Recent ASIC License Cancellations

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Recent ASIC License Cancellations

By Lex Yaranu | Friday, August 28th, 2020

The Australian Securities and Investment Commission (ASIC) is continuing its renewed focus on the retail Over the Counter (OTC) derivative market in Australia, which is where margin spot FX and binary options fall into.

As a result, a number of decisions have been taken concerning brokers operating in this market space.

Below is a list of recent outcomes of ASIC investigations and punitive actions taken against certain brokers.

1) The AFS licence of FX provider Rainbow Legend Group Pty Ltd (operating under the Rainbow Legend brand) has been suspended for presenting false and misleading statements and failing to cmply with ASIC requirements.

2) Following an ASIC investigation which revealed some misleading statements on its website, Advanced Markets has agreed to remove this material from its website.

3) The suspension of AFS licence of AGM Markets Pty Ltd (AGM) has been confirmed by ASIC, which has also asked investors not to do business with the brand of this company known as Grandegoldens as it is not licensed to offer OTC products in Australia.

4) The AFS license of one of Australia’s earliest binary options brokers, Enfinium, has been cancelled due to inadequate risk management systems.

5) Following extensive surveillance, ASIC found out that Calibre Investment altered the way it offers OTC products to retail clients, different from ASIC guidelines. The company, its brand and its former director and general manager, Quinten Hunter, have been banned from carrying on a financial services business in Australia.

6) An investigation by ASIC showed that Vault Market had only one director, Mr MD Anamul Amin, in contravention of ASIC guidelines which mandate that companies offering financial services must have a minimum of three directors with relevant industry experience. Vault Market and its sole director have been banned from operating in the Australian financial services industry.

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7) Pepperstone has agrred to stop providing financial services in Japan as part of collaborative efforts by both agencies to root out companies that are not licensed to offer such services in their individual countries. Pepperstone had claimed to be licensed by the JFSA but investigations by ASIC revealed that they do not hold any license from the JFSA.

8) The AFS licence of online OTC broker Global Derivative Services has been cancelled after an investigation revealed that the company failed to comply with a number of its licensing obligations.

9) The AFS licence of Australian Capital Advisory Services Pty Ltd was suspended on the grounds that it had stopped providing financial services following a change in shareholding structure and ownership.

We will continue to bring you more news about actions of regulators in sanitizing the binary options marketplace as they break.

Cancelling your AFS licence

Cancelling your licence

If you no longer need your Australian financial services (AFS) licence, you can ask ASIC to cancel it. You must maintain professional indemnity (PI) insurance and membership of an ASIC-approved external dispute resolution (EDR) scheme until you receive notification that we have cancelled your licence.

If your company holds an AFS licence and is placed into external administration, you should request a licence cancellation.

Before you request cancellation, you should first:

  1. revoke any authorisations you have given to representatives and notify ASIC of the revocations within 10 business days through ASIC Connect: see section 916F(3) of the Corporations Act 2001. You should also notify all representatives of the revocation
  2. arrange for de-registration of registered managed investment schemes or transfer of the scheme(s) to a new responsible entity
  3. confirm the status of any disputes with EDR schemes. We will make our own inquiries with your EDR scheme if you have provided services to retail clients
  4. take immediate steps to lodge Form FS70Australian financial services licensee profit and loss statement and balance sheet and/or Form FS71Auditor’s report for AFS licensee for any financial year that ends before the date the licence is cancelled. For further information, see Outstanding financial statements and auditor’s report below
  5. take steps to discharge any amounts owed to ASIC. You can confirm your account balance by telephoning the Customer Contact Centre on 1300 300 630 (within Australia) or +61 3 5177 3988 (outside Australia).

To cancel your licence, complete the request for cancellation and write a covering letter that explains in detail the reasons that you require cancellation of your licence and includes all your contact details (postal address, email address, telephone number). The covering letter should clearly set out:

  • your licence number
  • that you want ASIC to cancel your AFS licence
  • that you have ceased or will cease to carry out any financial services business that requires an AFS licence
  • the date you cease or will cease to carry out the financial services business
  • your reason(s) for ceasing your financial services business
  • whether you will continue to operate your financial services business under an exemption from the requirement to hold an AFS licence
  • whether you are under administration (i.e. whether you have been declared bankrupt, are under a personal insolvency arrangement, are under a debt agreement, are in receivership, have had a controller appointed, are in voluntary administration, are under a deed of company arrangement or are in liquidation)
  • whether you are regulated by the Australian Prudential Regulation Authority (APRA)
  • any related bodies corporate that are APRA regulated (including their Australian Company Number (ACN) and/or Australian Business Number (ABN)) and provide details of their APRA status (i.e. whether or not they are an authorised deposit-taking institution (ADI)), and whether any activities they undertake will be prevented by the licence cancellation
  • details of any outstanding financial statements (Form FS70) and auditor’s reports (Form FS71), and the reasons these are outstanding
  • if we hold a security bond, the details of the bond (i.e. the bond amount, the financial institution that issued the bond, the name of a contact person at the financial institution and their contact details, and the date of the security). You will also need to lodge a Form FS20Change of details for an Australian financial services licence and provide lodgement details in your covering letter
  • your EDR scheme name and membership number
  • details of any dispute(s) (both internal and with an EDR scheme) that have not been fully resolved
  • whether you will accept notice of cancellation by email and, if so, a valid email address
  • a valid postal address for receipt of documents from ASIC.

Email the request for cancellation and the covering letter to [email protected] When we receive your request we will issue a fee invoice. We will not process the cancellation until the fee has been paid.

Alternatively, you can send the completed request for cancellation, along with the covering letter and a cheque for the relevant fee, by mail to:

Australian Securities and Investments Commission
Licensing
GPO Box 9827
Brisbane QLD 4001

For details of the fee, see Information Sheet 30 Fees for commonly lodged documents (INFO 30). The fee is listed under ‘Lodge a document under Ch 7 which does not have a fee specified elsewhere’ in the ‘Other financial services matters’ table under ‘Financial services’.

What happens after we receive your cancellation request?

We assess your request to ensure that there are no outstanding matters that preclude cancellation of your licence.

To expedite this process, please complete all relevant areas of the request for cancellation.

We may cancel the licence subject to specified statutory obligations remaining in place. These obligations could include maintaining, for a specified period, EDR scheme membership and PI insurance.

Outstanding financial statements and auditor’s reports

Even though you have asked for the licence to be cancelled, you must still lodge financial statements (Form FS70) and an auditor’s report (Form FS71) for any financial year that ends before the date the licence is cancelled. Therefore, if your cancellation request is received towards the end of a financial year, the request may not be finalised until the next financial year, and you will need to lodge financial statements and an auditor’s report for a further financial year.

If circumstances prevent you from lodging any outstanding financial statements and auditor’s reports for any financial year, you should advise ASIC of these circumstances in the covering letter to your request for cancellation.

We will not generally process the cancellation until all outstanding lodgements are up to date.

What happens after we approve your cancellation request?

We will send you a letter when we have cancelled your licence and publish a notice of the cancellation in the ASIC Gazette.

Getting your security bond back when you cancel a licence

If you have satisfied current compensation requirements

Regulatory Guide 126 Compensation and insurance requirements for AFS licensees (RG 126) details the current arrangements for satisfying compensation requirements. Under previous arrangements, some licensees were required to lodge and maintain a security bond with ASIC. If you want to discharge a security bond because you have satisfied the current compensation requirements, you should complete question 5.2 on Form FS20 and lodge the form.

If you have not satisfied current compensation requirements

If you do not have compensation arrangements that meet the requirements of RG 126, to arrange release of your security bond you must:

  1. publish a notice containing the details set out in Form 702Application for discharge of security (other than the information set out in ‘Lodgement details’ and ‘Company details’) in a daily newspaper of general circulation in Australia. Please note that:
    • at the end of the paragraph numbered one in the notice, you will need to replace the words ‘dealers/investment advisers licence’ with the words ‘Australian financial services licence’
    • the reason shown in the paragraph numbered two in the notice must include a statement indicating that the security bond is no longer required because the AFS licence is being cancelled
    • if the financial services business was carried out solely in one state or territory, you may publish the notice in a daily local newspaper. However, if any of the financial services business was conducted in more than one state or territory, you should place the notice in either The Australian or The Australian Financial Review
  2. after you have published the notice, apply for the security to be discharged. The application should consist of the following:
    • a copy of Form FS20, with question 5.2 completed (see the guide attached to the form for the lodgement address)
    • an original or photocopy of the newspaper advertisement, clearly showing the date and newspaper in which the notice was published
    • a statement that to the best of your knowledge no person has, or is likely to have, a claim against the licensee for pecuniary loss due to the failure of the licensee, or an agent or employee of the licensee, to carry on business under the licence adequately or properly
    • if you have this information, the name of a contact person at the issuer of the security bond and their address details.

We will release the security bond at least three months after publication of the notice, if there have not been any claims made against it.

AFS licensees

Important notice: AFS licensees are now required to submit breach reports to us via the ASIC Regulatory Portal. The portal will replace existing submission channels. Visit our Changes to how AFS licensees report breaches page for more information.

You must have an Australian financial services (AFS) licence to conduct a financial services business.

If you carry on a business of providing financial services, you must hold an AFS licence (unless you are exempt or are authorised to provide those services as a representative of another person who holds an AFS licence).

You may need an AFS licence if, as part of your business, you:

  • provide financial product advice to clients
  • deal in a financial product
  • make a market for a financial product
  • operate a registered scheme
  • provide a custodial or depository service, or
  • provide traditional trustee company services.

You will need to have your AFS licence or be a representative of a licensee from the day you start your financial services business. Depending on your business, you may decide to apply for a limited AFS licence.

ASIC assesses applications for AFS licences as part of our role as regulator of the financial services industry.

Consumers should be aware that the licensing process is a point-in-time assessment of the licensee, not of its owners or employees. Holding an AFS licence does not guarantee the probity or quality of the licensee’s services.

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