ASIC continues FX clampdown, revokes Rainbow Legend Group’s AFS license


The Australian Securities and Investments Commission (ASIC) has engaged in a highly stringent clampdown on the practices of retail FX companies under its jurisdiction recently, a matter which the regulatory authority has made very clear in its enforcement reports, backed up by its actions.

Today, ASIC has announced that following an investigation, ASIC has cancelled the Australian financial services (AFS) licence of FX provider Rainbow Legend Group Pty Ltd (Rainbow Legend) for failing to comply with its obligations, including making false and misleading statements.

The move is part of ASIC’s ongoing crackdown on the margin FX industry and work around retail investment in foreign exchange which has resulted in a number of outcomes recently. There are several more investigations on foot.

ASIC’s investigation found the company falsely promoted on a number of websites an insurance compensation scheme for clients of up to $2.5 million. The scheme does not exist in Australia, and would not apply to clients based in Australia or to services covered under Rainbow Legend’s licence.

The use of ASIC’s logo on the websites and could have led clients to wrongly believe the company was in some way endorsed or approved by ASIC.

The company had also not complied with a number of its reporting obligations, including failing to lodge financial statements for the years ended 30 June 2013 and 30 June 2014, and an auditor’s report for two financial years.

ASIC Commissioner Greg Tanzer said, ‘In a global market it is necessary to recognise that an AFS licence only covers financial services offered in Australia.

‘It is also vital an entity holding a AFS licence complies with their reporting requirements to ensure users of financial reports, such as creditors and investors, have the proper information to make informed decisions.’

In the latter part of last year, LeapRate reported that ASIC had become reluctant to process new AFS licenses for retail FX firms, with extended delays experienced by applications, however AFS licenses for other industry sectors were processed as normal.

Furthermore, the regulator has indicated in several public notices and its enforcement reports that it intends to focus on applying greater restrictions on FX firms.

In this particular case, Rainbow Legend promotes itself as a global Forex and CFD brokerage company specialising in derivative trading. It operates the following websites:

www.//rlg88.com
www.rainbowlegendgroup.com
www.rlg88.org
www.rainbowlegendgroup.com.au

The cancellation of its licence took effect on 30 April 2015.

Recent ASIC actions relating to FX companies

Product distribution and financial market innovation and complexity, which includes the retail margin foreign exchange market, has been identified as a focus area for ASIC. Recent outcomes include:

For the official announcement relating to Rainbow Legend Group from ASIC, click here.

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ASIC continues FX clampdown, revokes Rainbow Legend Group's AFS license

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