ASIC Enforcement on Product Intervention
The Australian Securities and Investments Commission is rumoured to be introducing new product intervention measures on retail traders in the next two years. This comes after it was revealed that the Australian Parliament approved for the ASIC to alter the regulation standards relating to product intervention. The new amendment requires all firms maintaining services in the country to change their distribution methods and obligations by April 5th, 2021.
There have also been immediate amendments implemented onto Australian brokers. All brokerages must hand over their business and client data before the end of June. This country-wide audit will help the commission determine if any new laws need to be enacted with the upcoming 2021 Product Intervention Measures.
The Focus on China
The Australian Securities & Investments Commission has been working with Chinese Government Officials to stop offshore brokers in China from entering into the Australian market. This conjunction commission has prevented hundreds of Chinese Brokers from providing unsafe trading services to Australian investors.
ASIC has also demanded that brokerage provides over their geographical data & compositions. This will allow the regulator to determine if any brokerages have been working with Chinese traders secretly. These companies are only able to conduct businesses with a sovereign, democratic nation. Already, there have been several firms that have shown strong resistance towards this demand.
The mounting pressure from the Australian Commission has seen these several brokerages lose valuations in profit. This indicates that the firms were actively trading with Chinese Investors. This isn’t surprising though, as Chinese clients fuel a large portion of the FX & Forex Market in Australia. However, with the upcoming regulatory framework, this will all change.
ASIC’s Rumoured Regulations
The product intervention measures being implemented in 2021 is the result of a recent spike in pressure from the media. There have been senior executives and industry insiders that have been caught speaking off the record, with one of the executives indicating that Australia Forex Market will become like the European Unions.
The statement made secretly paint the picture of significantly lower leverage limits, with executives and insiders imploring brokerages to slow their trading operations before April of 2021. There have even been rumours from industry insiders that the new regulation will go as far as to stop retail clients from maintaining or trading contracts-for-difference entirely. This aggressive regulation becomes Government officials, and Australians have scrutinized the commission for lack of control towards retail brokers.
Senior Executives speaking off the record also indicates that anybody in Australia that will want to become a broker, crypto accountant or trader will need to have a minimum of $2.5 Million in Net Assets and a gross income of $250,000.00. This will only permit you to have the license for two financial years.
Product Intervention Explained
Fines can only be implemented as the Australian Securities and Investments Commission assesses the brokerage in full & the detriment they’ve had to clients. These fines can be handed out because of poor design; inappropriate distribution, lack of features and no disclose clauses.
When April 1st, 2021 begins, this regulator will also be able to determine if products being released by brokerages are harmful to traders and investors. Additionally, all products provided will have to have a classification status symbol displayed to consumers. There is no other Forex Market in the world that requires this measure. This gives the regulator full control over the markets and industry, as they can shut down any product or brokerage when they deem fit. This has resulted in a backlash amongst the majority of brokers, traders and investors in Australia to ASIC.
The Australian Security and Exchanges Commission is being more severe with their regulator than the European Securities and Markets Authority. Unlike the ESMA, which can stop order for three months, the ASIC will be able to stop orders for upwards of eighteen months. The official reasoning for this is so that the regulator can assess the order for any detrimental effects.
In the last few months, representatives from ASIC have had to promote the product intervention measures on high-leverage forex products vocally. However, the backlash hasn’t stopped, and the commission has beefed up their lawyer in anticipation of multiple lawsuits from brokerages. Hopefully, the Australian Supreme Court will force these product intervention measures to be abolished.