March 29, 2021 | AtoZ Markets – The Australian Securities and Investments Commission (ASIC) on Monday confirmed that its product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) to retail clients takes effect from today.
A CFD is a leveraged derivative contract that allows a client to speculate in the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities or cryptoassets.
The maximum CFD leverage available to retail clients will range from 30:1 to a 2:1, depending on the underlying asset class. Before now, a retail investor’s CFD exposure could be as much as 500 times their original outlay.
ASIC Commissioner Cathie Armour said:
‘We will closely monitor compliance with the product intervention order and won’t hesitate to take appropriate action to enforce the order.’
‘We are also paying careful attention to changes in CFD providers’ reported holdings of retail client money and any mis-classification of retail clients as wholesale clients, which would risk denying them important rights and protections. Protecting retail investors from harm, particularly at a time of heightened vulnerability, is a priority for ASIC,’ Commissioner Armour said.
ASIC Is Serious About Brokers’ Compliances With New CFD Trading Restrictions
According to the Aussie regulator, the maximum penalty for not complying with the new requirements could reach five years imprisonment for individuals and a penalty of up to $555 million for corporations.
If a court finds that a person has contravened a product intervention order, a retail client may recover the amount of loss or damage suffered because of the contravention.
The product intervention order will remain in force for 18 months, after which it may be extended or made permanent.
As a reminder, the Financial Conduct Authority (FCA) has banned the sale, marketing, and distribution to all retail consumers of any derivatives (ie contract for difference – CFDs, options, and futures) and ETNs that reference unregulated transferable crypto assets by firms acting in, or from, the UK.
The ban, which does not apply to crypto trading, came into effect on January 6, 2021.
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