ASIC cancels licence of yet another CFD issuer
The Australian Securities and Investment Commission (ASIC) is continuing its ongoing crackdown on suspect over-the-counter (OTC) derivative providers, cancelling the licence of FXOpen AU.
The cancellation comes following an investigation of FXOpen AU, a contracts for difference (CFDs) and foreign exchange contracts issuer, by ASIC which identified “serious concerns” with its provision of financial services.
The financial regulator noted deficiencies in FXOpen’s human resources, leading to its failure “to provide financial services and to carry out supervisory arrangements”.
ASIC contends that the CFD provider failed to comply with its obligations as an Australian Financial Services (AFS) licensee, failing to show competence in providing financial services covered by the licence, and breaching financial services laws.
FXOpen, headquartered in the UK but with offices in Australia, counts more than one million traders globally. The platform enables registered users to establish CFD arrangements for forex, stock indices, commodities, individual equities and cryptocurrency assets across more than 600 markets globally.
FXOpen AU has held its AFS licence since it was issued in December 2011.
ASIC said the cancellation of FXOpen AU’s licence would also deter others from breaching their AFS licensing obligations, and “promote the objects of fairness, honesty and professionalism by those who provide financial services”.
CFDs, a type of leveraged OTC derivative contract, enable investors to speculate on the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities or crypto-assets.
The Australian Securities Exchange (ASX) considers CFD investments high-risk, exposing investors to magnified losses. The practice is currently banned in the US.
OTC derivative providers have come under the crosshairs of ASIC in recent years, with the regulator noting its enforcement action against multiple CFD providers. In 2020, ASIC pursued civil action against AGM Markets for excessive client losses, leading to a $75 million penalty against the firm; earlier this year, it cancelled XTrade.AU’s AFS licence alleging the firm unscrupulously targeted and issued CFDs to vulnerable clients.
Late last year, ASIC noted that it also oversaw $17.4 million in compensation to more than 2,000 retail investors affected by breaches of financial services laws by eight retail OTC derivatives.
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