ASIC Sacks Online Foreign Exchange Broker for Misusing People’s IMA

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ASIC Sacks Online Foreign Exchange Broker for Misusing People’s IMA

ASIC Sacks Online Foreign Exchange Broker for Misusing People’s IMA

The Australian regulator banned Forex FS from offering Retail Managed Accounts, referring to an enforceable undertaking from the forex broker.

ForexMinute,com – The Australian Securities and Investments Commission (ASIC) has taken a definite step against the major online forex brokerage company Forex Financial Services Ltd. (Forex FS). In its recent press release, the Australian regulators have confirmed the role of Forex FS in an alleged misuse of people’s individually managed account (IMA).

The brokerage company was found guilty of offering managed discretionary accounts to retail clients, which can only be given if the first party is registered for a managed investment scheme. Forex FS’s Australian Financial Services (AFS) license prohibits them from offering such services to retail clients.

But quite opposed to the law, ASIC’s investigation found Forex FS to have opened accounts for 34 retail clients, by wrongfully classifying them as wholesale clients. The total amount of funds the brokerage company received was more than $2.6 million, as per ASIC’s press release. “We found that between March 2010 and October 2011, Forex FS offered an account known as an individually managed account which was a managed discretionary account (MDA),” it mentioned.

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Commissioner Greg Tanzer also elaborated the facts of this law and stated, “An MDA service allows a broker to enter and exit trades on behalf of a client without seeking the client’s approval. Consumers can face significant loss if the service is not provided appropriately.”

The 10-year ban thus came on the grounds of an enforceable undertaking, a formal pledge given by the company before the law, which permits the commission to take a civil or administrative action against the company if it is found to be involved in any sort of violations of the legislation.

The ASIC also revealed its concerns over the Forex FS’s recent misleading presentations in public that might have fostered a wrong idea in their potential clients’ minds. “Forex FS made representations as to target returns in excess of 30% per annum for certain products based on the past performance of those products, including the IMAs,” said the ASIC press release.

“Companies must ensure they do not mislead people by implying that past returns are likely to be repeated in the future’, Mr. Tanzer said.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com