Brokers Are Being Warned By ASIC For Offering High-Risk Products To Retail Investors

Securities lending and crypto assets are examples of these products.

The regulator is worried with “zero” or “low-cost” brokerage promises.

On Wednesday, the Australian Securities and Investments Commission issued a warning, advising brokers to be “careful about or rethink” supplying high-risk investment instruments or products to retail clients.

Furthermore, the Australian Securities and Investments Commission (ASIC) has classified high-risk goods and services, which include securities lending and crypto-assets. Furthermore, it addresses marketing promises of “zero” or “low-cost” brokerage.

The warning comes as some brokers widen their offers in the aftermath of the epidemic in order to grow their income base. Though high-risk goods and services are not fully forbidden, brokers should exercise caution when marketing them to ordinary investors because they may be “unfair, unsuitable, or result in unsatisfactory results.”

“Australian financial services (AFS) licensees may be liable for hefty civil penalties if they do not do all things required to guarantee the financial services covered by their license are delivered effectively, honestly, and fairly,” stated ASIC Commissioner Danielle Press.

High-Risk Products

Securities lending, for example, is a complicated financial product that is typically available to institutional investors. The legislation said that certain of these products' design elements may be difficult to comprehend and inappropriate for regular investors.

“Where we discover unfair or improper offers of securities financing arrangements to retail consumers, we will intervene or take action,” Press stated.

Marketing Strategies

Furthermore, the Australian regulator was quite precise regarding the brokerage industry's marketing tricks. To attract retail consumers, several trading platforms advertise “zero” or “low-cost” brokerage offers. However, the full cost is often hidden within the given spreads or elsewhere.

“We are concerned that promises of 'zero brokerage' may not be true to label if the service is ”bundled“ with other goods or services that effectively subsidize brokerage and enable individual investors to take on greater risk,” the Commissioner stated.

What exactly is ASIC？

The Australian Securities and Investments Commission (ASIC) is a non-partisan Australian government agency that serves as the country's business regulator. It was formed on July 1, 1998, in response to the Wallis Inquiry's recommendations. The purpose of ASIC is to enforce and regulate corporate and financial services laws in order to safeguard Australian consumers, investors, and creditors. The Australian Securities and Investments Commission Act, 2001 established ASIC's jurisdiction and scope.

If you wish to look into ASIC-regulated forex brokers, go to the WikiFX official website at www.wikifx.com.

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