Increasing Misuse of AFSLs Attracts Attention of ASIC

If you don’t have an AFSL to run an FX brokerage, you cannot run a website which says you do.

Misleading information provided by Australian Financial Services Licensees (AFS Licensees) in their marketing and promotional material has been a long running concern for the Australian Securities and Investments Commission (ASIC), particularly in relation to the financial services being provided to retail clients.

Instances where AFS Licensees provide misleading information on their website in relation to the financial services they are authorised to provide can result in an ASIC investigation and in some cases, the cancellation or suspension of the AFSL.

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For example, many Chinese entities have purchased AFSLs which they proceed to use as a regulatory reference on their website which promotes MT4 platforms and other margin FX and CFD brokerage services. ASIC’s view is that if you don’t have an AFSL to run an FX brokerage, you cannot run a website which says you do, regardless of the location of the clients you are targeting.

Our experience is that there may be agents in China who are selling AFSLs representing that they can offer MT4 platforms when in fact they cannot, leading to confusion and disappointment when ASIC gets in touch with them to make significant edits to the website.

This can also lead to problems down the road for all involved when disgruntled customers seek compensation or account withdrawals in Australia when their underlying provider is actually an operator in China.

ASIC published a media release on 10 March 2016 entitled “16-067MR FXAsia updates website disclosure to clarify the services it may offer” which is demonstrative of ASIC’s stance when it comes to misleading or unclear information in relation to the financial services being provided by the AFS Licensee.

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FXAsia Pty Ltd was required to update disclosure on its website after ASIC raised concerns about the quality of the information being provided. The updates included:

– Removing a Product Disclosure Statement and Financial Services Guide

– Including a statement that their services were for wholesale investors only.

The updates were made to ensure prospective clients clearly understand the types of services which FXAsia was licensed to provide and the types of clients who could apply for these services. It is clear that ASIC will take action against AFS Licensees whose websites advertise services they are not authorised to provide.

It is important that all AFS Licensees provide clear and accurate information on their websites, to ensure there are no false or misleading statements. AFS Licensees should ensure their websites clearly and accurately outline:

– the scope of the financial services they are authorised to provide;
– the products in which they authorised to advise and deal in; and
– the types of clients (i.e. retail or wholesale) which the AFS Licensee is authorised to target.

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