Some regulatory news coming from the Australian Securities and Investments Commission (ASIC) this morning. Following concerns raised by the financial regulator, Advanced Markets Ltd (Advanced Markets) has agreed to make changes to its website. The changes relate to statements which may have been misunderstood as implying that ASIC regulates all financial services provided by Advanced Markets, including those which are not carried on in Australia.
Advanced Markets is incorporated in the Cayman Islands and is a registered foreign company under the Corporations Act. Advanced Markets holds an Australian financial services (AFS) licence. According to its website, Advanced Markets’ physical address is in the United States and it provides financial services to clients globally.
The Advanced Markets website contained many statements emphasising the requirements and protections of its AFS licence, including:
- The heading “Advantages of working with an ASIC registered company,” followed by claims about ASIC regulation and protection.
- Paragraphs on handling of client money, including the statement “Client funds are held in accordance with ASIC requirements.”
- The requirement for all applicants to state that they qualify as a wholesale client under the Corporations Act, under its Account Application webpage.
These statements were not accompanied by an appropriate clarification that these AFS licence requirements and protections do not apply to financial services provided outside Australia.
ASIC was concerned that such statements may confuse potential foreign clients to believe that the remit of ASIC’s regulation of the financial services business carried on by Advanced Markets under its AFS licence extends to financial services conducted by Advanced Markets that have no link to Australia.
The AFS licensing regime only covers financial services carried on in Australia. Where an entity such as Advanced Markets, is based overseas and is providing financial services to clients outside Australia, these services are not being carried on in Australia.
“ASIC expects that any content or material published by a foreign company mentioning that the company holds an AFS licence to be clear about the reach of the licence,” ASIC Commissioner Cathie Armour said. “Any limitations of the licence that are not obvious to investors should be clearly disclosed to avoid confusion or misunderstanding…”
Financial service providers must also ensure that they are appropriately licensed in each jurisdiction in which they operate. An AFS licence does not permit AFS licensees to offer financial services in other jurisdictions where approval may be required from the local regulatory authority.
Background
ASIC’s Regulatory Guide 121 Doing financial services business in Australia (RG 121), provides guidance to foreign licensees, covering their obligations and our expectations of foreign AFS licence holders.
ASIC has recently taken the following action in the FX space:
- Suspending the AFS licence of FX provider AGM Markets Pty Ltd (AGM) (refer: 15-075MR).
- Warning Australian investors not to deal with unlicensed forex broker, Grandegoldens (refer: 15-066MR).
- Cancelling the licence of Efininium Pty Ltd for failing to have adequate risk management systems (refer: 15-026MR).
- Shutting down Vault Market Pty Ltd and removing its sole director, Mr MD Anamul Amin, from the financial services industry (refer:14-309MR).
- Pepperstone has agreed to cease providing financial services in Japan following inquiries by ASIC that revealed they were not licensed by the Japanese Financial Services Agency (refer: 14-267MR).
- Commencing proceedings in the Federal Court of Australia to restrain Monarch FX, and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-342MR).
- Cancelling the AFS licence of online FX broker Global Derivative Services Pty Ltd, after an investigation found it failed to comply with a number of its AFS licence obligations (refer: 14-226MR).
- Following a surveillance, Calibre Investment changed the way it offers FX services to retail clients (refer: 14-327).
- Restraining Monarch FX and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-342MR).
- Warning investors not to deal with YoutradeFX (refer: 14-306MR). It is not licensed to trade in margin FX in Australia.
- Accepting an enforceable undertaking from online FX broker Forex Financial Services prohibiting it from operating managed discretionary accounts (refer: 14-036MR).
- Banning Robert Lloyd Wilson from providing financial services and warning the public against dealing with him for his promotion of a program that showed ‘when to get in and when to get out’ of trades. These trades included, among other things, FX trades (refer: 13-282MR).
To view the official notice, click here.