from the iii board9 Dec 2015 10:09
cut and paste this from iii - any one know anything about this?
"Broker Numis has announced it will no longer cover Plus500 because it believes the company represents too great a risk for its (institutional) clients.
Here's what they say:
Although the recent quarterly numbers have been surprisingly strong, we believe the risks remain very much towards the downside due to the significant number of uncertainties. In particular, increasing regulatory scrutiny creates a significant risk which, in our view, is likely to have a material impact on Plus500's growth, profitability and potentially even the markets in which it can operate. Given the severity of these issues, we will now be ceasing coverage.1. What exactly went wrong and can it happen again: We believe investors should be told what exactly went wrong, what has been changed, what measures have been put in place to ensure such events do not happen again and whether these measures have now been implemented across its other subsidiaries.2. Where there is smoke, there is often fire: Given at least one problem has already been found with Plus500's low cost, low-touch, electronic operating model, we believe there is a significant risk other problems could be found in its client onboarding procedures (suitability, KYC), client management systems (best execution) or risk management controls (client fund segregation).3. Increasing regulatory scrutiny: Plus500 stated that it has become the subject of increased scrutiny and received further requests for information from its regulators. In our view, this is the key risk for Plus500 as increased scrutiny from any of its regulators may seriously impacts its ability to continue to operate within regulated markets.4. What is happening at Plus500UK: Although management state they are not currently under any regulatory "restrictions", we wonder why Plus500UK is still unable to accept new clients. Perhaps the master plan is to redirect all European clients to Cyprus, close the UK subsidiary and avoid the FCA?5. We believe fines/penalties are on their way: In our view, there is a significant risk the FCA may look to impose fines/penalties for, amongst other issues, allowing so many clients to trade on its platform without having provided the necessary information and documentation.6. We believe management communication needs to improve: We believe management needs to improve the consistency of messaging, provide more details on client onboarding procedures/risk management controls and to be clearer regarding regulatory relationships in order to improve the perception of Plus500 within the City.7. What is the bull case: We believe a bull investor would point to the robust quarterly performance, a lack of any further regulatory announcements, its $20m buyback and payment of an interim dividend as signs that the business is in a strong position. While we do agree recent performance has been surprisingly strong, we wonder if this has anythi
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