Australian Brokers Gearing up to Fight
The Australian Financial Market will remember the week that just passed for a long time to come, especially Forex and CFD Brokers. Last week a massive collection-data effort was untaken by the Australian Securities and Investments Commission. This newly minted regulator made a press release statement on Thursday April 11th saying that there have been firms breaking laws overseas and the collection-data effort shows to all brokers committing illegal activities that it won’t be tolerated anymore by the Australian Government or ASIC.
Need an EU License
The Australian Securities and Investments Commission has since sent out a letter to all Australian Brokers, informing them to stop offering financial services to clients in the European Union. Brokers who want to provide services to EU Clients will now have to obtain a broker’s license in the EU.
The letter also requires that Australian brokers that have EU Clients currently using their services will now have to take steps to close client accounts if the broker cannot be licensed by May 31, 2019. Receiving a brokerage license in the EU is a difficult task and most likely won’t be able to be accomplished by most brokers in the next month and a half.
This harsh punishment towards the regulation of brokers resembles the strict stance Google took when it came to adverting last year. In May 2018, the tech giant required that brokers can only legally advertise their services in the jurisdiction they have a brokerage license. This put a massive halt on EU Operations and now with the additional laws for ASIC, it will be nearly impossible for most brokers to provide their financial services to European clients.
It appears that brokers aren’t just willing to give up so easy though, as the rumour on the street is that brokers are going to take drastic steps in court. Firms have been prompted to seek high-level legal advice and that the fight in court will be based on the fact that the new laws from ASIC aren’t legal and that they shouldn’t be tolerated.
Any brokerage firm wanting to enter the fight against the financial regulator will have a lengthy and costly court bills that might not result in a favourable finding for the regulators. However, these brokers are stating that the regulator is overstepping their powers and that they are stopping brokers from diversifying their portfolio.
However, as the Australian Securities and Investment Commission is a government-body and so is the courts, it’s unlikely that regardless of the money brokers spend, they won’t win on their final day in court.
Brokers will now be mandated to submit a written answer to ASIC before the end of this month. This letter will have to elaborate on the steps the broker plans to take to comply with the new laws put into effect. Each brokerage firm will also be required to send a list of all European clients before the end of May 7th 2019. However, the response that ASIC gets might not be favourable.