20 October, 2015: The Australian CFD & FX Forum welcomes today’s announcement of the Government’s intent to develop legislative amendments to improve protections for client monies held in relation to derivatives by the end of 2015.
Forum Co-Founder Tamas Szabo of IG Markets said, “This is good news for both investors and Australia’s international standing as a well-regulated financial centre. The CFD & FX Forum has consistently called for reform and better investor protection and we are pleased Government is finally addressing this.”
Fellow CFD & FX Forum Director Paul Casey, Head of Compliance at CMC Markets added, “The issue has been extensively examined by ASIC and Treasury in recent years. Legislative reform to benefit and better protect investors is straightforward and should be introduced as soon as possible.”
CFD & FX Forum Members (CMC Markets, GAIN, IG Markets and OANDA, who together handle about two-thirds of the volume of CFD’s traded in Australia) have led the way for better consumer protection by already segregating funds and instituting other voluntary actions to improve investor protection and service through their ACCC authorised Best Practice Standards.
ASIC have also publicly called for reform with ASIC Chairman Greg Medcraft telling the Parliamentary Joint Committee on Corporations and Financial Services in August this year that ASIC “have raised the matter with Treasury that the law needs to be amended so client monies can’t be co-mingled”.
The CFD & FX Forum contends that it has been clear for many years that the Corporations Act 2001 (Section 981D) is deficient in allowing derivatives providers, including OTC CFD’s and FX, to co-mingle client segregated monies with its own and use it for other purposes. The practical effect of this has been to both unnecessarily imperil investor funds as providers can use them for other purposes such as collateral or hedging; and to detract from Australia’s standing and reputation as a global leader in financial services regulation and investor protection regimes.
There have been numerous examples where this legislative loophole has resulted in retail investors suffering loss, from MF Global through to the current situation at collapsed stockbroker BBY.
*From “Improving Australia’s financial system. Government response to the Financial System Enquiry.”
Page 5 – By end-2015: Develop legislation to facilitate participation of Australian entities in international derivative markets and better protect client monies.
Page 26 – Additional Government Action Enhance retail consumer protections for client monies.
The Government will develop legislative amendments to improve protections for client monies held in relation to derivatives.
These improvements are needed to ensure that investors’ monies are adequately protected when held by intermediaries.
About the Australian CFD & FX Forum
The CFD & FX Forum, an industry body established by Australia’s leading CFD providers is committed to enhancing the efficient operation, transparency and overall investor understanding and confidence in CFDs and the industry. The CFD & FX Forum grew out of conversations with ASIC, who were keen for the industry to self-regulate and to continually raise industry standards and offer greater investor protection. Cfdfxforum.com.au