This week will be remembered by the forex and CFDs brokerage industry in Australia for a long while. Starting from the newly minted product intervention powers of the Australian Securities and Investments Commission (ASIC) late last week, and evolving into a massive data-collection effort on the part of the regulator, Friday brings yet more news.
After the Australian financial watchdog informed the industry via a press release yesterday, stating that some firms might be breaking overseas laws, today the ASIC has sent out a message to it licensees, clarifying its not so subtle message.
Brokers Mandated to Take More Steps
The letter which Australian brokers received today is signaling them to stop providing financial services to new clients residing in overseas jurisdictions where the broker is not licensed. In other words, firms which do not have an EU license, for example, can not onboard new clients from the EU.
The wording of the letter sent out to Australian brokers by the ASIC’s OTC products compliance team is also mandating firms to take steps to close the open positions of existing clients from overseas jurisdictions where the broker is not licensed by the end of May.
The harsh stance of the regulator resembles a policy enforced by Google when it comes to advertising. In May last year, the search giant stated that it requires a legal opinion about each jurisdiction where brokers are advertising about the legality of their offering.
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Seeking Legal Assistance
Rumor on the street is that the latest drastic steps mandated by the local regulator are prompting firms to seek high-level legal advice. The general view of industry insiders from Australia is that the latest “orders” from the ASIC are not legal or viable and that they should be resisted.
Any legal fight against a financial regulator is likely to be a costly and lengthy process, with some firms in the industry locally determined that the watchdog is overstepping its powers. That said, some Australian brokers have been recently actively diversifying their regulatory portfolio with licenses from the CySEC.
The regulator’s steps seem to be a surprise for many but are also well anticipated by established Australian firms.
Written Answer Requirement
Brokers are mandated to send a written answer to the ASIC before the end of April, elaborating on the steps taken to comply with the regulator’s request regarding overseas clients. Each Firm also needs to send by email the number of clients it has in each jurisdiction by May 7, 2019. Yesterday’s media release by the regulator highlighted China and the EU as the main focus for the Australian watchdog.
ASIC also signals that companies should not be “making misleading or deceptive statements about the scope or application or effect of its AFS license in its marketing materials, websites, social media platforms, and disclosure documents.”
Australian brokers are warned that failure to comply with the requests could result in actions from the regulator. The ASIC highlights actions under section 915C of the Corporations Act 2001.