Cayman may lose its only discount broker
(CNS): The Cayman Islands Monetary Authority has appointed controllers to take over the affairs of OneTRADEx, a local online discount broker, ahead of its possible shut down. According to the CIMA notice, accountants from KRyS Global have taken over the company, owned by Colin Wilson and Rich Ellison, which offers the only online discount share trading services in Cayman.
Despite being in the hands of administrators since last week, the website was still up and running Monday, where the company offers trades for as little as US$9.95.
But in the statement about the company, CIMA said that the controllers have taken over the company with full powers, including the possibility of closing down its securities business. After assessing its current financial position the controllers will then submit a report to the authority.
See CIMA statement here
Category: Business, Financial Services
As a client, I just received a letter from the controllers saying that they will be finalizing their final report by October 18 (!). Until then all funds remain blocked. So this saga is not going to end soon. This broker is finished.
No one deserves the Ken Krys treatment. With all the accountants and liquidation people on this island I’m amazed he still gets work.
Savage
Any up to datenews
You are so right. Liquidators take a failing company over and if there are any assets at all left, it is the liquidators that profit! These laws should be changed.
Commenters here should not be quick to jump to conclusions. Rich and Colin are honorable professionals and straight as arrows.
You must be new to the anonymous comments section.
Lol
“You must be new to the anonymous comments section.” … Of the internet.
If you are an account holder, you should jump to conclusions until you have reasons to not be worried!
Hopefully there is at least a press release from the controllers or CIMA.
I completely agree with this—-at least for Colin as I don’t know Rich. But Colin is a stand up guy!
So is Rich.
So was Allen Stanford
So was Rob Aspinall
No, he was always a bit too smarmy for my liking.
Cayman Islands Stock Exchange was suppose to monitor the activities of
one tradex. I worked at ONE tradex and I saw them come over once in my 5 years of working there. Cayman is corrupted beyond measure
Jumping to conclusions there mate. Read the statement, a possibility is one trade ex being shut down, but it also could re-emerge with a good report…. thens it’s business as usual as if nothing happened….
When have you ever seen a controller appointment by CIMA end with business as usual? Ever?
You may believe CAYMAN is corrupt beyond measure, and you are entitled to your opinion. However, that does not make ONETRADEx corrupt. Let the auditors do their thing.
As a relatively educated client, I have never seen anything out of order in the many years I have used ONETRADEx for very large trades. Their service is quick, reliable, honest, and highly consumer oriented.
It certainly will be a loss both for the owners, customers and the islands if the Monetary Authority pulls the plug on all of us.
I have dealt with OneTRADEx for several years and have always found the two partners to be honorable men, true to their word. I have no reason whatever to think that any deliberate wrongdoing is going on, despite possible problems with their reporting to CIMA that may have triggered this situation. Nor can I begrudge them what they charge for their services because their charges are still a bargain compared to full-service banks. For the sake of the clients, and the two partners, and the Cayman Islands itself, we should all hope that OneTRADEx comes through this successfully.
I am also a client spoke to Rich Ellison on Sunday about this situation. Their explanation is that this controllership resulted from delayed audit reporting related to the small percentage of assets that were being actively managed. That said, as other commenters have noted, it is unlikely that they will be able to survive this period of controllership given the huge reputationshl damage they have sustained. Their only hope would be a clear and complete exoneration of any wrong-doing very quickly, but it is unlikely that a regulator would do so as it would suggest the regulator had acted hastily.
Delayed audit on managed accounts doesn’t bode well…..CIMA wouldn’t have done this without multiple requests and warnings.
What a laugh. CIMA recently revoked a hedge fund licence for not producing audited accounts for six years. They are certainly ‘ on the ball’.
I didn’t say they were necessarily prompt in their action so your comment doesn’t seem relative. Are you saying there wasn’t multiple requests or warnings made to the hedge fund?
The choice of KRyS Global as the controller is also ominous. They emphasize on their website that they are not an ordinary auditor or bankruptcy trustee, but rather specialize in complex cases including offshore fraud, complex cross-border insolvencies and asset recovery.
Don’t like the guy but they might be the best and most knowledgeable firm on island.
Agree, the two partners are very professional. I suspect this has more to do with one of their clients who might have engaged in some activity (maybe in connection with a shiny metal….just putting two and two together with some other current stories). And CIMA rightfully wants to demonstrate they are actively doing something about this.
As you state, this is probably more of a suspicious activity reporting problem to CIMA or KYC/AML (just speculating). And it is very likely OneTRADEx was unaware (as bad actor clients dont come out and tell you they are bad actors). But all of us that work in the financial services industry have this responsibility as we are the gatekeepers and have an obligation to ensure the integrity of the jurisdiction.
We will have to see if they can survive. Locally, Caledonian Bank collapsed because of a couple bad clients. Globally, Arthur Andersen collapsed because of one bad client. Once a run on a financial services entity starts, it tends to self perpetuate (I need to get out before others get out…) and can lead to a death spiral.
Interesting theory, but it doenst relate to the recent seizure of gold. I can see how you came to that speculation, but just a coincidence the two stories surfaced at the same time. Good detective work anyway! But wrong.
Only is Cayman would be gouged by a 400% uplift for online services be considered a discount model.
What is the reason for the appointment of the administrators?
It’s a secret!
They are not saying, but the appointment under Section 17(2A)(h) means that it must be one of the following:
The Authority may carry out any of the actions specified in
subsection (2A) if it knows or has reasonable grounds to believe
that a licensee or a registered person —
(a) is unable or appears likely to become unable to meet its
obligations as they fall due;
(b) is carrying on business fraudulently or otherwise in a manner
detrimental to the public interest, to the interest of its clients or
to the interest of its creditors;
(c) has contravened any provision of this Law or the regulations
or of the Anti-Money Laundering Regulations (2018 Revision);
(d) has failed to comply with a condition of its licence or
registration;
(e) has not conducted the direction and management of its
business in a fit and proper manner or has directors, senior
Securities Investment Business (Amendment) Law, 2019 Section 13
c
Law 8 of 2019 Page 13
officers, managers or persons who have acquired ownership or
control who are not fit and proper persons; or
(f) has failed to comply with any lawful direction from the
Authority.
Well, for the first time, I am disappointed with the reporting of CNS.
Your story as written indicates the only option and or authority of KRyS us to close down the comany. That is not true, according to the CIMA Notice.
In addition to the report to be issued to CIMA, the administrators have full authority to develop a plan to maintain the business in operation. Hopefully that will be the case.
CNS: I think you’re right and have amended the story. I also hope that will be the case.
This broker is toast, regardless of what the controllers do. As soon as customers are able, they will surely remove all assets out of their accounts. Financial services are all about confidence, and I doubt anyone will have confidence in this entity.
And no one that has Google will open a new account with them.
Thanks, CNS. I realize you must always read between the ines with governoment writings, but your corrections make the CIMA alert much more logical.
Note to CNS: You don’t have the story quite right. The CIMA notice says that KRyS has “all the powers necessary to administer the affairs of the Company [OneTRADEx] including power to terminate the securities invevestment business of the Company” — but it does NOT say that termination is necessarily going to occur. Your story clearly suggests in the last paragraph that termination is going to occur. Maybe it is, and maybe it isn’t. Hopefully for Cayman, it isn’t.
CNS: Note taken. I hope so too.
OneTRADEx’s is just a frontal portal to an account with the large US broker, Interactive Brokers (in this industry this is called white labelling). The trading software (the Trader Workstation, the mobile app, and the simplified trading website) is actually Interactive Brokers (just look at the software on Interactive Brokers website — and compare to OneTRADEx — its 100% identical). And your account is actually custodied at Interactive Brokers in the background.
OneTRADEx charges $9.95 plus a per share amount per equity trade. The average commission at Interactive Brokers is about $1.50 per trade.
Just open an account directly with Interactive Brokers and pay way, way less (Cayman residents are able to…unless you are trying to hide something).
Great point but on a side note most online “big brokers” TD ameritrade, Fidelity, Tradestation etc, have ceased to open new accounts for non US residents. Not sure about IB and Vanguard but I suspect it’s the same. Charles Schwab will for international clients but you need a $25k minimum. Hardly cost effective to the wealthiest person…
IB will accept accounts from non-US residents (I have an account). They are excellent (can buy almost anything globally).
Also use them for currency exchange. Local banks will charge you 1 to 2 % spread. With IB, you transact directly in the currency markets, so the spread is 4 decimal points.
I have a Charles Schwab account, $25k minimum is only if you are a day trader. Been with them for a while now so I get $1 trades and free Level 2 data.
IB still open international personal and corporate accounts and IME are excellent however see the warnings of posters below regarding US taxes.
Tradestation still offers accounts to non-US residents.
You are 100% right. They used Interactive Brokers on the back end. (Interactive Brokers is a large US publicly traded direct access broker, and rated by Barron’s as the best broker in the US for multiple consecutive years). The good news for account holders is that their assets were placed in segregated accounts within Interactive Brokers so there is little to no risk of loss to customers of Onetradex. I think this controllership relates to other matters ( I have a strong suspected hunch what it is….in addition to offering financial asset trading, Onetradex also offered sales and storage of physical precious metals…I’m guessing it relates to matters in this area).
Interactive Brokers white branding program is explained here:
https://www.interactivebrokers.com/en/index.php?f=14322
US broker accounts are considered in situs for US estate taxes; be careful, non dom estate taxes start at 60k!
Your comment is exactly what I was thinking. So, for non-U.S. persons, dealing DIRECTLY with Interactive Brokers could be costly.
This issue is easily remedied. As the original poster says, there is a $60K exemption, so only assets in excess of $60K are potentially subject to this.
Easiest way is to withdraw prior to death, or if you have an executor/estate administrator, they can be pre-provided with your online account details and can do an ordinary withdrawal.
If the account is jointly owned with your spouse, this is not an issue.
And if you want a bullet-proof fail safe, own the account through a foreign trust or company (can set up in Cayman very cheaply) and shares/interests of the company/trust pass to beneficiaries which is Cayman property.
Once you’re dead it’s too late; an executor or relative would be evading US taxes at that point! Let’s not go there. AFAIK owning jointly with a spouse isn’t as simple as it sounds either; there are several different kinds of joint account and they are all treated differently by each state; I guess Connecticut or NY would be the relevant law for IB. Sounds like a pain to me.
Holding through a CI Exempted company is legit and clean but there are setup and ongoing costs to consider in addition to being treated as a corporate for data and exchange billing purposes which is also more expensive and can add up.
”Just open an IB account directly” is not good advice to give generally. The best solution really depends on the size of your account.
Exactly. This is why I opened an account with Onetradex after happily using IAB for years. It is a great platform. Paying slightly more to have practically the same thing with a Cayman legal situs is worth it. It would be a huge loss to all of us if this facility is closed down. Please CIMA, if all this is is a technicality, please do what you can to help. We need them!
That is one of the tradeoffs. Paying much higher commissions is a non-issue if you have limited trading. But if you are very active trader, then paying $1 vs $12 a trade (ie, $2 vs $25 on a round turn) makes a big difference.
The other negative with Onetradex vs directly with IB is that you subject yourself to the risk of a three-man shop, vs a fully regulated SEC broker. (And one day you can get a notice that your broker is in controllership).
We’re all trying to hide something…
For me it’s male pattern baldness.
I wish I could tell you you’re doing a good job…
Ah, go ahead; it’s just a little white lie.