Australian Regulator ASIC Revokes DirectFX’s Licence

Australian regulator ASIC revoked AFS License of Direct FX Limited. According to the Australian watchdog, the withdrawal was due to failure in compliance with a section 912C (3) direction. 

18 October 2018 | AtoZMarkets – The Australian Securities and Investments Commission (ASIC) has withdrawn the licence from DirectFX Trading Limited, upon discovering that the firm has failed to comply with their requirement. 

Why Was DirectFX’s Licence Cancelled?

DirectFX’s licence was issued by the Australian financial services (AFS) but was suspended back in April 2018 by ASIC after an investigation revealed that the brokerage has not complied with the Net Tangible Asset (NTA) requirements. The reason for the suspension back then also includes the broker not having sufficient cash and cash equivalents.

Today, ASIC announced on its website saying that it had withdrawn their licence for the following serious reasons:

  • failed to comply with client money reporting rules requiring the company to provide to ASIC daily and monthly reconciliations of client money held by Direct FX;
  • continued to carry on a financial services business while suspended (refer: 18-126MR) by continuing to allow clients to enter into trades;
  • failed to comply with its Net Tangible Asset (NTA) requirements provided in Class Order 12/752, including not having sufficient cash and cash equivalents to comply with its obligations. Specifically, Direct FX continued to enter into transactions when its NTA was less than 75% of the required NTA of $1 million in breach of its obligations;
  • did not maintain the competence required to provide the financial services covered by its AFS license by failing to replace key persons named on its licence;
  • did not fully understand its obligations as an AFS licensee and cannot be relied upon to  discharge the duties and obligations imposed by the financial services laws on a licensed provider of financial services;
  • resources were not sufficient to enable Direct FX to provide financial services efficiency, honestly and fairly given the possible magnitude of its financial services business and the risks associated with the trading of derivatives; and
  • failed to comply with an ASIC s912C(3) Direction to give ASIC an audit report about Direct FX’s compliance with various financial licence conditions. 

The Australian watchdog has also discovered that Direct FX did not stick to the competence required to offer the financial services described in its AFS license or understand its responsibilities as an AFS licensee.

Ignoring Previous Warnings and Breaching Conditions

Cathie Armour, the Commissioner of ASIC confirmed this report when she stated that the firm has breached multiple conditions listed in its AFS license, with the sole purpose of protecting investors against higher operational and credit risks posed by the retail OTC derivative sector.

Amour was quoted as saying:

DirectFX ignored key conditions of the notice of suspension by continuing to open new trading positions and failed to comply with its client money reporting obligations whilst suspended.

The Commissioner also added.

“The ongoing and demonstrated disregard for meeting their obligations has resulted in ASIC acting to remove the company from the industry.”

Direct FX would be required to continue its membership of an external dispute resolution scheme and adequate professional indemnity insurance until April 2019.

It is also worth mentioning that DirectFX, as noted by ASIC, was placed into external administration and a liquidator, appointed by the Supreme Court of New South Wale (NSW) on the 11 October 2018.

This was after the cancellation of the Australian Financial Services Licence (AFSL) which was effective on 8 October 2018. Nevertheless, Direct FX has the right to make an appeal to the Administrative Appeals Tribunal for a review the decision made by ASIC.

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