Degiro UK the UK subsidiary of Pan-European low-cost stock broker FlatexDegiro has stopped onboarding new client accounts at least temporarily.
The broker wrote to its marketing affiliates and partners today to say that it was pausing UK acquisition campaigns and client onboarding for regulatory reasons, without saying what they might be. In its brief communication with the Good Money Guide, the firm says that it hopes to start accepting UK client accounts again in the next two to three months.
Firms can be prevented from onboarding new clients if a regulator feels that its internal processes, record keeping and safeguards are not robust enough.
Degiro UK is not directly regulated by the UK FCA, instead as a German /Dutch brokerage its activities are overseen by European regulators, BaFin in Germany, and the DNB and AFM in the Netherlands.
Degiro has had issues in the past, having been criticised over its execution practices, including using an internal hedge fund as a counterparty and selling client orders to specific execution venues.
In 2021 the Dutch National Bank. the DNB raised concerns about the stability of the firm’s IT infrastructure and ruled that it was insufficiently secured against hacks and crashes.
As a result, Degiro was forced to set aside more than €3.0 million against required upgrades to its IT systems.
The firm says it has now made a significant investment in this area.
FCA-regulated broker Trading212 was forced to halt its client onboarding in January 2021, during the meme stock boom as thousands of new day traders flocked to the platform.
At the time firm said it was seeing unprecedented demand and would reopen to new business once it had finished processing the backlog of account applications.
The firm’s mobile trading app crashed due to the surge in trading volumes and interest in opening new accounts.
Back in May 2015 Israeli-based broker Plus500 stopped onboarding clients at its UK business, as regulators looked at the firm’s client verification procedures.
Though that decision was said to be voluntary, rather than one thats was forced on the firm by the FCA. Plus500 was able to resume onboarding new accounts in December of that year.