AFS licensees may be breaking overseas laws

ASIC has warned Australian financial services licensees that offer over-the-counter derivatives to retail investors located overseas could be breaking laws abroad, with Chinese authorities having alerted the watchdog that some online platforms have engaged in illegal activity.

Many jurisdictions (such as Europe, Japan, North America and China) had restricted or prohibited the provision to retail investors of certain OTC derivatives. These included binary options, margin foreign exchange and other contracts for difference (CFDs) to mitigate harm to retail investors.

AFS licensees are on notice that in addition to overseas consequences of potential breaches of overseas law. ASIC will also consider whether AFS licensee are making misleading or deceptive statements about the scope or application or effect of an AFS licence.

According to our source, Rakuten Securities Australia has informed its oversea (non-Australian) clients to close their accounts by the 17th of May.

In particular, Chinese authorities have informed ASIC that: ‘some online platforms are illegally engaged in forex margin trading activities.’ AFS licensees with China-based clients may be conducting unlicensed or illegal activities in China if they are providing margin foreign exchange products to retail clients in China.

Temporary product intervention measures have recently been extended in Europe by the European Securities and Markets Authority (ESMA). Authorities in the United Kingdom and Germany have announced permanent measures.

ASIC is concerned that some OTC derivative issuers that hold AFS licenses (or their agents) may be marketing or soliciting clients located in China, Europe and other jurisdictions to open accounts with Australian-based AFS licensees on the basis doing so will avoid the overseas intervention measures.

Premier League Football Clubs Signed Advertising Deal With eToro

Global investment platform eToro has secured partnerships with seven different Premier League soccer clubs. These deals are especially unique because they were paid using the world’s leading cryptocurrency, bitcoin. The deal could be worth somewhere between £4 and £5 million.

The seven Premier League clubs who have agreed to set up a digital wallet with eToro include Brighton & Hove Albion F.C., Cardiff City F.C., Crystal Palace F.C., Leicester City F.C., Newcastle United F.C., Southampton F.C., and Tottenham Hotspur F.C.

eToro’s UK MD Iqbal V. Gandham has commented on the deal: “As a global multi-asset platform where you can purchase the world’s biggest cryptoassets alongside more traditional investments, we are excited to be partnering with so many Premier League clubs and make history by being the first company ever to pay for a Premier League partnership in bitcoin.”

These partnerships mark the first step in bringing the opportunity offered by bitcoin and cryptoassets to football. eToro believes that crypto, and the technology, namely blockchain that underpins it, can improve football and the world of sports. In the future, this could include addressing issues of ticket touting, problems with transparency, and providing a guarantee of authenticity for merchandise.

eToro is regulated in Europe by the Cyprus Securities and Exchange Commission and regulated in the UK by the Financial Conduct Authority. eToro empowers people to invest on their own terms. The platform enables people to invest in the assets they want, from cryptoassets to stocks and commodities. You can read our full eToro review here.

UK and Australia enter post-Brexit agreement

FCA Regulator

The UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC) today announced they have agreed two Memoranda of Understanding to ensure there is continuity once the UK leaves the European Union. The MoUs cover trade repositories and alternative investment funds (AIFs).

These agreements will provide reassurance by ensuring arrangements are in place for cross-border cooperation between the FCA and ASIC. The FCA and ASIC also support the continuity of existing equivalence decisions to provide certainty to businesses post-Brexit.

Commenting on the news, the Chief Executive of the UK FCA, Andrew Bailey, said: “The FCA and ASIC have always had a strong relationship, which will continue after Brexit. The MoUs we have agreed today will ensure the FCA and ASIC have an uninterrupted exchange of information and can supervise the cross-border activity of firms. They provide a strong signal to the markets that the UK will continue to play an important role after Brexit. The MoUs will also provide much-needed assurance to our regulated stakeholders.”

These MoUs will enter into force on the date EU legislation ceases to have direct effect in the UK. This will occur when the UK leaves the EU, or at the end of the transition period if a Withdrawal Agreement is in place.

ASIC remains committed to take steps to provide, where appropriate, for continuing recognition post-Brexit of the equivalence of the UK’s regulatory and supervisory regime in relation to UK-based foreign financial services providers and market operators that operate in Australia under licences and exemptions or are otherwise recognised for the purposes of the Australian regulatory regime.

SFC reprimands and fines BOCI Securities HKD10 million

The Securities and Futures Commission (SFC) has reprimanded and fined BOCI Securities Limited (BSL) HK$10 million over BSL’s internal system and control failures in its investment product selling practices.

BOCI Securities Limited is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 5 (advising on futures contracts) regulated activities.

The disciplinary action followed an investigation which found that BSL had failed to comply with various regulatory requirements concerning client profiling, product due diligence and suitability assessment in its sale and distribution of investment products, including bonds listed under Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The company specifically failed to do the following:

– properly assess and determine its clients’ risk tolerance level and investment strategy in certain cases;

– ensure the investment recommendations and/or solicitations made to its clients were reasonably suitable in all the circumstances;

– ensure the clients had sufficient net worth to be able to assume the risks and bear the potential losses of trading in derivative products and/or leveraged transactions;

– conduct proper and adequate product due diligence on certain investment products.

(SFC) of Hong Kong is the independent statutory body charged with regulating the securities and futures markets in Hong Kong. The SFC is responsible for fostering an orderly securities and futures markets, to protect investors and to help promote Hong Kong as an international financial center and a key financial market in China.

CySEC reforms Investor Compensation Fund to enhance investor protection

Regulator CySEC

The Cyprus Securities and Exchange Commission (CySEC) is changing its approach to the compensation of investors. On 13th of March, the Cyprus financial watchdog introduced the final set of reforms to the legal framework governing the operation of the Investor Compensation Fund (ICF). The updated rules reflect the more stringent approach of the Cypriot regulator, as it tries to find solutions in response to the loss of customer funds observed in recent years.

The obligation to participate in the ICF applies to all investment services and to ancillary custody services irrespective of whether clients’ funds and financial instruments are held.

Changes made by the regulator will take effect immediately, with all CIFs required to fulfill the following mandatory provisions. To cover the administrative and operational expenses of the ICF, the new directive introduces annual fees of 700 euros for firms owning clients’ assets and 100 euros per year for members who do not have acceptable means.

It is reported that CySEC will remove any provisions in relation to limiting or refunding the contributions of the members that will be paid to the ICF pursuant to the New ICF Directive. Also, the regulator will not limit potential extraordinary contributions by an ICF member in the event of an adverse scenario which requires the ICF to fund compensation due to investors, should the necessary requirements be met.

CySEC changed the maximum compensation for valid claims from the current 100% with a maximum of 20,000 euros so that it constitutes either 90% of the total covered claims or 20,000 euros, whichever is lower.

CySEC chairman Demetra Kalogeru has commented on the new rules: “The upgraded regulatory framework governing the Investor Compensation Fund provides for a balanced, proportionate and risk-based approach to determining the level of contributions required by member firms. The robustness of the ICF is fundamental to maintaining investor confidence, and ultimately investor protection. Our thorough consultation and resulting changes will help ensure it is a well-funded and resilient mechanism to support the compensation of eligible investors in the event of last-resort market failure.”

FCA warns public of investment scams for over £197 million losses

FCA Regulator

The Financial Conduct Authority (FCA) is warning investors to be vigilant to the threat posed by investment scammers, as data from Action Fraud reveals over £197 million of reported losses in 2018. Victims were scammed out of over £29,000 on average last year, as fraudsters employed increasingly sophisticated tactics to persuade victims to invest.

Most commonly reported scams involved investments in shares and bonds, forex and cryptocurrencies by firms that are not authorized by the FCA. Together they accounted for 85%2 of all suspected investment scams reported in 2018.

The profile of investment scams is changing as more and more people are being targeted online, moving away from the traditional cold call. Fraudsters are now contacting people through emails, professional looking websites and social media channels, such as Facebook and Instagram. Though the contact methods used by fraudsters may vary, their tactics remain the same.

The FCA is urging people to be vigilant when making investment decisions, and to look out for these six warning signs: cold-calling, time pressure, fake reviews, false authorization (regulation).

To reduce the chance of falling victim to investment fraud, the FCA advises consumers to, at the very least: Reject unsolicited investment offers whether made online, on social media or over the phone. Before investing, check the FCA Register to see if the firm or individual you are dealing with is authorized and check the FCA Warning List of firms to avoid. Get impartial advice before investing.

You can also read about the perks of trading with FCA brokers here

South Korean Regulator Fines Four Global Banks for Rigging FX

The Fair Trade Commission (FTC) has fined four global banks operating in Korea for illegally sharing information and colluding in price bids to win foreign exchange derivatives contracts from five Korean companies. Foreign exchange derivatives refer to financial products designed to avoid the risks of the exchange rate and interest rate fluctuations in foreign exchange transactions.
The Korea Fair Trade Commission (KFTC) is South Korea’s regulatory authority for economic competition. It is a ministerial-level central administrative organization under the authority of the Prime Minister and also functions as a quasi-judicial body. The KFTC formulates and administers competition policies, and deliberates, decides, and handles antitrust cases.


According to the FTC, JPMorgan Chase has to pay the biggest fine of 251 million won ($223,000), followed by HSBC with a 225 million won fine. Deutsche Bank faces a penalty of 212 million won, and Standard Chartered (SC) Bank Korea gets 5 million won in fines. In total, South Korea’s Fair Trade Commission has fined JP Morgan, HSBC, Deutsche Bank and StanChart a combined $613,000 for rigging forex derivative prices.
The South Korean agencies have been investigating some foreign investment banks. The Financial Supervisory Service (FSS) has also been probing into a number of cases involving investment banks’ price rigging of forex derivatives contracts separately.
According to the FTC, the investigation was about a worldwide scandal that helped global regulators to look into the implications of several investment banks such as JP Morgan Chase, HSBC and Citibank. From March 2010 to February 2012, JP Morgan Chase, HSBC, Deutsche Bank, and SC Bank conspired seven times to sell currency contracts to five corporate clients. The banks were offering the same price to avoid competition when the companies were looking to assign the banks to manage their contracts. Also, the four had worked together in order for one of them to win contracts should their clients decide to choose only one bank for derivatives trading management. This would enable them to take turns in winning the bids.
The regulator states that putting fines on the banks will bring back the market order and make companies deal through the fair competition.

Japanese Crypto Exchange Zaif has been hacked, losing around $60 million

Japan-based cryptocurrency exchange Zaif has been hacked, losing a 6.7 billion yen (about $60 million worth of cryptocurrency), including 5,966 bitcoins.
Zaif exchange is one of the major Japanese cryptocurrency exchanges. It is owned by Osaka-based Tech Bureau and licensed by the Japanese regulator Financial Services Agency (FSA).


Tech Bureau reported that after the investigation of the case, it was discovered that hackers have accessed the exchange’s hot wallets without any authorization and had stolen around $60 million in bitcoin, bitcoin cash, and MonaCoin (cryptocurrencies worth 4.5 billion yen and 2.2 billion yen from the company funds).
Zaif has stated that their own reserve is currently around 2.2 billion yen (or $20 million). They have made an agreement with a Japan-listed firm Fisco to receive a $44.5 million financial support in exchange for a major share of ownership, so the hacked company will be able to compensate users who lost assets in the hacking.
Japan’s Financial Services Agency has asked Tech Bureau to submit a report on the incident and plans to perform an on-site inspection of the company after receiving the document. Tech Bureau didn’t give further details of how the hack happened, citing a criminal investigation that has been launched into the breach.

CySEC Warns CIF licensed FX brokers about Offering Their Services in Russia

The Cyprus Securities and Exchange Commission (CySEC) has issued a statement warning the regulated forex Cyprus Investment Firms (the ‘CIFs’) about offering their services to the clients from Russia unless they have a license in that country.

The Cyprus Securities and Exchange Commission, better known as CySEC, is the financial regulatory agency of Cyprus. It supervises and controls the operation of the Cyprus Stock Exchange, grants operation licenses to investment firms, including investment consultants, brokerage firms, and brokers, imposes administrative sanctions and disciplinary penalties.

In 2016 the Bank of Russia introduced licensing for Retail FX brokers and only has given around ten Russian FX license. The licenses were mainly given to the Russia-based brokers and other forex financial institutions. Also as the EU regulatory framework states, the firms can only provide their services in jurisdictions in which they are authorized or regulated. So the companies regulated by CySec may not be able to offer their services in Russian unless they are also authorized by the Bank of Russia. However, a lot of brokers which are based in other form Russia countries have continued to offer the services to Russian customers from abroad.

CySEC advises CIFs to consult with their legal consultants regarding the necessary measures required to ensure compliance with the Bank of Russia new regulatory requirements and reminds about the duty of CIFs to fully comply with the provisions laid down in the released statement.

FxPro Announces Partnership Agreement with McLaren F1 Team

fxpro_review FxPro, a London-based foreign exchange brokerage, has announced about a multi-year partnership agreement with Mclaren F1 Team. Terms of the sponsorship deal were not disclosed, but it was confirmed that FxPro prominent branding will now appear on McLaren cars during all F1 races. The FxPro logo will appear on the MCL33 car from this weekend’s Monaco Grand Prix (24-27 May), highlighting the company as the number one online broker in the world. This partnership means a lot for the FxPro and requires the commitment and high quality performance from both parties. The Chief Executive Officer of the McLaren Racing, Zak Brown in his comments about the deal said that the company is pleased to start the partnership with FxPro, as the world famous broker has proven its ability to perform at the highest level and that both companies always aim to be the best in  what they’re doing. Also the Chief Marketing Officer of the FxPro, Ilya Holey, said that with the numerous sports sponsorships, it is a part of company’s outreach program and the way they do business and McLaren is a perfect partner who also aims for excellence and success. FxPro has a significant sports sponsorship history as a sponsor for AFC Champions League (2011-2012), Formula 1 (2009-2010), Aston Villa F.C. (2011-2012), WRC Rally (2010-2011) and others.