Australian Watchdog Suspends Licence of a Bought out Broker

The move calls into question the advantage of taking over an Australian licensed firm to access the market, a common

The Australian Securities and Investments Commission (ASIC) has suspended the Australian financial services (AFS) licence of retail broker Australian Capital Markets Advisory Services Pty Ltd (ACMAS) following its sale.

ACMAS ceased providing services after a change of all directors and shareholders in the company in June 2015, when the entity became a wholly owned subsidiary of Formax International Market Limited, a New Zealand registered multi-asset broker. The watchdog says today that the new management of the company was unable to demonstrate it was fully compliant with many of the AFS licensing requirements.

ACMAS has stated that it intends to set up and recommence its business in a few months. On this basis, ASIC has suspended its licence until October 30, 2015. If ACMAS is unable to demonstrate prior to that date that it is in a position to recommence its financial services business, including demonstrating its ability to meet the obligations that would apply to it as the holder of an AFS licence, consideration will be given to cancelling the licence entirely.

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It is a common practice in the industry to take over a company that holds a license in a specific jurisdiction that the acquiring company wants to expand to, as it saves the long legal process of obtaining a new license. Today’s move by the watchdog calls into question the advantage of taking over an Australian firm if ASIC does not honor the license. The regulator has been trying to curtail the operations of China focused brokers in its jurisdiction for a while now, and this seems to be a continuation of that effort.

ASIC Commissioner Cathie Armour commented, “We have seen an increase in retail OTC derivative providers purchasing companies that already hold a licence but that have ceased providing financial services. The new management are often not in a position to recommenced providing services that are compliant with Australian obligations for an extended period of time.

More generally we would have concerns if new entrants to this market were trying to inappropriately bypass ASIC’s stringent AFS Licence application processes. Regulatory obligations on AFS licensees continue to apply after the change of control. Any entity that is unable to comply with Australian licensing obligations risks having its licence suspended or cancelled.”

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