ASIC cancels OTC issuer's AFS licence
The Australian Securities and Investment Commission (ASIC) has cancelled the Australian financial services (AFS) licence of retail over-the-counter (OTC) derivative issuer Forex Capital Trading (Forex CT).
Forex CT offered clients opportunities to trade in contracts-for-difference (CFDs) for margin foreign exchange contracts.
ASIC’s investigation identified several clients that incurred large losses from their superannuation accounts because of investment in these products.
ASIC cancelled the AFS licence after its investigation found Forex CT’s financial services business model disregarded key obligations of an AFS licence, which resulted in unconscionable conduct, misleading and deceptive conduct, and a failure to manage conflicts of interest.
The investigation from the corporate regulator found Forex CT lacked sound ethical values and judgment when dealing with clients, failed to ensure its representatives were adequately trained and complied with financial services laws, and failed to ensure services covered by its licence were provided efficiently, honestly and fairly.
Forex CT’s AFS licence will continue until 31 July, 2020, for the purpose of having a dispute resolution scheme in place to resolve any disputes with the Australian Financial Complaints Authority and facilitate the orderly closure of existing client positions.
It would not be permitted to open new client positions and current clients could contact Forex CT in relation to the closure of current open positions.
Cathie Armour, ASIC commissioner, said: “ASIC continues to focus on conduct by AFS licensees who operate business models that harm consumers”.
CFDs and foreign exchange contracts were over the counter derivatives that allowed clients to speculate on the change in value of an underlying asset.
Forex CT had the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.
AUTHOR
Chris Dastoor
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