ASIC has imposed additional conditions on the Australian financial services (AFS) licence of AxiCorp Financial Services Pty Ltd (AxiCorp, AFS licence 318 232) to ensure that AxiCorp has adequate compliance arrangements in place for its over the counter (OTC) derivatives business.
Under the additional AFS licence conditions:
- AxiCorp must appoint an independent expert to conduct a review and assess whether AxiCorp has adequate procedures and internal controls in place to ensure compliance with its regulatory obligations;
- the independent expert is required to identify remedial actions from the review and AxiCorp must provide a plan to ASIC setting out the remedial actions it proposes to implement;
- AxiCorp must maintain a minimum of three equivalent full-time compliance staff until 31 December 2022; and
- AxiCorp must not appoint any Corporate Authorised Representatives until 31 December 2022.
AxiCorp is also required to provide ASIC with an attestation from a senior executive within AxiCorp. The senior executive must confirm they are satisfied that AxiCorp has undertaken all necessary remedial actions and that AxiCorp has in place adequate compliance measures to ensure that it and its representatives comply with financial services laws.
If the executive attestation is not provided by the time required, AxiCorp is required to take all necessary steps to cease on-boarding new customers and not charge customers commission or other fees for financial services provided by AxiCorp in Australia for as long as the attestation remains outstanding.
On 2 January 2020, ASIC suspended AxiCorp’s AFS licence for four months after finding that AxiCorp failed to comply with certain financial services laws, namely the requirements to:
- pay client money into an account with an Australian authorised deposit-taking institution;
- comply with client money reporting rules;
- lodge product disclosure statement in-use notices with ASIC;
- comply with the ASIC derivative transaction rules; and
- lodge financial statements with ASIC by the due date.
On the same day, AxiCorp applied to the Administrative Appeals Tribunal (the Tribunal) for a review and stay of ASIC’s suspension decision (20-019MR).
The Tribunal granted a stay of the suspension, meaning that AxiCorp could continue providing financial services under their AFS licence after 2 January 2020, pending final review of ASIC’s decision.
Following the imposition of the additional licence conditions, ASIC and AxiCorp filed proposed consent orders with the Tribunal, setting aside the decision to suspend AxiCorp’s AFS licence. On 9 March 2021 the Tribunal granted the orders and set aside the suspension decision.
On 28 June 2018, ASIC released REP 579 Improving practices in the retail OTC derivatives sector which found that the practices of licensees in the retail OTC sector (margin FX, CFDs and binary options) fell short of ASIC’s expectations. ASIC will continue to take action to improve issuers’ compliance.
In August 2019, ASIC released REP 626 Consumer harm from OTC binary options and CFDs detailing ASIC’s proposed actions to address consumer detriment suffered as a result of OTC binary options and CFD’s.