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ASIC Imposes 10-Year Ban on Forex FS

The Australian Securities and Investments Commission (ASIC) today announced a set of measures, including a 10-year ban on services provision, against Forex Financial Services Pty Ltd (Forex FS). 
 
The company, which holds an Australian Financial Services License with the national watchdog, is found to have misled its clients into pumping funds in a managed discretionary accounts (MDAs), without having the right to offer such a product. More particularly, the ASIC alleged that from March 2010 to October 2011 Forex FS had lured at least 34 clients to invest in an MDA, promising returns of as much as 30%. To avoid the fact that it's not allowed to offer an MDA service to retail clients under the ASIC rules, the broker simply classified the clients as wholesale ones, which has added weight to the gravity of the violations. The Commission also detected a raft of misleading statements on the company's website. 
 
Australia is known for its mild investment climate and the rules are not so rigid as in the United States, for example. However, when it comes to rule-obedience, the watchdog does not accept any compromises. That is why, when Forex FS made these serious violations of the MDA rules, the watchdog acted so roughly. 
 
The Regulatory Guide 179, which spells out the MDA regulations in Australia, defines this financial service as involving “a person (an MDA operator) managing a portfolio of assets for a retail client on an individual basis.” And it's important to note that the rules are not that strict – in fact they offer surprising freedom of action for MDA operators. For instance, a provision says that “The MDA operator has the discretion to invest in financial products using client contributions without prior reference to the client for each transaction”. Commissioner Greg Tanzer referred to this provision, stressing how important it was for companies engaged with MDA to follow the rules, as any disobedience can lead to severe risks and losses for clients.
 
Apart from the 10-year ban on providing MDA services, Forex FS will have to meet a raft of requirements. Its directors will have to pass extra educational courses for 12 months and the company will have to hire an expert to advise it on its product offering. 
 
This is another harsh action by ASIC, following the measures against Interactive Brokers from August 2013. The regulator then prohibited the US Forex broker from extending margin loans in Australia. 
TAGS: forex fs  forex financial services pty ltd  asic  australia  australia forex  forex rules  forex ban  mda  managed discretionary accounts  forex regulation  australian securities and investment commission  forex investments  forex market 
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