ASIC's continued focus on margin foreign exchange businesses operating in Australia has led to the cancellation of the Australian financial services (AFS) licence of Enfinium Pty Ltd ACN 129 298 442 (in liquidation) (Enfinium). The action follows an ASIC investigation into Enfinium.
ASIC was concerned Enfinium failed to have adequate risk management systems, in particular, controls on its Meta Trader 4 (MT4) trading platform and a plug in device known as the 'Virtual Dealer.'
A function of the Virtual Dealer is ability to add a trade execution delay of between 1 to 10 seconds. An execution delay added by the Virtual Dealer could disadvantage clients to the benefit of the broker, if markets moved against the client during any period of delay.
ASIC's investigation found that during 2010-2013 (Relevant Period), the Virtual Dealer had been changed on 271 occasions; however Enfinium kept no records of those changes.
Certain Enfinium employees had 'Manager' access with special rights for administering MT4 including editing and deleting clients' open positions which, according to the MT4 Administrator User Guide was potentially dangerous.
ASIC was concerned Enfinium's risk management system was inadequate because:
- Enfinium did not maintain records which recorded the configuration of the Virtual Dealer
- Enfinium did not monitor the use of the Virtual Dealer, or persons who had access to the Virtual Dealer
- there was no training for persons who had the ability to modify the Virtual Dealer
- employees of Enfinium had access to enter, modify, close and delete orders on MT4 without secondary authorisation
- there was no monitoring of trades placed through 'Manager', and
- the Virtual Dealer and 'Manager' access were not identified as risks in Enfinium's risk register.
The Enfinium AFS licence was cancelled due to Enfinium ceasing to carry on a financial services business, after it appointed administrators on 1 October 2014, and was wound up by creditors on 6 November 2014.
Due to a lack of adequate records concerning the changes to the Virtual Dealer, ASIC was unable to identify whether a trade execution delay had a negative impact on any client.
ASIC Commissioner Greg Tanzer said: 'Margin foreign exchange businesses that utilise the Meta Trader trading platform and use the Virtual Dealer plug in, need to ensure they have robust risk management systems. These systems must ensure the client is not disadvantaged to the benefit of the broker. Any tool that has the potential to advantage a broker needs to be carefully managed.'
ASIC has recently taken the following action on retail margin FX licensees:
- shutting down Vault Market Pty Ltd and removing its sole director, Mr MD Anamul Amin, from the financial services industry (refer: 14-309MR)
- 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 (refer: 14-267MR)
- commencing proceedings in the Federal Court of Australia to restrain Monarch FX, and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-342MR)
- cancelling the Australian financial services (AFS) licence of online FX broker Global Derivative Services Pty Ltd, after an investigation found it failed to comply with a number of its AFS licence obligations (refer: 14-226MR)
- accepting an enforceable undertaking from online FX broker Forex Financial Services Pty Ltd prohibiting it from operating managed discretionary accounts (refer: 14-036MR)
ASIC has also issued an alert cautioning Australian investors against dealing with the company or group YoutradeFX for trading in margin FX (refer: 14-036MR) and issued a more general warning to retail investors about the dangers of FX trading (refer: 13-283MR).