The chief executive of spread-betting firm Plus500 has apologised to customers and admitted “major failings” in the wake of money-laundering checks which locked tens of thousands of UK customers out of their accounts.
The Israeli-based, London-listed group was forced by the Financial Conduct Authority to review its anti-money laundering procedures in January. When the review was completed earlier this month, the City watchdog ordered a freeze on all transactions for UK customers. It is understood only a “modest” number of tens of thousands of UK customers have been cleared for trading while the company gathers proof of identity.
Plus500 said the trading freeze of the past two weeks had cost it $4m (£2.6m) in lost revenues and a conservative $2m in costs, as 40 staff are brought in to work through the backlog. It previously only required documents when clients were withdrawing funds. The firm allows customers to trade contracts for difference, which are tax-efficient derivatives based on share and commodity prices.
Chief executive Gal Haber said the watchdog found “major failings” in how Plus500 collected documentation on its clients’ proof of residence and financial position. It expects to take a month to check the identity of all its UK customers.
Mr Haber said at the firm’s annual meeting that the FCA-imposed review found a “problem with how we’d done it that was pointed out”. He added: “We would extend apologies to our customers, obviously, to shareholders.” The firm said that “at this point it is not possible to accurately estimate the effect on the group’s annual revenue return”.
Mr Haber and chairman Alastair Gordon have temporarily waived big pay rises approved by Plus500’s remuneration committee, although they intend to pay them as soon as the company is trading “normally” again.
Mr Gordon said the firm “has taken a number of lessons away from this situation and is determined to restore Plus500’s business to full health”.
He added: “We assure customers and shareholders that Plus500 has a sustainable business model and is managed and governed by a board committed to transparency and robust compliance.” Plus500 said revenues of $107.9m so far this year were still ahead of the whole of the first half of 2014. But the company has seen more than half its value wiped out in little more than a week. The shares closed down 13.25 to 271.75.
Investor Crispin Odey is betting on a recovery however, taking advantage of recent falls to take his stake to 19 per cent. That makes him the single biggest shareholder in the company ahead of Alon Gonen who set up the business with Mr Haber in 2008.
Liberum analyst Cormac Leech said: “The statement does not provide key information on customer behaviour once their accounts are unlocked... It is too soon to draw conclusions about revenues going forward.”
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