ASIC crackdown on unlicensed retail OTC derivative providers

ASIC has warned of a dramatic increase in the extent of unlicensed conduct by retail OTC derivative providers seeking to expand their market with new customers for their complex and risky products such as binary options.

The recent Report 482 Compliance review of the retail OTC derivatives sector (REP 482) highlighted an increase in activity among licensed and other participants,  especially binary option providers, operating through online platforms or websites that are offering financial services to retail investors in Australia without an appropriate licence or authorisation.

ASIC has raised its concerns with more than 40 unlicensed providers. The majority are binary option issuers but also contacted were some binary option review websites, binary option trading signal providers, binary option broker affiliate websites, margin FX providers and managed FX service providers.

Of those providers contacted, 21 have agreed to co-operate with ASIC and take remedial steps to ensure they are no longer providing financial services in Australia until they are appropriately licensed or authorised.  Remedial actions that have been implemented include:

  • removing references to Australia on their website;
  • ceasing marketing campaigns directed at Australian investors;
  • adding appropriate disclaimers to websites and mobile apps;
  • blocking sign-up access to Australian investors;
  • educating introducing brokers and affiliates to cease targeting Australian investors;
  • closing down existing Australian accounts; and
  • informing Australian investors that the entity is not appropriately licensed in Australia.

Some of these entities have indicated an interest in obtaining the appropriate licence to operate in Australia and have been provided with information to assist them with that process.

A further nine entities have not directly responded to ASIC regarding our concerns but appear to have made some changes to their websites, including removing references to Australia.

Entities that agreed to implement remedial actions appropriate to their circumstances include:

  • IQ Option Limited and IQ Option Europe Limited trading as IQ Option
  • Rodeler Limited trading as 24Option, Quick Option, 24FX and Grand Option
  • BDB Services (Belize) Ltd trading as Banc de Binary
  • Ouroboros Derivatives Trading Ltd trading as AnyOption
  • NXB Financial Services Ltd trading as Stockpair.com
  • Up & Down Marketing Limited trading as OneTwoTrade
  • AM Capital Ltd trading as Tradorax
  • Centralspot Trading (Cyprus) Ltd and CST Financial Services Ltd trading as Opteck
  • Nuntius Brokerage & Investment Services S.A. trading as Topoption.com
  • OptionRally Limited trading as OptionRally
  • Market Punter Limited trading as Market Punter
  • Terapad services LTD trading as FMTrader
  • Growell Capital Ltd trading as GrowBinary
  • CherryTrade at www.cherrytrade.com
  • Tradersasset.com
  • Binary Options Pty Ltd via www.binaryoptions.net.au, www.binaryoptionsptyltd.com.au, www.privatesignalsgroup.com and www.freesignal.com
  • Best10binarybrokers.com.au
  • 10bestbinarybrokers.com.au
  • Binaryoptionrobot.org
  • Diamond Managed FX
  • Blackwell Global Investments (Cyprus) Limited trading as Blackwell Trader

Entities that have not directly responded to our concerns but appear to have made some rectification actions include:

  • OTP Solutions LTD operating as No1Options
  • Brevspandnz Limited trading as AutoTradingBinary.com
  • Pacificsunrise UK Ltd trading as AAOption.com
  • TTN Marketing LTD trading as Trades Capital
  • Lerona Impex SA and Norske Inter LP trading as Finpari
  • Chemmi Holdings Limited  trading as Binary Tilt
  • Peter Knight Advisors
  • Banc de Options at www.bancdeoptions.com
  • Advanced Binary Technologies Ltd trading as Ayrex

ASIC has also released a number of recent public warnings in relation to the entities that have not responded to our concerns in any way.

ASIC Commissioner Cathie Armour said, ‘The dramatic increase in unlicensed conduct – particularly in entities offering binary options – is of real concern to ASIC.

‘We remind investors to be wary of advertising on websites or unsolicited calls or emails by people offering these types of products, and to verify that product providers are appropriately licensed or authorised before dealing with them’, she said.

Products such as binary options and margin FX are very complex and risky. Australian investors may be exposing themselves to increased risk when they deal with an entity that is not appropriately licensed or authorised in Australia because they will not be able to rely on many of the protections available under Australian regulation.

Australian investors should check ASIC’s professional registers to determine if an entity is licensed to provide financial services in this jurisdiction and should not deal with an entity that does not hold the appropriate authorisation.

Background

A binary option is a financial product, in particular a derivative, under the Corporations Act.   Any entity that deals in, or provides advice about, binary options in Australia must hold an Australian financial services (AFS) licence, or be authorised by an AFS licensee.

Australian clients who receive financial services from an entity that is not appropriately licensed may have the right to rescind their agreement with the entity and may be entitled to recover brokerage, commissions and other fees paid to that entity.

Recent advances in technology have made it more possible for providers of retail OTC derivative products to quickly set up low cost website businesses often from overseas locations which may be largely outside our jurisdictional remit. ASIC has responded to this emerging risk by seeking timely public outcomes to;

  • better inform investors of the risks and give them the tools (e.g. ASIC Professional Register and the Moneysmart website) and information to make  informed investment decisions and promote consumer trust and confidence;
  • encourage industry standards; and
  • improve industry compliance with regulatory obligations.

Where ASIC has identified concerns it has adopted a more facilitative approach to encourage appropriate and timely remediation of unlicensed conduct. Where entities have not cooperated with ASIC, it has issued public warnings. Where the conduct identified is more serious ASIC may take further regulatory action as it considers appropriate.

ASIC has released the following public warning notices under s12GLC(1) of the Corporations Act in relation to other retail OTC derivative providers who are not appropriately licensed:

  • ASIC warns investors about dealing with GOptions, Porterfinance, Boss Capital, MaxOptions, Bloombex Options, Citrades, RBoptions, and OptionsXO (PWN 2016-3);
  • ASIC warns investors about services advertised by Top Ten Binary Brokers also known as Top 10 Binary brokers.com (Top Ten Binary Brokers) (PWN 2016-2); and
  • ASIC warns investors about dealing with Market City International and Brokers500 (PWN 2016-1) .

[Source : http://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-218mr-asic-crackdown-on-unlicensed-retail-otc-derivative-providers/]