Firm

Direct Trading Technologies UK Ltd

Related Decisions

No related decisions but the Firm has the right to make representations to the FCA in respect of the FSN and/or to refer it to the Upper Tribunal so a further decision may follow.

Sanction

1. Immediate imposition of various requirements with varying short-term deadlines including:
   • restriction on dealing, without FCA consent, with the Firm’s assets and customer funds (with the exception of BAU payments of up to £5,000 and salary payments); 
   • return of all client money to a CASS compliant client money account;
   • notification of all relevant persons (including clients and insurers) that may be affected by the requirements and posting of a notice on its main website and client login pages (and to pass this on to group members to do the same);
   • closing all open trading positions;
   • sending to the FCA weekly bank statements and trading statements;   
   • preservation of records to be confirmed to the FCA.
2. Variation of the Firm’s Part 4A permissions by removing all regulated activities effective from 4 April 2025.

Provisions

Sections 55L and 55J FSMA

Threshold conditions: suitability (para 2E of Sch 6, FSMA) and effective supervision (para 2D of Sch 6 FSMA); COND 2.5.1A; COND 2.7.1

Principle 11 (Relations with regulators); SUP 15.6.1R; SUP 15.2.1G; SUP 15.3.17R

Factual Findings

The factual findings summarised below related to: 

1. communications between the Firm and its auditors with regards to some accounting irregularities and failures to reconcile a shortfall in the Firm’s client liability account; 
2. the investigation carried out by the Firm in relation to the accounting matters; 
3. communications between the Firm and the FCA.
   • the investigation only partially responded to the auditors’ concerns;

Between April 2024 and December 2024: the Firm and its auditors communicated with regards to various accounting matters in the context of the audit of the Firm’s financial statements for 2023.  The auditors requested explanations in respect of the Firm’s relationship with a third party; an invoice issued by that party to the Firm; certain income recorded in the Firm’s client liability account; adjustments proposed by the Firm; marketing costs and a payment to another third party. 

The explanations provided included inconsistencies and a discrepancy was identified between income received by the Firm and sums paid to clients. They also gave rise to some serious concerns on the part of the auditors due to matters such as lack of a written agreement with a third party registered in Panama; a potential connection between an individual contracted by the Firm as its accountant and the third party; and an invoice address relating to a restaurant chain with a potential connection with the SMF who authorised payment. 

January 2025: the auditors wrote to two directors of the Firm to convey some concerns and also notified the FCA under s342 FSMA that the Firm had provided them with documentation they reasonably believed had been fabricated.   

Mid-January 2025: one of the directors responded to the auditors stating that an internal review had been conducted and providing some documentation. The auditors replied stating that the information provided had not addressed their concerns and it appeared some documentation had been fabricated.  The Firm responded to state that action was being taken including an investigation. 

End of January 2025: one of the directors wrote to the auditors stating that a thorough internal investigation had been conducted; that certain documentation provided to the auditors had been falsified by the Firm’s accountant but that a number of actions had been taken (attaching a copy of the investigation report).

The FCA reviewed information provided by the auditors; identified inconsistencies between information the Firm had provided to the auditors and information the Firm had provided to the FCA and had concerns that the initial internal review and subsequent internal investigation had a number of deficiencies including:

• the Firm’s internal review had not identified the falsified documentation;
• the conclusions appeared contradictory to information provided to the FCA;
• in the circumstances, the FCA would have expected an independent third party to have conducted the investigation (the report lacked reference to the role of management and consideration of the potential risk of conflict of interest arising from certain senior managers involved in relevant transactions participating in the investigation);
• the proposed remedial actions were “wholly inadequate”. 

February 2025: an extraordinary meeting of the Firm’s board was held but the minutes do not reference the issues concerning the audit or internal investigation.

Between June 2024 and February 2025: the Firm and the FCA were in communication in relation to various matters but the FCA had not received any notification from the Firm in relation to accounting irregularities or suspected staff misconduct.

Failings

The FCA has serious concerns that the Firm is failing or likely to fail to meet the Suitability and the Effective Supervision Threshold Conditions because:

• Financial crime systems & controls: the Firm may not have appropriate systems and controls in place to identify and prevent financial crime particularly given the Firm did not prevent a staff member allegedly falsifying documents in connection with a substantial shortfall in the Firm’s client liabilities account;
• Governance & oversight: the Firm may not have robust governance and oversight arrangements particularly given the Firm informed the auditors that serious control failings had been caused by a lack of oversight and controls in the accounting and audit process;
• Communication with FCA: the Firm may have provided the FCA with inaccurate and incomplete information, given contradictions between information provided to the auditors and the FCA (which raise serious concerns that the Firm’s business may have been used to further financial crime);
• Lack of co-operation: the Firm was not open and cooperative with the FCA having failed to disclose a number of matters including accounting irregularities identified by the auditors; the substantial deficit in the client liabilities account; the resignation of an SMF; the alleged serious misconduct of the Firm’s accountant; the outcome of the Firm’s internal investigation.