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Screenshot of a breaking news alert e-mail from Q2 2017
Australia financial regulator ASIC has issued a consultation paper, asking for feedback on new proposed rules requiring brokers to reconcile and report all retail client money held on a daily, monthly, and yearly basis.
As we reported back in March, Australia’s parliament recently passed the Treasury Laws Amendment (Measures No 1) Bill 2016, known more commonly as the Retail Client Money law. The new law, which although already passed only goes into effect in April 2018, changes the rules as to what ASIC licensed retail brokers offering over-the-counter derivatives products (read: Forex Brokers) can and cannot do with client money.
Until now, Australia has been one of the few properly-regulated countries which allowed Retail Forex brokers to make use of client money for things such as working capital and even marketing budget. However the new legislation closes that loophole, with all client money to now be fully segregated and held in trust.
As part of the new legislation, ASIC was given the mandate to make new client money reporting rules, to ensure greater transparency and to help confirm and enforce that money was actually being segregated.
So what is ASIC proposing?
ASIC’s client money reporting rule proposals follow two main tiers:
1. Daily Reconciliation. Each AFS licensee must perform a daily and monthly reconciliation of the amount of reportable client money it has recorded in its records against the amount actually held in the client money account. The reconciliations must be done per-account, and in total. The licensee must notify ASIC if it fails to perform a reconciliation in accordance with the client money reporting rules, or if it identifies a discrepancy.
2. Monthly and Annual Reports to ASIC. Each AFS licensee must complete and give to ASIC within 10 business days of the end of each calendar month an accurate reconciliation of the amount of reportable client money held in a client money account for each client, and the corresponding amount recorded in the licensee’s records, as well as an aggregate reconciliation.
As far as timing goes, ASIC is asking for feedback on its proposals by August 8, i.e. in four weeks. ASIC plans to release its feedback including the finalized rules in October 2017, with the new rules to take effect on April 4, 2018, the same date on which the client money handling law comes into effect.
The full ASIC consultation paper can be sen here (pdf).