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ASIC Tightens Its Grip: City Index Australia Must Appoint an Independent Expert

Over the past few months, we've seen financial regulators around the world rectify a number of rules concerning the foreign exchange industry, with the Australian Securities and Investments Commission (ASIC) being among the most active of reformers. In mid-December last year, they partnered up with leading software and consulting services provider, First Derivatives, to bring in Delta Stream – a surveillance platform which enabled the regulator to monitor local market conditions for inconsistencies or abuses. Not long after, another stringent measure was taken as ASIC officially approved their 2012 proposition on raising the minimum net capital requirement for brokers and brought the figure up from AUD $50,000 to AUD $500,000.

The commission's grip is clearly tightening and last week City Index Australia (CIA), the Australian subsidiary of UK-based forex and CFD brokerage City Index, found that out from first hand experience. On Wednesday, April 10, ASIC issued a press release, saying that in relation to established deficiencies in CIA's client money handling arrangements, the company will be required to hire an independent expert. This external actor will work with the CIA over the following 18 months, help them prepare an improvement plan, oversee the results and report to ASIC on a regular basis.
“ASIC warned the industry late last year that we expect issuers to know and understand their client money handling obligations, and to comply with them. We are no longer facilitative in our approach to the regulation of client money handling practices and we will pursue issuers who fail to meet their obligations”, says ASIC Commissioner Greg Tanzer.
In October last year, the regulator served two infringement notices to CIA for which the company later paid two penalties of $6,600 as prescribed by the ASIC Act. One was for falsely guaranteeing full protection of client funds on their website when CIA's Product Disclosure Statement and Customer Agreement states otherwise. The second had to deal with a similar misrepresentation, sent around in an electronic newsletter. The broker was quick to respond, though. They removed the potentially misleading content and acted in compliance with the rest of the commission's demands.
On the other side of the Pacific, Interactive Brokers faced a similar situation last week concerning weaknesses in managing segregated client accounts. These failures to adhere to the local requirements resulted in a much more solid fine than the one the CIA had to pay, $225,000, imposed on them by ASIC's U.S. counterpart, the Commodities Futures Trading Commission (CFTC).
TAGS: asic  increase  net capital requirement  broker  forex  australia  city index  cia  independent expert 

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