Post: ASIC cancels AFS licence of retail OTC derivative issuer XTrade.AU Pty Limited

ASIC has cancelled the Australian financial services (AFS) licence of retail over the counter (OTC) derivatives issuer XTrade.AU Pty Ltd (XTrade).

XTrade offered clients opportunities to trade in contracts for difference (CFDs) and foreign exchange contracts (FX contracts).

ASIC cancelled XTrade’s AFS licence after its investigation found that several vulnerable clients were encouraged to trade in CFDs in circumstances where they could not afford to do so or had limited trading experience resulting in significant losses to some consumers.

ASIC’s investigation found that between June 2018 and September 2022, XTrade failed to comply with its general obligations as an AFS licensee and:

engaged in unconscionable conduct;
did not take reasonable steps to ensure that its representatives complied with financial services laws;
did not have adequate arrangements for the management of conflicts of interest;
failed to take reasonable steps to ensure its retail product distribution was consistent with its target market determination;
did not do all things necessary to ensure that financial services were provided efficiently, honestly and fairly.
ASIC also found that XTrade put its own interests above those of its clients and did not act in good faith, falling short of the standards expected of an AFS licensee.

Further, ASIC found that XTrade failed to prevent its representatives engaging in misconduct over many years and failed to ensure that they underwent adequate training.

XTrade applied to the Administrative Appeals Tribunal (AAT) on 29 April 2024 for a review and stay of ASIC’s decision to cancel the AFS licence.

Following an interlocutory hearing on 31 May 2024, the AAT refused XTrade’s stay application. This means that XTrade’s AFS licence remains cancelled until a final decision is made by the AAT on the substantive review application.

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