ASIC has warned Australian financial services licensees that offer over-the-counter derivatives to retail investors located overseas could be breaking laws abroad, with Chinese authorities having alerted the watchdog that some online platforms have engaged in illegal activity, via InvestorDaily.
Regulators in jurisdictions including Europe, Japan, North America and China have restricted or prohibited the provision of certain OTC derivatives, such as binary options, margin foreign exchange and other contracts for difference (CFDs) to mitigate harm to retail investors.
ASIC has expressed concern that some OTC derivative issuers that hold AFSLs may be marketing or soliciting overseas clients to open accounts with Australia-based licensees on the basis of avoiding overseas intervention measures.
The regulator said is it considering whether breaching overseas laws is consistent with obligations under Australian law to provide services ‘efficiently, honestly and fairly’.
ASIC is also considering whether it will see AFSL holders could be making misleading or deceptive statements about the scope or effect of their license.
“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,” commissioner Cathie Armour said.
“ASIC will not tolerate that conduct.”
Chinese authorities have already informed ASIC that “some online platforms are illegally engaged in forex margin trading activities”.
Under Chinese law, no institution or agency has approval to carry out margin foreign exchange trading.
Temporary product intervention measures have also been extended in Europe by the European Securities and Markets Authority, with authorities in the UK and Germany introducing permanent measures including anti-avoidance provisions.
“AFS licensees offering OTC derivatives to overseas retail clients should, as a matter of priority, seek advice on the legality of their offerings to these clients,” commissioner Armour said.
“Any non-compliant activities should cease immediately and be notified to ASIC and the relevant overseas authorities.”
