1 July, AtoZForex – Earlier this week, the surveillance team of the Australian Securities and Exchange Commission (ASIC) raised non-compliant concerns with that the licensed retail OTC derivative issuer arm of Xtrade. The payment processes of XTrade's Australian branch was questioned in regards to compliance with ASIC's client money provisions. Due to ASIC's investigation into the matter, XTrade client money policy will need to be changed.
What are ASIC’s client money provisions?
According to the ASIC, the client money provisions were introduced to protect the customers' interests of the regulated entities. One of the provisions indicates that ASIC's licensees are required to separate clients’ money from the broker's funds. Moreover, the licensee is required to hold the clients' money on trust, while set limits how the funds can be used, withdrawn or deal with in any other way. Commenting on the introduced provisions framework, the ASIC Commissioner Cathie Armour informed that:
“The protection of client money is an important safeguard of investors’ interests. Using a general buffer or delays in paying client money into the correct client money trust account can breach these legislative protections."
What exactly has changed in XTrade client money policy?
XTrade.au is the Australia arm of the global XTrade Retail Forex and online CFD broker. The global brokerage is known for its recent sponsorship deal with Cristiano Ronaldo, the star football player of Real Madrid and Portugal. Relating back to the case, the Australian financial regulator previously was concerned about the fact that the broker’s payment processes may not comply with the requirements. The requirement states that client money should be allocated to the clients' trust accounts within the same day it was received or on the next business day.
Another concern of ASIC was that the parent company of XTrade deposited a “buffer” into the client trust accounts, in order to cover potential shortfalls. Whereas Australian regulations prohibit the firm to deposit its funds into the clients’ accounts. The regulator has expressed the expectation that licensee will maintain appropriate reconciliation practices regarding XTrade client cash handling policy.
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