IFGM is the first broker in Australia to begin closing accounts of select clients it on-boarded from overseas. The company started informing its customers from outside of Australia that it will be returning their client funds held with the brokerage.
The move is announced a couple of weeks after the Australian Securities and Investments Commission (ASIC) guided brokers that they should be mindful of providing their services to clients outside of Australia. After the country’s parliament approved a product intervention law in early April, the regulator requested a slew of data from AFS license holders which is focused on overseas clients.
As Finance Magnates exclusively reported, some firms from the local industry have been actively coordinating a response to the regulator’s effort. Within an increasingly complex regulatory environment however, some companies are throwing in the towel and bowing regulatory pressure.
The latest communication on part of the Australian regulator signaled to brokers that they have until the end of June to report on their plans on how to handle clients from overseas. The ASIC is reportedly looking to collect some data first before taking any follow-up decisions about the retail brokerage industry’s practices.
That said, representatives of the regulator have been publicly vocalizing their opinion about high leverage offered to retail customers by Australian firms. In the meantime, brokers which depend on high volumes of clients from overseas are considering different options.
TrustedBrokerz: The Source More Traders Are TrustingGo to article >>
While there is no regulatory certainty about the next developments in the market, some firms are considering their options in light of the upcoming new product intervention measures. Last year, AFS licenses were in very high demand, due to the lack of strict limits on product offerings to retail clients.
While the debate is likely to continue over the coming months, IFGM, which is one company heavily reliant on Chinese clients as many other local brokers are, decided to restructure its operations. Over the coming weeks, the options for brokers operating in Australia should become clearer.
While some legal opinions are advocating that local firms are not breaching foreign laws because their services are provided from Australia, at least two companies have shared with Finance Magnates that they are considering to offer to their overseas customers a service regulated in an offshore jurisdiction.
Complex Legal Debate
Despite the ensuing legal spat with ASIC, several Australian brokers which are housing overseas clients are continuing to operate their business as normal. In the meantime, IFGM has informed its clients that recent communication from the local regulator forced the company to reassess its business and the brokerage is accepting only Australian clients.
Funds of all clients who are residing outside of the country have been returned to customers, while the company is working on providing an alternative solution to onboard such clients.
With the legal framework being widely debated by compliance experts in the country and the regulator reportedly overstepping its authority with some of its recent steps, the industry is gearing up for a prolonged period of uncertainty about the fitter of overseas clients.