The Australian Securities and Investments Commission (ASIC) announced today that it has canceled the Australian financial services (AFS) license of Direct FX Trading Pty Ltd, an Australian-based forex broker.
ASIC noted in its statement that due to continued compliance failures from Direct FX, the regulator canceled the firm’s license earlier this month on October 8, 2018. Following the cancellation of the license, the Supreme Court of New South Wales, a state in Australia, placed Direct FX into external administration and appointed a liquidator on October 11, 2018.
The securities regulator originally suspended Direct FX’s license on April 17, 2018, for a period of six months, which expired this Wednesday. Initially, the watchdog suspended the license as it found that Direct FX was not meeting its financial and non-financial obligations.
ASIC has listed a number of failures from the firm, including the company not complying with client money reporting rules. These rules require financial institutions to provide ASIC with daily and monthly reconciliations of client money, which Direct FX did not do.
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In addition, the firm continued to provide financial services that allowed clients to enter into trades while its license was suspended. It also failed to comply with its Net Tangible Asset (NTA) requirements. This failure included not having enough cash and cash equivalents to comply with its obligations.
In fact, ASIC lists seven separate reasons for the termination of its license, which you can read here. The regulator also notes that Direct FX is required to maintain its membership to an external dispute resolution scheme and have sufficient professional indemnity Insurance until the end of April next year. This is to minimize the impact of the cancellation on both its past and current clients.
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Commenting on the announcement, ASIC Commissioner Cathie Armour said: “Direct FX was in breach of multiple conditions of its AFS license, which are aimed at protecting investors from the higher operational and credit risks posed by the retail OTC derivative sector.
“Direct FX ignored key conditions of the notice of suspension by continuing to open new trading positions and failed to comply with its client money reporting obligations while suspended. The ongoing and demonstrated disregard for meeting their obligations has resulted in ASIC acting to remove the company from the industry.”
ASIC ends the statement by adding that Direct FX has the right to appeal its decision to the Administrative Appeals Tribunal.