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ASIC’s CFD trading restrictions come into effect



The Australian Securities and Investments Commission (ASIC) has announced that its intervention order placing conditions on the distribution of CFDs to retail clients comes into effect today. The order limits the leverage brokers offer to a range from 30:1 to 2:1.

The order also reduces the CFD leverage which is available for retail clients. It targets sales practices that increase retail clients’ losses when trading CFDs such as incentives offered by brokers to become a client or trade.

The penalty for not complying with the new requirements could reach five years imprisonment for individuals and a penalty of up to $555 million for corporations.

ASIC

The Australian regulator decided to strengthen its protection for retail clients after it found that CFDs trading may result in significant loss for retail clients.

ASIC Commissioner Cathie Armour commented:

Cathie Armour, ASIC
Cathie Armour
Source: LinkedIn

We will closely monitor compliance with the product intervention order and won’t hesitate to take appropriate action to enforce the order.

Commissioner Armour added:

We are also paying careful attention to changes in CFD providers’ reported holdings of retail client money and any mis-classification of retail clients as wholesale clients, which would risk denying them important rights and protections. Protecting retail investors from harm, particularly at a time of heightened vulnerability, is a priority for ASIC.

The order will also allow retail customers to recover their losses suffered as a result of a contravention of a product intervention order.

The intervention order will be in effect for 18 months. After this period, it may be extended or made permanent.


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ASIC’s CFD trading restrictions come into effect

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