ASIC Licensed Brokers Must Comply With New Regulations By 2021

June 20, 2019
ASIC Licensed Brokers Must Comply With New Regulations By 2021 June 20, 2019 Kevin Stokes

The Australian Securities and Investments Commission (ASIC) recently received product intervention powers from the Australian parliament and the ASIC plans to bring about significant changes that will impact how brokers conduct their business operations.

However, brokers have a lot of breathing space to work with. Many estimate that it will take two years before ASIC operations will be able to enforce their powers. This should give Australian brokers sufficient time to meet ensure that their business operations comply with the various new requirements that the regulatory body has decided to implement.

Latest Deadlines

The latest move by ASIC was rolled out via the Design and Distribution Obligations and Product Intervention Powers amendment. This requires ASIC-approved brokers to comply with the new design and distribution obligations that the regulatory body will lay down. The deadline for this is fixed for April 2021.

The deadline that is putting pressure on regulated brokers in Australia is the one set for end of June 2019. The regulator has requested brokers to turn over a large amount of data related to their clients so that the regulator may analyze them. The data requested focuses on their business model, the geographical composition of clients, and whether they are allowed to operate in certain regions.

All of these moves are aimed at preventing local brokers from signing up Chinese customers. The approach has succeeded to a certain extent as several Australian brokers have moved away from signing Chinese customers. It didn’t help them that the Chinese State Administration of Foreign Exchange is also putting pressure on the forex industry in China.

However, despite the move away, there is still a large part of the Australian broker market that is dependent on Chinese clients keeping their money moving into the country. However, with regulatory changes, Australia is becoming a less attractive location.

Going The Way of The European Union

There has been a lot of pressure on the Australian retail brokerage industry. Several senior executives are convinced that the industry will soon be facing the same challenges that the European Union have had to address in recent times. This means limited leverage options for clients and other punitive measure. They agree that this could result in a gloomy future for the industry.

ASIC’s crackdown on the industry is motivated mainly in its desires to minimize the risks to investors. With its new powers, if it determines a product class is too risky, it can ban the financial product from being sold to a particular class of customers.


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