Pepperstone Group Ltd (Pepperstone) has agreed to cease providing financial services in Japan following inquiries by ASIC that revealed they were not licensed by the Japanese Financial Services Agency.
Pepperstone is an Australian corporation, which was licensed by ASIC on 4 February 2013, to carry on a financial services business to make a market, deal in and provide advice on a range of financial products, including derivatives and foreign exchange contracts.
As part of ASIC's ongoing monitoring of the retail derivatives and margin foreign exchange industry, ASIC became aware that Pepperstone was also advertising its products through a Japanese mirror website and that it has a number of clients based in Japan to whom it offers margin foreign exchange services.
An Australian financial services (AFS) licence only permits AFS licensees to carry on a financial services business in Australia. It does not permit AFS licensees to offer financial services in other jurisdictions where approval may be required from the local regulatory authority.
Pepperstone has recently announced that it will not accept any new Japanese clients, and has emailed all existing Japanese clients to inform them that it does not hold a licence in Japan and to allow them to close their current open positions and withdraw their funds by 31 December 2014. ASIC is of the view that any interim trading by Japanese clients should be to wind down their current open positions in an orderly manner.
ASIC Commissioner Cathie Armour said, 'ASIC reminds all holders of an AFS licence that they must ensure that, when providing financial services in foreign jurisdictions, they understand and comply with the regulatory requirements of offering a service in that jurisdiction.
'ASIC has been monitoring the retail derivatives and margin foreign exchange industry and is concerned that some Australian AFS licensees may be operating in other jurisdictions without the necessary authority or regulatory approval to provide financial services in those jurisdictions.
'ASIC will continue its focus on entities that are licensed in Australia but appear to conduct most of their business offshore. As part of ASIC's ongoing work, we will liaise with international regulators.'
ASIC notes Pepperstone's cooperation in this matter.
ASIC's recent action in relation to retail margin foreign exchange AFS licensees include:
- restraining Monarch FX Group Pty Ltd (Monarch FX), and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-266MR)
- cancelling the AFS licence of a margin forex company after it failed to comply with a number of its AFS licence obligations (refer: 14-226MR)
- shutting down unlicensed foreign exchange trading (refer: 14-155MR), and
- accepting an enforceable undertaking from an online foreign exchange broker operating managed discretionary accounts (refer: 14-036MR).
ASIC has also warned retail investors about the dangers of foreign exchange trading (refer: 13-283MR).