As the Australian Securities and Exchange Commission continues its clamp down on illicit broker dealings in the margin FX industry, another firm has become a victim. The ongoing process has already led to a number of busts and convictions with many ongoing more cases.
After an in depth investigation, ASIC found that FX provider Rainbow Legend Group Pty Ltd (Rainbow Legend) defied standards by failing to comply with its obligations, as well as making false and misleading statements. This has led to the termination of the FX service provider-Rainbow Legend’s Australian financial services (AFS) licence. Rainbow legend’s wrong doing includes the firm's use of deceptive means to try and woe clients by falsely promoting a non existent insurance compensation scheme for clients of up to $2.5 million on some websites. Such schemes are not covered by the broker’s license, neither is it even existent in Australia.
Another wrong doing is the use of ASIC’s logo on these websites to try to create a form of authenticity to the false scheme. This could have led to clients wrongly believing the insurance scheme was actually in collaboration with ASIC or endorsed by the regulator. Also, the company has failed for years to comply with the requirement of lodging its financial statement. Reporting obligations require that the firm should lodge it financial statement with the regulator for the years ended 30 June 2013 and 30 June 2014, and an auditor’s report for two financial years.
ASIC Commissioner Greg Tanzer said: "In a global market it is necessary to recognise that an AFS licence only covers financial services offered in Australia. It is also vital an entity holding a AFS licence complies with their reporting requirements to ensure users of financial reports, such as creditors and investors, have the proper information to make informed decisions."
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INFORMATION ON RAINBOW LEGEND
Rainbow Legend promotes itself as a global Forex and CFD brokerage company specialising in derivative trading. It operates the following websites:
As Rainbow legend license terminated, Forex brokerage is not the only angle being closely scrutinized by the Australian regulators. Recently, the watchdog investigated a spike in the Australian dollar which occurred a minute prior to the release RBA cash rate in April. The regulator released an update on the investigation last week, stating that initial investigations show that the irregular volatility was actually due to normal market activities.
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