Following ASIC's concerns Ingot Brokers (Australia) Pty Ltd (Ingot) has rectified its 'cash and cash equivalents' arrangements to comply with its financial resource requirements.

ASIC found Ingot was in breach of the financial requirements of its Australian financial services licence (AFSL) as a result of inappropriately including funds held as collateral against derivative contracts to meet the 'cash and cash equivalents' aspect of its net tangible assets (NTA) requirement.

Ingot has fully cooperated with ASIC's enquiries into the matter and rectified the breach in a timely manner. Ingot transferred adequate monies to an authorised deposit taking institution to cover its 'cash and cash equivalents' requirement in order to comply with its financial resource requirements under ASIC Class Order [CO 12/752] Financial requirements for retail OTC derivative issuers.

ASIC Commissioner Cathie Armour said, 'The financial resource requirements for retail over-the counter derivative issuers, including those relating to ‘cash or cash equivalents’, are critical to ensuring that licensees are able to manage the risk of financial loss and that, if a licensee is wound up,  there is a buffer to assist with an orderly and compliant winding up of their business.'

'Licensees should be fully aware of their financial resource requirements. We encourage them to take immediate steps to review their existing arrangements and ensure they are meeting their financial resource obligations. We also encourage them to obtain professional advice if they are unsure of their specific financial requirements.'

Background

As a licensed retail OTC derivative issuer, Ingot must hold 50% of its NTA requirement in cash or cash equivalents and 50% in liquid assets. ASIC does not consider funds held as collateral against derivative contracts or otherwise used for hedging purposes to be cash and cash equivalents because such funds are subject to encumbrances and are at significant risk of change in market value.

Ingot Brokers (Australia) Pty Ltd ACN 159 895 431 is the holder of AFSL number 428015 and an issuer of margin foreign exchange (FX) and contracts-for-difference (CFDs). Under its licence Ingot is authorised to provide general advice and to deal, issue, apply for, acquire, vary, dispose or make a market in derivatives and FX contracts in Australia.

This work continues ASIC’s focus on AFSL compliance in the retail OTC derivative sector, including margin FX, CFDs and binary options.

Recent outcomes include:

• O.C.M. Online Capital Markets Pty Ltd paying  $30,600 in penalties after ASIC issued three infringement notices for false or misleading online advertising (refer: 15-321MR).
• cancelling the Australian financial service licence (AFSL) of LSG Group Pty Ltd (refer: 15-293MR).
• British Virgin Island company FIBO Group Limited and Cyprus company, Trading Point of Financial Instruments Limited (also known by the trading name XM.com), agreeing to cease providing unlicensed financial services to Australians (refer: 15-233MR).
• suspending the AFS licence of Australian Capital Advisory Services Pty Ltd on the grounds it had ceased providing financial services after a change of control (refer: 15-217MR).
• following an investigation, Advanced Markets agreeing to change potential misleading statements on its website (refer: 15-085MR).
• following an investigation, suspending the AFS licence of FX provider AGM Markets Pty Ltd (AGM) (refer: 15-075MR).
• warning investors not to deal with Grandegoldens, w hich was not licensed to trade in margin FX in Australia (refer: 15-066MR).
• cancelling Enfinium’s AFSL because, among other things, concerns around inadequate risk management systems (refer: 15-026MR).
• following a surveillance, Calibre Investment changing the way it offers FX services to retail clients (refer: 14-327MR).
• restraining Monarch FX and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-342MR).
• shutting down Vault Market and removing its sole director, Mr MD Anamul Amin, from the financial services industry (refer: 14-309MR).
• warning investors not to deal with YoutradeFX which was not licensed to trade in margin FX in Australia (refer: 14-306MR).
• Pepperstone agreeing to stop providing financial services in Japan following inquiries by ASIC that revealed they were not licensed by the Japanese Financial Services Agency (refer: 14-267MR)
• cancelling the AFSL of online FX broker Global Derivative Services after an investigation found it failed to comply with a number of its licence obligations (refer: 14-226MR)