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14-241MR Invast Financial Services pays $20,400 penalty for making misleading representations
Invast Financial Services Pty Ltd (Invast), an Australian financial services (AFS) licensee based in Sydney, has paid $20,400 in penalties after ASIC issued two infringement notices for alleged misleading representations.
ASIC’s concerns related to statements that appeared on the Invast website in May 2014 and in an email to prospective clients in April 2014.
The representations on the website contained a link that invited investors to download a demonstration to undertake 'risk-free trading' of contracts for difference (CFDs) for foreign exchange.
ASIC was concerned that a reasonable investor may be misled into believing that the platforms promoted in the demonstration involved risk-free trading, rather than understanding that the demonstration account was risk free.
Further, ASIC was concerned that a statement on the AFS licensee's website that 'Forex CFDs allow you to buy one currency whilst simultaneously selling another' was misleading because CFDs are derivatives and, by their nature, do not involve acquisition or selling of the underlying asset.
In addition, ASIC was concerned that an email to prospective clients which contained a statement claiming investors could access 'low risk, high reward trading opportunities' by viewing Invast's video tutorial and ebook was inconsistent with disclaimers in the email. The disclaimers said, 'trading in FX and derivatives can be risky and you may incur a loss that is far greater than the amount you invested.'
ASIC was concerned that, in general, both the email to prospective clients and statements on the website misled consumers about the inherent risks of trading foreign exchange and derivatives.
Deputy Chairman Peter Kell said, ‘Trading in CFDs and other derivatives, by their nature, involve risks. It is important that consumers are aware of these risks and can make fully informed decisions when considering a particular investment strategy.
'AFS licensees should ensure the content of their promotional material does not contain any false or misleading statements that misstate or underplay these risks and create unrealistic expectations for consumers'.
ASIC acknowledges that Invast has taken steps to correct its website.
The payment of an infringement notice is not an admission of a contravention of the Australian Securities and Investment Commission Act 2001 consumer protection provisions. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.
Regulatory Guide 234 Advertising financial products and services (including credit): Good practice guidance (RG 234) provides guidance to help promoters comply with their legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.
RG 234 states, among other things, that warnings, disclaimers and qualifications should not be inconsistent with other content in an advertisement, including any headline claims. Warnings, disclaimers and qualifications should have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing the advertisement.