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ASIC warns that some Australian brokers are soliciting European clients

 

The Australian Securities and Investments Commission (ASIC) made an official statement, warning local forex brokerages to be careful not to break any overseas laws while offering OTC derivatives to retail investors in Europe and other overseas jurisdictions.  

 

It seems that some Australian brokers are soliciting clients in jurisdictions such as Europe, Japan, or China, where the provision of certain OTC derivatives to retail clients is restricted or prohibited.

 

For example, binary options trading was banned throughout the EU by the European Securities and Markets Authority (ESMA) in 2018. The Pan-European regulator also imposed harsh restrictions on retail CFD trades, and most notably, capped leverage to 1:30. These “temporary” restrictions have already been renewed a number of times, and ESMA will probably continue to do so until they are made permanent.

 

In an effort to avoid the ESMA’s intervention measures, many European brokers are using their Australian entities to offer their clients higher leverage levels. Although Australia has strict rules in place regarding the financial market, it is now viewed as a safe haven in terms of regulation. 

 

In its official statement, the Australian regulator stated that it will consider whether breaching overseas law is consistent with obligations under Australian law to provide services ‘efficiently, honestly and fairly.’ ASIC will also consider whether locally regulated brokers are making misleading or deceptive statements about the scope or application of their Australian financial service (AFS) license.

 

Commenting on the matter, Commissioner Cathie Armour said, ‘AFS licensees who break the law in overseas jurisdictions, or who mislead retail investors about their services undermine the integrity of the Australian licensing regime. ASIC will not tolerate that conduct.’

 

TAGS: ASIC  EU  Australia  regulation  leverage cap  ESMA restrictions 

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