ASIC has cancelled the Australian financial services (AFS) licence of contracts for difference (CFDs) and foreign exchange contracts issuer, FXOpen AU Pty Ltd (FXOpen AU), after an investigation identified serious concerns about the inadequacy of its human resources to provide financial services and to carry out supervisory arrangements.
ASIC’s investigation also found that FXOpen AU failed to comply with its obligations as an AFS licensee, including:
- maintaining competence to provide financial services covered by the licence
- complying with the ‘key person’ condition on its licence, and
- complying with financial services laws.
FXOpen AU has held AFS licence 412871 since 12 December 2011, allowing it to issue CFDs. CFDs are leveraged derivative contracts that allow a client to speculate in the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities or crypto-assets.
ASIC found FXOpen AU’s failure to comply with its core obligations as an AFS licensee warranted the cancellation to protect existing and future clients from likely future breaches of its core obligations. By cancelling the licence, ASIC also aims to deter other AFS licensees from failing to comply with their obligations, promote the objects of fairness, honesty and professionalism by those who provide financial services and support confident and informed participation of investors and consumers in the financial system.
Background
ASIC has pursued enforcement actions against retail OTC derivatives issuers addressing misconduct in the sector, including:
- obtaining a $75 million penalty against AGM Markets and its authorised representatives OT Markets and Ozifin, along with compensation for approximately 10,000 former clients
- commencing proceedings against eToro in its first design and distribution action to protect consumers from high-risk CFD products
- the suspension of the AFS licence and winding up on just and equitable grounds of Prospero Markets, and
- the cancellation of the AFS licence of XTrade.AU after it failed to comply with its general obligations as an AFS licensee and the banning of its former directors and responsible managers.
ASIC has also taken regulatory action to protect consumers from high-risk OTC derivative products by:
- making the CFD product intervention order (PIO) and extending it until 23 May 2027, which has been effective in reducing the risk of significant harm to retail clients resulting from CFDs (Report 724)
- releasing ASIC’s key observations on how issuers of retail OTC derivatives were meeting these obligations and highlighting areas for improvement (Report 770), and
- overseeing more than $17.4 million in compensation to over 2,000 retail investors affected by breaches of financial services laws by eight retail OTC derivatives.
More information
ASIC’s Moneysmart website has further information about forex trading and CFDs.
Editor's Note:
On 25 September 2024, FXOpen AU applied for a review of the AFSL cancellation decision with the Tribunal. ASIC received the application for review from the Tribunal on 1 October 2024.