ASIC Sues USGFX, Two Representatives for Doing FX Business in China

The Australian Securities and Investments Commission (ASIC) is suing three Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers for chasing business in a gray area of China’s Online Trading Online Trading Online trading represents the trading of fiat currencies, digital currencies, commodities, stocks and indices, where traders and investors intend to make a profit, via the purchase or sale of the aforementioned products. This is done through an electronic network, made accessible by brokers in the form of an online trading platform or hub.Online trading continues to see a rapid growth year on year, due to a number of reasons. Firstly, the number of brokers offering their services, with more mone Online trading represents the trading of fiat currencies, digital currencies, commodities, stocks and indices, where traders and investors intend to make a profit, via the purchase or sale of the aforementioned products. This is done through an electronic network, made accessible by brokers in the form of an online trading platform or hub.Online trading continues to see a rapid growth year on year, due to a number of reasons. Firstly, the number of brokers offering their services, with more mone Read this Term sector, even after it warned Aussie firms over illegal Chinese activities.

The corporate regulator alleges that Union Standard International Group Pty Ltd (USGFX) provided leveraged FX trading and other financial services to Chinese clients. ASIC launched the investigation into the Sydney-based firm and its two former representatives - BrightAU Capital Pty Ltd and Maxi EFX Global AU Pty Ltd. The firms are trading as TradeFred and EuropeFX, respectively.

FX trading in the world’s most populous nation has been restricted by a ban on currency margin trading, in which investors borrow money to trade. However, USGFX and its representatives appeared to have exploited Beijing’s regulatory loopholes, notably the fact their systems are based offshore.

Those curbs were the subject of ASIC’s concerns. Specifically, Aussie brokers were put on notice by the Australian regulator that it reviews any breaches of overseas laws. Further, the watchdog has been reviewing whether AFS licensees are making misleading or deceptive statements about the scope and application of their authorisation.

The brokers in question offered forex margin trading in China though the practice is officially banned. This may have put their Chinese clients in trouble as they can trade currencies only through commercial banks and without leverage.

USGFX Troubles Are Not Confined to Australia

“ASIC alleges Union Standard’s conduct placed its China-based clients at risk of contravening Chinese law, and thereby exposed them to potential administrative and criminal penalties under Chinese law,” the watchdog explains.

USGFX troubles are not confined to Australia, and its activities in China have not gone unnoticed. Some angry Chinese customers stormed the company's offices in Shanghai three years ago.

ASIC’s statement further alleges that EuropeFX and TradeFred provided personal advice to clients without being authorised to do so and used high-pressure sales tactics to encourage clients to deposit or trade more. Furthermore, both brands are accused of making misleading representations about risk involved or profits the clients can make.

The Australian arm of USGFX has collapsed into administration amid an investigation by the corporate watchdog into its trading platforms. The cancellation of USGFXs AFS licence follows on from the broker being ordered to enter into liquidation by the Federal Court of Australia in August.