The Australian watchdog, the Australian Securities and Investments Commission, or ASIC, has brought lawsuits to bear against three respective forex brokers. These three brokers stand accused of chasing business within a gray area of the online trading sector of China. This comes after ASIC had warned all Australia-based firms against doing illegal activities of Chinese origin.
Illegally Margin-Trading Within China
The Aussie watchdog accuses Union Standard International Group Pty Ltd, or USGFX, of providing financial services such as leveraged FX trading to clients based in China. ASIC isn’t just investigating USGFX, but also two of its former representatives: Maxi EFX Global AU Pty Ltd and BrightAU Capital Pty Ltd, who work under EuropeFX and TradeFred, respectively.
Australia had issued out a ban on currency margin trading, where you borrow money to trade, which ultimately restricted FX trading within the most populous nation in the world. It seems, however, the Sydney-based firm and its two representatives didn’t rightly get the memo, as they exploited a regulatory loophole in Beijing and continued to do business. In particular, this loophole had to do with the firms’ systems being based offshore.
Putting Chinese Citizens At Risk
ASIC has been cracking down on any breaches in overseas laws, having notified Aussie brokers of just that. The Australian regulator is taking this even further, taking into review over the statements about the application and scope of AFS licenses to ensure it has no deceptive or misleading statements.
As for the suspects in question, these firms had offered margin trading in China, despite the fact that the practice itself has been officially banned. As such, the Chinese clients these firms catered to could’ve gone into trouble thanks to their legal mandate to trade currencies with no leverage, and only through commercial banks.
The Problems Keep Coming
ASIC explained that it accuses USGFX to have acted in such a way to put its clients within China at risk of breaking the country’s laws, which would expose them to both criminal and administrative penalties.
Indeed, USGFX has been having troubles across the world. Angry Chinese customers had even stormed its Shanghai offices three years ago, as the firm’s activities haven’t gone unnoticed there, either.
Another heavy accusation comes against TradeFred and EuropeFX, in particular, as ASIC claims that it gave clients personal advice without proper authorization. The watchdog went as far as claiming that these firms leveraged high-pressure sales tactics to convince clients to trade and deposit more. Further claims against the representatives include misleading statements about the profits for the clients and the associated risks against them.