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Screenshot of a breaking news alert e-mail from Q2 2017
ASIC states the company now rectified its ‘cash and cash equivalents’ arrangements to comply with its financial resource requirements.
The Austrailian Securities and Investments Commission (ASIC) yesterday notified the investing public following ASIC’s concerns regarding licensed retail FX provider Ingot Brokers. ASIC found Ingot was in breach of the financial requirements of its Australian financial services licence (AFSL) as a result of inappropriately including funds held as collateral against derivative contracts to meet the ‘cash and cash equivalents’ aspect of its net tangible assets (NTA) requirement.
Ingot should be commended as they reportedly have fully cooperated with ASIC’s inquiries into the matter and rectified the breach in a timely manner. Ingot transferred adequate funds to an authorized deposit taking institution to cover its ‘cash and cash equivalents’ requirement in order to comply with its financial resource requirements under ASIC Class Order [CO 12/752] Financial requirements for retail OTC derivative issuers.
ASIC Commissioner Cathie Armour said, “The financial resource requirements for retail over-the counter derivative issuers, including those relating to ‘cash or cash equivalents’, are critical to ensuring that licensees are able to manage the risk of financial loss and that, if a licensee is wound up, there is a buffer to assist with an orderly and compliant winding up of their business.
Licensees should be fully aware of their financial resource requirements. We encourage them to take immediate steps to review their existing arrangements and ensure they are meeting their financial resource obligations. We also encourage them to obtain professional advice if they are unsure of their specific financial requirements.”
As a licensed retail OTC derivative issuer, Ingot must hold 50% of its NTA requirement in cash or cash equivalents and 50% in liquid assets. ASIC does not consider funds held as collateral against derivative contracts or otherwise used for hedging purposes to be cash and cash equivalents because such funds are subject to encumbrances and are at significant risk of change in market value.
Ingot Brokers (Australia) Pty Ltd ACN 159 895 431 is the holder of AFSL number 428015 and an issuer of margin foreign exchange (FX) and contracts-for-difference (CFDs). Under its licence Ingot is authorised to provide general advice and to deal, issue, apply for, acquire, vary, dispose or make a market in derivatives and FX contracts in Australia.
This work continues ASIC’s focus on AFSL compliance in the retail OTC derivative sector, including margin FX, CFDs and binary options.
To view the official release click here.