to Laura Mackinnon at the Financial
Conduct
Authority,
12
Endeavour
Square,
London,
E20
1JN
(email

laura.mackinnon2@fca.org.uk) at the same time as a reference is filed with the
Tribunal.

Confidentiality and publicity

6.9
FXBFI should note that this First Supervisory Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose
of obtaining legal advice on its contents).

6.10
FXBFI should note that section 391(5) of the Act requires the Authority, when
this First Supervisory Notice takes effect (and this First Supervisory Notice takes
immediate effect), to publish such information about the matter to which the
notice relates as it considers appropriate.

Authority contacts

6.11
For more information concerning this matter generally, contact Laura Mackinnon
(email laura.mackinnon2@fca.org.uk, direct line 020 7066 67902) at the
Authority.

Annex

RELEVANT STATUTORY PROVISIONS UNDER THE ACT

1.
The Authority’s operational objectives established in section 1B of the Act include
securing an appropriate degree of protection for consumers (section 1C).

2.
Section 55L of the Act allows the Authority to impose a new requirement, or to vary a
requirement previously imposed by the Authority under section 55L, on an authorised
person if it appears to the Authority that it is desirable to exercise the power in order
to advance one or more of the Authority’s operational objectives (section 55L(2)(c)).
This power is referred to as the Authority’s own-initiative requirement power.

3.
Section 55N of the Act allows a requirement to be imposed under section 55L of the
Act so as to require the person concerned to take specified action (section 55N(1)(a))
or to refrain from taking specified action (section 55N(1)(b)). Section 55N(2) provides
that a requirement may extend to activities which are not regulated activities.

4.
Section 391 of the Act provides that:

“[…]
(5) When a supervisory notice takes effect, the Authority must publish
such information about the matter to which the notice relates as it
considers appropriate.
[…]


(6) The Authority may not publish information under this section if in
its opinion, publication of the information would, be unfair to the
person with respect to whom the action was taken or proposed to
be taken [or] prejudicial to the interests of consumers or
detrimental to the stability of the UK financial system.
[…]


(7) Information is to be published under this section in such manner as
the Authority considers appropriate.”

RELEVANT MiFID PROVISIONS

5.
Article 24 of MiFID concerns general principles and information to clients.

6.
Article 24.1 of MiFID requires that, when providing investment or ancillary services,
investment firms act honestly, fairly and professionally in accordance with the best
interests of their clients.

7.
Article 24.2 of MiFID requires that investment firms assess the compatibility of the
financial instruments with the needs of the clients to whom they provide investment
services and ensure that the financial instruments are offered or recommended
only when this is in the interest of the client.

8.
Article 24.3 of MiFID requires that all information, including marketing
communications, addressed by investment firms to clients or potential clients shall
be “fair, clear and not misleading”. It also requires marketing communications shall
be clearly identifiable as such.

9.
Article 24.4 of MiFID requires appropriate information to be provided in good time
to clients or potential clients with regard to the investment firm and its services,

the financial instruments and proposed investment strategies, execution venues
and all costs and related charges.

10.
Article 24.5 of MiFID requires that the information referred to in paragraph 24.4
shall be provided in a comprehensible form in such a manner that clients or
potential clients are reasonably able to understand the nature and risks of the
investment service and of the specific type of financial instrument that is being
offered and, consequently, to take investment decisions on an informed basis.

RELEVANT REGULATORY PROVISIONS

The Principles

11.
Principle 6 states “A firm must pay due regard to the interests of its customers and
treat them fairly”.

12.
Principle 7 states: “A firm must pay due regard to the information needs of its
clients, and communicate information to them in a way which is fair, clear and not
misleading”.


COBS

13.
COBS 22.5 sets out restrictions on the retail marketing, distribution and sale of
CFDs. By COBS 22.5.1-AG, these apply to firms in the TPR.

14.
COBS 22.5.6R provides that a firm must not: (a) market, publish, provide or
communicate in any other way any communication or information in a durable
medium or on a webpage or website to a retail client or in such a way that it is
likely to be received by a retail client; (b) approve or communicate a financial
promotion in a durable medium or on a webpage or website; or (c) disseminate
such a communication, information or financial promotion to a retail client, or in
such a way that it is likely to be received by a retail client unless the firm includes
a specified risk warning.

15.
COBS 22.5.11R provides minimum levels of margin (which depend on the
underlying asset) which a firm must require a retail client to post to open a position.

16.
COBS 3.5.3R provides that, in relation to MiFID business, a firm may treat a retail
client as an elective professional client if:


1) The firm undertakes an adequate assessment of the expertise, experience and
knowledge of the client that gives reasonable assurance, in lighyt of the nature
of the transactions or services envisaged, that the client is capable of making
his own investment decisions and understanding the risks involved;

2) At least two of the following criteria are satisfied:

a) The client has carried out transactions, in significant size, on the relevant
market at an average frequency of 10 per quarter over the previous four
quarters;

b) the size of the client's financial instrument portfolio, defined as including
cash deposits and financial instruments, exceeds €500,000;


c) the client works or has worked in the financial sector for at least one year
in a professional position, which requires knowledge of the transactions or
services envisaged;

3) the following procedure is followed:

a) the client must state in writing to the firm that it wishes to be treated as

a professional client either generally or in respect of a particular service or
transaction or type of transaction or product;


b) the firm must give the client a clear written warning of the protections and

investor compensation rights the client may lose; and


c) the client must state in writing, in a separate document from the contract,

that it is aware of the consequences of losing such protections.

The Enforcement Guide

17.
The Authority's policy in relation to its own-initiative powers is set out in chapter 8
of the Enforcement Guide (EG), certain provisions of which are summarised below.

18.
EG 8.2.1 provides that the Authority will have regard to its statutory objectives and
the range of regulatory tools that are available to it, when it considers how it should
deal with a concern about a firm. It will also have regard to the responsibilities of
a firm’s management to deal with concerns about the firm or about the way its
business is being or has been run and the principle that a restriction imposed on a
firm should be proportionate to the objectives the Authority is seeking to achieve.

19.
EG 8.2.3 provides that the Authority will exercise its formal powers under section
55L of the Act, where the Authority considers it is appropriate to ensure a firm
meets its regulatory requirements. EG 8.2.3(1) and (2) specifies that the Authority
may consider it appropriate to exercise its powers where it has serious concerns
about a firm or the way its business is being or has been conducted, where it is
concerned that the consequences of a firm not taking the desired steps may be
serious or where the imposition of a formal statutory requirement reflects the
importance the Authority attaches to the need for the firm to address its concerns.

20.
EG 8.2.6 provides examples of circumstances in which the Authority will consider
varying a firm’s Part 4A Permission because it has serious concerns about a firm or
about the way its business is being or has been conducted. These include where
the firm appears to be failing to satisfy the Threshold Conditions because its
material and financial resources appear inappropriate for the scale or type of
regulated activity it is carrying on, for example, where it has failed to take account
of the need to manage risk professional indemnity insurance or where it is unable
to meet its liabilities as they have fallen due; or the firm appears not to be a fit and
proper person to carry on a regulated activity because it has breached requirements
imposed on it by or under the Act, and the breaches are material in number or in
individual seriousness.

21.
EG 8.3.1 provides that the Authority may impose a requirement so that it takes
effect immediately or on a specified date if it reasonably considers it necessary for
the requirement to take effect immediately (or on the date specified), having
regard to the ground on which it is exercising its own-initiative powers.

22.
EG 8.3.2 provides that the Authority will consider exercising its own-initiative power
as a matter of urgency where (1) the information available to it indicates serious
concerns about the firm or its business that needs to be addressed immediately;

and (2) circumstances indicate that it is appropriate to use statutory powers
immediately to require and/or prohibit certain actions by the firm in order to ensure
the firm addresses these concerns.

23.
EG 8.3.3 states that it is not possible to provide an exhaustive list of the situations
that will give rise to such serious concerns, but they are likely to include one or more
of four listed characteristics, these include: “(1) information indicating significant
loss, risk of loss or other adverse effects for consumers, where action is necessary
to protect their interests”; (2) information indicating that a firm’s conduct has put
it at risk of being used for the purposes of financial crime, or of being otherwise
involved in crime;…”.

24.
EG 8.3.4 states that the Authority will consider the full circumstances of each case
when it decides whether an imposition of a requirement is appropriate and sets out
a non-exhaustive list of factors the Authority may consider. These include:

“(1)
The extent of any loss, or risk of loss, or other adverse effect on consumers.
The more serious the loss or potential loss or other adverse effect, the more
it is that [the Authority]’s urgent exercise of its own-initiative powers will be
appropriate, to protect the consumers’ interests.

(2)
The extent to which customer assets appear to be at risk. Urgent exercise
of [the Authority]’s own-initiative power may be appropriate where the
information available to [the Authority] suggests that customer assets held
by, or to the order of, the firm may be at risk.

(4)
The seriousness of any suspected breach of the requirements of the
legislation or the rules and the steps that need to be taken to correct that
breach.

(8)
The firm’s conduct. [The Authority] will take into account:

(a) whether the firm identified the issue (and if so whether this was by
chance or as a result of the firm’s normal controls and monitoring);
(b) whether the firm brought the issue promptly to [the Authority]’s
attention;
(c) the firm’s past history, management ethos and compliance culture;
(d) steps that the firm has taken or is taking to address the issue.

(9)
The impact that use of [the Authority]’s own-initiative powers will have on
the firm’s business and on its customers. [The Authority] will take into
account the (sometimes significant) impact that a variation of permission
may have on a firm’s business and on market confidence. [The Authority]
will need to be satisfied that the impact of any use of the own-initiative
power is likely to be proportionate to the concerns being addressed, in the
context of the overall aim of achieving its statutory objectives.”