The Australian Securities and Investments Commission (ASIC) revealed today that it has cancelled the Australian financial services (AFS) licence of FX provider Rainbow Legend Group Pty Ltd (Rainbow Legend) for failing to comply with its legal obligations, including making false and misleading statements.
Rainbow Legend promotes itself as a global forex and CFD brokerage specialising in derivative trading. It seems to target mainly the Chinese market and operates the following websites: www.//rlg88.com, www.rainbowlegendgroup.com, www.rlg88.org and www.rainbowlegendgroup.com.au. The cancellation of its licence took effect on April 30, 2015.
ASIC’s investigation found that the company falsely promoted on a number of websites an insurance compensation scheme for clients of up to $2.5 million. The scheme does not exist in Australia, and would not apply to clients based in Australia nor to services covered under Rainbow Legend’s licence.
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The regulator also warned that the use of its logo on the websites could have led clients to wrongly believe the company was in some way endorsed or approved by ASIC. The company had also not complied with a number of its reporting obligations, including failing to lodge financial statements for the years ended June 30, 2013 and June 30, 2014, and an auditor’s report for two financial years.
ASIC Commissioner Greg Tanzer said, “In a global market it is necessary to recognise that an AFS licence only covers financial services offered in Australia. It is also vital an entity holding a AFS licence complies with their reporting requirements to ensure users of financial reports, such as creditors and investors, have the proper information to make informed decisions.”
The financial markets watchdog says this move is part of its ongoing crackdown on the margin FX industry and work around retail investment in foreign exchange, which has resulted in a number of outcomes recently. ASIC adds that more legal action might be coming against other brokers as “there are several more investigations on foot.”