May 29, 2009 / 1:17 PM / 10 years ago

Swiss Crown Forex bankrupt, others may follow

* Company under FINMA control since December

* Forex shops required to have license since April

* New rules will leave 20 forex providers or fewer

By Martin de Sa’Pinto

ZURICH, May 29 (Reuters) - A Swiss court has declared foreign exchange brokerage Crown Forex bankrupt, the Swiss financial regulator said on Friday, warning that others could follow, given new requirements for forex providers.

Financial regulator FINMA posted a statement on its website saying Crown Forex was declared bankrupt on Friday. FINMA spokesman Alain Bichsel said Crown’s assets would be liquidated after the company’s appeal against an earlier ruling was rejected.

FINMA took control of Crown Forex on Dec. 9 after the regulator identified potential liquidity issues at the company. New Swiss rules have made operating more onerous for foreign exchange providers since April 1, when they were required to obtain a license from the regulator and to hold some 100 million Swiss francs ($92.6 million) in liquidity.

Bichsel said companies were given a year’s notice to comply with license requirements. Prior to April, forex shops did not require a license provided they were registered with a self-regulatory body.

“We had a lot of complaints from a lot of forex traders all around the world, these providers were not under supervision. The licence requirement gives more stability and legitimacy to the whole system,” said Bichsel.

“Crown had time to prepare to get the licence, but the problems there were too big.”

A spokesman at self-regulatory body ARIF, the association of financial intermediaries in Switzerland’s French-speaking region, said companies need a lot of capital to be registered and some forex providers simply do not have enough.

Crown Forex, based in Bassecourt, was previously a member of ARIF. When Reuters approached Crown Forex for comment, nobody was available from the company.

The liquidators Notter Megevand & Partners declined to comment on the liquidation.

Prior to the new rules there were several dozen such platforms operating from Switzerland. Only around five of have been registered to date, although Bichsel said he thought there would be about 20 “once we have checked all current requests.”

“Clients can feel more secure because the new rules mean these companies have more solidity,” he said. “But it’s possible there will be more liquidations of this kind.” (Editing by Rupert Winchester) ($1=1.080 Swiss Franc)

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