December 11, 2020, | AtoZ Markets – The Australian Securities and Investments Commission (ASIC), is suing three forex brokers for offering their services in China despite the regulator's repeated warnings of illegal activities.
ASIC sues USGFX, EuropeFX and TradeFred
The Australian regulator claims that Union Standard International Group Pty Ltd (USGFX) provided Chinese clients with the option of margin trading in currencies. ASIC has launched an investigation against the Sydney-based firm and two of its former representatives, BrightAU Capital Pty Ltd and Maxi EFX Global AU Pty Ltd. They operate under the TradeFred and EuropeFX brands respectively.
The Chinese authorities have banned their citizens from trading on margin, that is, using borrowed funds. The USGFX and its agents, however, used local regulatory loopholes to circumvent this ban. In particular, they referred to registration in offshore zones.
These limitations were of concern to the ASIC. In particular, brokers received a notification from the regulator that they violate the laws of another state. In addition, the Commission is careful to ensure that regulated companies do not make false or misleading statements about the scope of the license.
The brokers in question have offered forex trading services in China, despite the official ban. Perhaps many Chinese clients have found themselves in a quandary because they can only trade currencies through commercial banks and without margin.
"ASIC claims that Union Standard has compromised its Chinese clients, which are likely to face administrative or even criminal charges," the regulator said in a statement.
USGFX's troubles are not limited to Australia, and the company's activities in China have not gone unnoticed. Some angry Chinese clients stormed the company's Shanghai offices three years ago.
Read also: Why is USGFX Vanuatu Slow in Refunding Australian Clients?
The ASIC statement also alleges that EuropeFX and TradeFred provided personal advice to clients without permission and used aggressive selling tactics to encourage customers to make deposits and make more deals. Both brands have also been accused of misleading customers about risks and potential rewards.
Recall that the Australian division of USGFX has been declared bankrupt as a result of a corporate investigation by the regulator. The USGFX license has been revoked and the broker is in liquidation.
Think we missed something? Let us know in the comment section below.