ASIC set sights on OTC derivatives industry

ASIC/OTC/compliance/

20 June 2016
| By Oksana Patron |
image
image
expand image

The Australian Securities and Investments Commission (ASIC) has identified a high degree of non-compliance in the retail over-the-counter (OTC) derivatives industry, measured against seven compliance risks categories.

The corporate regulator highlighted "serious and widespread compliance failure" in the OTC derivatives industry which is considered by ASIC as ‘often difficult to understand, even for experienced investors'.

Due to a material increase in the number of the Australian Financial services (AFS) licence applications from entities looking to operate retail OTC derivative financial services, ASIC assessed a large proportion of the AFS-licensed retail OTC derivatives industry and found that over 70 per cent of AFS licensees had demonstrated issues with three or more of the seven major compliance risks, including problems such as:

  • Disclosure in their product disclosure statements (PDS) or website;
  • Compliance with their financial reporting obligations and their net tangible assets (NTA) obligations;
  • Neglecting to provide any financial service under their AFS licence; and
  • Failure to notify ASIC in the event of a change of control.

Additionally, ASIC also noted a significant high number of smaller, foreign-owned or foreign-controlled AFS licensees demonstrating either a lack of awareness or understanding of their Australian regulatory obligations, or reluctance to invest resources in meeting compliance obligations of their Australian businesses.

According to ASIC's commissioner, Cathie Armour, the report also provided "a prudent warning to investors" as the investment products may not be appropriate for the "average investors" due to their complexity and the heightened risk profile of these products.

"We hope that the report will encourage them to be more aware of the risks of these types of products as well as improve their understanding of the standards of practice they should expect from retail OTC derivative providers," she said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 4 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 4 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 2 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND