Government moves to protect client monies

27 March 2017: The CFD & FX Forum, whose member Firms represent the majority of trading volumes, has strongly welcomed today’s parliamentary passage of a Government bill that introduces significant protection and reform for client monies in the contracts for difference (CFD) and foreign exchange (FX) sectors.

Schedule 5 of the Treasury Laws Amendment (2016 Measures No. 1) Bill 2016 amends the Corporations Act to provide greater protection for retail client money and property held by financial services licensees in relation to over-the-counter derivative products such as CFD and FX contracts. These amendments align the Australian client money regime with community expectations regarding the level of protection that should be afforded to retail consumers of complex financial products and services.

Schedule 5 also allows for ASIC to have greater oversight of the sector.  ASIC may, by legislative instrument, make rules for purposes relating to derivative retail client money. These rules may impose requirements to report information and reconciliation requirements.

“This is a win for investors, for regulators and for the industry,” said CFD & FX Forum Director and Chairman Paul Casey of CMC Markets. “Previous client money rules were misaligned with standards in other parts of the world, and ultimately unsustainable by exposing investor funds to misuse, fraud or insolvency. That’s why the CFD & FX Forum has worked hard to promote segregation of client money as our key benchmark for members and influence change where we can.

“The current Government should be commended in achieving this necessary reform, which with the right checks and balances in place, are sure to enhance the integrity of our financial system. The CFD & FX Forum looks forward to working closely with industry and ASIC in this regard,” Paul Casey said.

Fellow Forum Director, IG Australia’s Tamas Szabo, predicted the new regulatory regime would significantly boost confidence and trading volumes in the sector.

“Forum member firms long ago voluntarily adopted the measures and protection now enshrined in legislation for all providers.  This legislation brings the Australian regime into line with global standards and removes the current regulatory arbitrage, which led to firms with questionable practices setting up in Australia,” Tamas Szabo added.