The Australian Securities and Investments Commission (ASIC) has cancelled the AFS license of Direct FX Trading.
ASIC said it has made the move due to continued compliance failures from the Australian-based forex broker. In April, the regulator suspended the AFS licence of Direct FX because ASIC found that Direct FX had contravened, and was likely to contravene, both financial and non-financial obligations as set out in s912A.
Following the cancellation of the license, the Supreme Court of New South Wales, a state in Australia, placed Direct FX into external administration and appointed a liquidator on October 11, 2018.
The regulator noted a number of failures including failure to comply with client money reporting rules, which require financial institutions to provide ASIC with daily and monthly reconciliations of client money, which Direct FX did not do.
It also continued to carry on a financial services business while suspended by continuing to allow clients to enter into trades. Direct FX also 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, according to ASIC.
Other reasons for the termination include not maintaining its membership to an external dispute resolution scheme, not fully understanding its obligations as an AFS licensee, resources not being sufficient to enable Direct FX to provide financial services efficiency, honestly and fairly, and failure to comply with an ASIC s912C(3) Direction to give ASIC an audit report about Direct FX’s compliance with various financial licence conditions.
ASIC Commissioner Cathie Armour said, ‘Direct FX was in breach of multiple conditions of its AFS licence, which are aimed at protecting investors from the higher operational and credit risks posed by the retail OTC derivative sector. Direct FX 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 ongoing and demonstrated disregard for meeting their obligations has resulted in ASIC acting to remove the company from the industry’.
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