An ASIC review of client money handling and reconciliation practices has shown non-compliance by a number of issuers of over-the-counter contracts for difference (CFDs) and margin FX derivatives.
ASIC is midway though a risk-based review, commenced in December last year of 40 issuers’ practices.
In the first half of its review, ASIC found that:
- eight issuers failed to pay client money into a properly designated trust account, when no exception applied, and
- six issuers failed to pay client money into a compliant account on the day it was received or within one business day.
ASIC has also followed up with issuers to ensure they have a clear understanding of ASIC’s expectations about good practice. This includes feedback on:
- performing daily client money reconciliations, ensuring there is an appropriate segregation of duties and that the reconciliation is signed off by senior management, and
- documenting policies for dealing with variances.
ASIC Commissioner, Greg Tanzer said, ‘The client money provisions are an important safeguard to protect the interests of retail investors. ASIC expects issuers to know and comply with their obligations under the law and to put in place effective measures and supervisory arrangements to ensure these obligations are met’.
Mr Tanzer said today’s announcement should serve as a warning to those issuers who aren’t complying with the law.
‘In the second half of our review and in view of today’s advice highlighting the non-compliance areas, we will consider taking strong action against any issuers found to be in breach of the client money provisions,’ Mr Tanzer added.