ASIC comes out strongly in favor of Australia new Forex client money protection law which reforms client money regime and strengthens protection of the client.
28 March, AtoZForex – Australia financial regulator ASIC has amended the rules that govern the Forex brokers. The passage yesterday by Australia’s parliament of the Treasury Laws Amendment (Measures No 1) Bill 2016. The new law is also known as the Retail Client Money law.
Australia new Forex client money protection law
The new law closed the legal loophole where the brokers holding client cash were allowed to use that cash for their own purposes. Also, virtually all other properly regulated jurisdictions where Forex brokers operate need brokers to segregate all client funds. The amended law began something of a wrangle between the foreign and domestic Forex brokers serving the country. Moreover, the leading foreign-based brokers had formed the Australian CFD and FX Forum. Thus, it strongly backed the projected legislation as bringing Australia rules into parallel with international standards.
However, some Australia-based Forex brokers came out against the legislation, stating that it provided no real protection for consumers. Although the real reason behind their protest was the fear that they’d now need more capital to compete with the larger brokers.
Treasury Laws Amendment Bill
- The Bill removes an exclusion in the client money regime that allows Australian financial services to withdraw client money provided in relation to retail OTC derivatives from client money trust accounts.
- This rectification would require licensees to hold retail derivative client money on trust. Moreover, the obligation to hold client money on trust already applies to the vast majority of financial products and financial services under Australia’s client money regime.
- The Bill also give ASIC a power to compose client money reporting and reconciliation rules.
- The Bill gives the industry a 12-month transition period to implement the reforms and adapt to the latest regime.
According to Forum Director and Chairman Paul Casey of CMC Markets:
''This is a win for investors, for regulators and for the industry. Moreover, previous client money rules were misaligned with standards in other parts of the world, and ultimately unsustainable by exposing investor funds to misuse, fraud or insolvency. That’s why the CFD & FX Forum has worked hard to promote segregation of client money as our key benchmark for members and influence change where we can.''
''The current Government should commended in achieving this necessary reform. Adding the right checks and balances in place, are sure to enhance the integrity of our financial system. Hence, the CFD & FX Forum looks forward to working closely with industry and ASIC in this regard.''
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