ASIC Takes Action against 'Global Derivative Services' for Multiple License Breaches

The Australian Securities and Investment Commission (ASIC) has cancelled the Australian Financial Services (AFS) license of Global Derivative Services Pty Ltd (GDS) after an investigation found the broker had failed to comply with a number of its AFS license obligations.

Specifically, ASIC stipulated the following as failures to comply with conditions of its licence in an official media release earlier today:

The appointment and ongoing competency of the key person on the AFS licence; notification of changes to the responsible person; lodgement of account; payment of debts; adequacy of financial and human resources, by failing to maintain an Australian resident director and registered office; failing to provide up-to-date details with the Financial Ombudsman Service and on its website.

The company's only director, 'Brenton Nair' also serves as the company's CEO, but could not be reached for comment. Lacking an AFS license, GDS is now prohibited from operating in Australia.

Regulator Oversight

"Licensees must ensure they are up-to-date and actively complying with all current obligations," said Greg Tanzer, ASIC Commissioner.

The latest action by ASIC underlines the regulator's ongoing focus on over-the-counter (OTC) derivatives products offered by retail margin FX providers such as GDS and others. The Australian financial services industry has seen an increase in foreign broker participation attempting to tap the lucrative Asia/Pacific market. ASIC admits that "over the past two years, ASIC has seen an increase in the number of entities applying for an AFS licence authorizing the entity to operate a retail OTC derivative business, particularly in the area of retail margin foreign Exchange services."

The action taken against GDS and subsequent media communication suggests ASIC is actively monitoring the retail FX industry in Australia. According to the statement, "ASIC is continuing to conduct a surveillance of this industry and currently has several investigations into retail OTC derivative businesses on foot."

Despite Spot FX being unregulated worldwide, FX derivatives are regulated. Several regulators such as the NFA, FCA and Finma are finding difficulties in regulating a market that reaches outside and overlaps their respective jurisdictions.

Precedents

In July 2014, ASIC commenced action in the New South Wales Supreme Court to stop 'Vault Market Pty Ltd' and its sole director, Mr. Anamul Amin, from carrying on a financial services business without an Australian Financial Services (AFS) licence. The regulator also closed down a website with the domain name 'www.kiwifxbank.com' (KiwiFx Bank).

In February 2014, ASIC accepted an enforceable undertaking from online foreign exchange broker, 'Forex Financial Services Pty Ltd (Forex FS)'. ASIC’s investigation found that between March 2010 and October 2011, Forex FS had been offering a managed discretionary account (MDA) despite the firm lacking an MDA license authorizing it to offer discretionary managed account services.