Australia’s financial regulator ASIC has noted that IronFX, whose Australian subsidiary is licensed and regulated by ASIC, has been asked to correct disclosure about Australian regulation and counterparty arrangements.
Following concerns raised by ASIC, IronFX’s Australia sub IronFX Global Australia Pty Ltd has taken steps to remove references from the parent company’s (IronFX Cyprus) website, and a disclosure document that suggested certain financial services were regulated by ASIC, when this was not the case.
There was no fine or other censure or penalty involved.
ASIC was concerned that statements published on the website of IronFX Cyprus, as well as from the IronFX Cyprus disclosure document, gave the impression that the financial services provided by IronFX Cyprus are regulated by ASIC.
IronFX Australia’s Australian financial services licence only covers the financial services provided by that entity in Australia – it does not cover financial services provided outside of this jurisdiction or directly by other entities in the IronFX group.
Following discussions with the company, IronFX Australia has also updated its Product Disclosure statement (PDS) to include material information about its hedging arrangements and has updated its PDS to clearly disclose that its sole hedging counterparty is its parent company, IronFX Cyprus.
ASIC Commissioner Cathie Armour said:
Licensees need to ensure that any marketing materials, including those produced within their group, do not create the impression that the entity making those statements is licenced to issue the product.
In terms of disclosure, retail investors need to be given sufficient information in the PDS in order to ensure that they can make informed decisions including information on counterparties. Licensees should therefore review their marketing and disclosure documentation to ensure it meets these requirements.
IronFX Australia currently hedges each transaction with its Cyprus parent and has a general policy of using all client money for the purposes of funding those positions. Investors have no recourse against a hedge counterparty and their recourse is therefore limited to IronFX Australia’s actual recovery against its hedge counterparty (which is currently IronFX Cyrpus).
ASIC noted that investors should ensure that they understand their contractual rights and obligations and carefully assess all relevant risks. In particular, investors should understand the credit risk posed by the hedging arrangement with IronFX Cyprus before entering into any transactions with IronFX Australia.
To see the original note by ASIC click here.