The National Futures Association (NFA) has ordered New York-based forex dealer OANDA Corporation to pay a $600,000 penalty following a series of compliance failures, including inadequate capital practices and issues with client transparency.

The fine follows a formal complaint from the NFA’s Business Conduct Committee (BCC), which cited multiple violations of financial requirements and supervisory responsibilities. While OANDA settled the case without admitting or denying the charges, the BCC found the firm at fault for several regulatory breaches.

Capital Mismanagement and Affiliate Transactions

The most serious findings involve how OANDA calculated its net capital, a core measure of a firm’s ability to absorb losses. According to the NFA, OANDA failed to boost its capital by 10% of liabilities owed to certain counterparties, as required.

The firm also miscalculated its exposure by improperly offsetting transactions with an affiliate and did not collect the necessary security deposits from that affiliate. These actions led OANDA to fall below the minimum capital levels mandated under NFA Financial Requirements.

Customer Protection and Supervision Gaps

Beyond capital violations, the BCC cited other issues directly affecting customers. For example, OANDA failed to collect appropriate security deposits from retail clients in certain forex transactions.

The firm also faced criticism for a pricing display error that impacted customer experience and for distributing promotional material that did not meet NFA standards.

The BCC found that these failures reflected a broader lack of oversight, concluding that OANDA violated several NFA Compliance Rules, specifically concerning customer protection, covering promotional practices, and related to supervisory obligations.

In addition to the $600,000 fine, the NFA ordered OANDA to compensate affected customers. Details regarding the scope of restitution were not disclosed in the decision, but they highlight the regulator's intention to address harm caused by the firm’s missteps.

Source: Finance Magnates