Is XTrade’s clients’ money at danger? ASIC has made intervention to its operation.
After an intervention of ASIC the financial regulator in Australia, XTrade has been advised to change its policy to handle client money. According to the official document published by ASIC, XTrade may not have complied with the requirements of the corporation acts.
The company which has been intervened is “XTrade.au Pty Ltd”, the company name of XTrade in Australia, and the XTrade AU hasn’t been:
- Deposting clients’ money into segregated trust accounts on the daily basis, but the funds were only reconciled on a periodic basis
- Financially supported by its parent company by depositing a ‘buffer’ into the client trust account to cover any potential shortfall
Although this intervention is not expected to lead to any further warnings or license related issue, XTrade is to immediately made some amendments to its financial operational system.
You can fin the official announcement from ASIC website.
Please find the full official media release from ASIC below:
16-213MR XTrade to change client money practices following ASIC surveillance
As a result of ASIC’s intervention, licensed retail OTC derivatives issuer XTrade.au Pty Ltd (AFSL No. 343628) (XTrade), formerly O.C.M. Online Capital Markets Pty Ltd, will implement changes to the way it handles client money.
ASIC’s surveillance raised concerns that XTrade group’s payment processes may not comply with the requirements of the Corporations Act to pay client money into client trust accounts on the day it is received or on the next business day. Client money accounts were only reconciled on a periodic basis.
ASIC was also concerned that XTrade’s parent company was depositing a ‘buffer’ into the client trust account to cover any potential shortfall. The Corporations Act does not permit a licensee to deposit funds belonging to the licensee into client money accounts, by way of a ‘buffer’ or otherwise. ASIC expects a licensee to maintain appropriate and prudent reconciliation practices in respect of its client money accounts: see paragraph 42 of ASIC Regulatory Guide 212 Client money relating to dealing in OTC derivatives (RG 212).
ASIC Commissioner Cathie Armour said, ‘The protection of client money is an important safeguard of investors’ interests. Using a general buffer or delays in paying client money into the correct client money trust account can breach these legislative protections.’
The client money provisions protect the interests of clients of licensees. The provisions require licensees to separate client money from money belonging to the licensee, hold the money on trust and sets limits on how the money is used, withdrawn or otherwise dealt with.
ASIC’s work on the retail OTC derivatives sector continues.