ASIC worried about CFD breaches
The financial services regulator has expressed concerns about the number of breaches in the contracts for difference (CFD) and margin foreign exchange (FX) sector.
The Australian Securities and Investments Commission (ASIC) has warned the sector following the release of its new report, which highlighted weaknesses in the basic handling of client money.
The report - Review of client money handling practices in the CFD and margin FX sector - was based on a risk-based surveillance of 40 issuers of over-the-counter CFDs and margin FX contractors, which represented the vast majority of market share in the sector.
ASIC found that 18 issuers failed to properly designate client accounts as trust accounts, 11 failed to pay client money into a compliant account by the next business day following receipt, and six did not perform client money reconciliations on a daily basis.
"ASIC is concerned about the number of breaches of basic client money-handling provisions," said ASIC Commissioner Greg Tanzer.
"The client money provisions are an important safeguard to protect the interests of retail investors," Tanzer said. "We expect issuers to know and comply with their obligations under the law and to put in place effective measures and supervisory arrangements to ensure these obligations are met."
Five issuers had inadequate segregation of duties in their back office, while 19 issuers had no formal escalation process for resolving variances in the reconciliation, the report said.
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