ASIC issues retail OTC warning

Australian retail Over the Counter (OTC) derivatives traders have been placed on notice about any claims they may be making about the scope of their Australian Financial Services Licenses.

The Australian Securities and Investments Commission (ASIC) has placed the OTC traders on notice after having previously warned them that they may be dealing with overseas investors illegally.

In an address to a Sydney forum, ASIC commissioner, Cathie Armour noted that regulators in many jurisdictions including Europe, Japan, North America and China had restricted or prohibited the provision to retail investors of certain OTC derivatives.

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She also noted that because the same restrictions did not exist in Australia, there was a risk of regulatory arbitrage.

“Recently we publicly warned Australian issuers that they may be dealing with overseas investors illegally and to cease any non-compliant activities immediately,” Armour said. “There may be consequences overseas for potential breaches of overseas law, but in any event, ASIC will consider whether breaching overseas law is consistent with obligations under Australian law to provide services ‘efficiently, honestly and fairly’.”

She said ASIC was also concerned some AFS licensees may be making misleading or deceptive statements about the scope or application or effect of an AFS licence.

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