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Thursday 17 December 2015

15-395MR IronFX corrects disclosure about Australian regulation and counterparty arrangements

Following concerns raised by ASIC, retail OTC derivative issuer, IronFX Global Australia Pty Ltd (IronFX Australia) has taken steps to remove references from an associated website and a disclosure document that suggested certain financial services were regulated by ASIC, when this was not the case.

ASIC was concerned that statements published on the website of IronFX Australia's parent company, Cyprus-based IronFX Global Ltd (http://www.ironfx.com/en), (IronFX Cyprus), as well as from the IronFX Cyprus disclosure document, gave the impression that the financial services provided by IronFX Cyprus are regulated by ASIC.

IronFX Australia's Australian financial services licence only covers the financial services provided by that entity in Australia - it does not cover financial services provided outside of this jurisdiction or directly by other entities in the IronFX group. IronFX Cyprus is neither licensed nor otherwise regulated by ASIC. 

Following discussions with the company, IronFX Australia has also updated its Product Disclosure statement (PDS) to include material information about its hedging arrangements and has updated its PDS to clearly disclose that its sole hedging counterparty is its parent company, IronFX Cyprus.  

ASIC Commissioner Cathie Armour said, 'Licensees need to ensure that any marketing materials, including those produced within their group, do not create the impression that the entity making those statements is licenced to issue the product.

'In terms of disclosure, retail investors need to be given sufficient information in the PDS in order to ensure that they can make informed decisions including information on counterparties. Licensees should therefore review their marketing and disclosure documentation to ensure it meets these requirements', Ms Armour said.

IronFX Australia currently hedges each transaction with its Cyprus parent and has a general policy of using all client money for the purposes of funding those positions. Investors have no recourse against a hedge counterparty and their recourse is therefore limited to IronFX Australia's actual recovery against its hedge counterparty (which is currently IronFX Cyrpus).

Investors should ensure that they understand their contractual rights and obligations and carefully assess all relevant risks. In particular, investors should understand the credit risk posed by the hedging arrangement with IronFX Cyprus before entering into any transactions with IronFX Australia.

Background

This outcome continues ASIC’s focus on financial services compliance in the retail OTC derivative sector, including margin FX, CFDs and binary options.

Recent outcomes include:

  • Boca Global Financial Group removing potentially misleading website representations (refer: 15-340MR)
  • Formax removing false statements about the suspension of its subsidiary's licence following ASIC concerns (refer: 15-336MR).
  • Following ASIC's concerns Ingot Brokers (Australia) Pty Ltd rectifying its 'cash and cash equivalents' arrangements to comply with its financial resource requirements (refer: 15-333MR).
  • O.C.M. Online Capital Markets Pty Ltd paying $30,600 in penalties after ASIC issued three infringement notices for false or misleading online advertising (refer: 15-321MR).
  • cancelling the Australian financial service licence (AFSL) of LSG Group Pty Ltd (refer: 15-293MR).
  • British Virgin Island company FIBO Group Limited and Cyprus company, Trading Point of Financial Instruments Limited (also known by the trading name XM.com), agreeing to cease providing unlicensed financial services to Australians (refer: 15-233MR).
  • suspending the AFS licence of Australian Capital Advisory Services Pty Ltd on the grounds it had ceased providing financial services after a change of control (refer: 15-217MR).
  • following an investigation, Advanced Markets agreeing to change potential misleading statements on its website (refer: 15-085MR).
  • following an investigation, suspending the AFS licence of FX provider AGM Markets Pty Ltd (AGM) (refer: 15-075MR).
  • warning investors not to deal with Grandegoldens, which was not licensed to trade in margin FX in Australia (refer: 15-066MR).
  • cancelling Enfinium’s AFSL because, among other things, concerns around inadequate risk management systems (refer: 15-026MR).
  • following a surveillance, Calibre Investment changing the way it offers FX services to retail clients (refer: 14-327MR).
  • restraining Monarch FX and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-342MR).
  • shutting down Vault Market and removing its sole director, Mr MD Anamul Amin, from the financial services industry (refer: 14-309MR).
  • warning investors not to deal with YoutradeFX which was not licensed to trade in margin FX in Australia (refer: 14-306MR).
  • Pepperstone agreeing to stop providing financial services in Japan following inquiries by ASIC that revealed they were not licensed by the Japanese Financial Services Agency (refer: 14-267MR).
  • cancelling the AFSL of online FX broker Global Derivative Services after an investigation found it failed to comply with a number of its licence obligations (refer: 14-226MR).
Last updated: 17/12/2015 12:00