The Australian Securities and Investments Commission (ASIC) today provided an update on its regulation regarding the US-based online multi-asset brokerage Interactive Brokers LLC (IB).
The Australian watchdog details that IB has refunded $1.5 million in fees and commission payments to its retail margin lending customers in accordance with an ASIC enforceable undertaking accepted in December 2014.
According to ASIC, the terms of the enforceable undertaking have been met and it is now finalised. In addition to the $1.5 million refunded to clients, IB has paid approximately $150,000 to the Financial Rights Legal Centre, for the purposes of consumer education concerning financial services and consumer rights in Australia. IB also engaged independent consultant Price Waterhouse Coopers to confirm that the customer refunds were calculated and paid in accordance with a methodology agreed between IB and ASIC.
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The watchdog believes IB is a market maker for foreign exchange (FX) products. In December 2013, ASIC extended a no-action position to IB regarding its FX business on the basis IB would obtain an Australian financial services licence with a market-making authorisation for its Australian subsidiary.
Market-Making without a License
ASIC explained that it withdrew its no-action position in June 2015. This withdrawal followed a lengthy process of enquiry, attempting to clarify the FX services and products being provided by IB in Australia under the no-action position. ASIC now says it was not satisfied that the no-action position ought to continue in light of the information provided to ASIC about IB’s FX business in Australia. The regulator also notes that it has to date not been in a position to grant IB’s Australian subsidiary an appropriately authorised licence.
ASIC therefore ordered IB to cease providing all over-the-counter FX services in Australia, and has requested the provision of further information to enable ASIC to decide on an acceptable orderly exit mechanism from that part of its business in Australia.
This negative development in Australia has not made a noticeable dent in IB’s fortunes as its shares are up over 45% on the year.