What is ASIC and What Do They Do?
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The Australian Securities and Investments Commission (ASIC) is Australia’s financial regulatory body responsible for overseeing financial markets, investment firms, insurance companies, superannuation funds, and brokers. Its primary role is to ensure that these entities operate within the law, maintain ethical standards, and foster a stable financial system. ASIC operates independently of the Australian government and enforces laws that protect consumers, ensure market integrity, and promote transparency.
ASIC regulates a wide array of financial sectors, including trading platforms, investment services, insurance providers, credit companies, and superannuation funds. Its overarching goal is to promote trust and confidence in the Australian financial system, ensuring that individuals, investors, and businesses have the necessary protection while operating in the market.
ASIC plays a critical role in safeguarding traders and maintaining the integrity of financial markets in Australia. Through strict licensing standards, transparent regulations, and active enforcement, ASIC ensures that brokers and financial firms operate ethically and fairly.
By capping leverage and banning very high-risk products like binary options, ASIC is putting special protection mechanisms in place for non-professional traders. This way, ASIC helps retail traders decrease risk.
Traders in Australia are encouraged to use only ASIC-regulated brokers to benefit from the protections that the regulator provides. With its comprehensive oversight, consumer protection initiatives, and dispute resolution services, ASIC remains one of the world’s most respected financial regulators, dedicated to maintaining market stability and protecting retail investors from harm.
ASIC Regulated Brokers
How Does ASIC Protect Traders?
- Licensing and Regulation
ASIC requires all financial service providers, including trading platforms, forex brokers, and investment firms, to be licensed. This regulation is intended to ensure that only qualified and financially sound firms are allowed to operate. Licensed brokers must follow strict guidelines on managing risks, handling client funds, and complying with transparency standards. These firms are also required to report regularly to ASIC, allowing the regulator to monitor their activities closely.
Traders benefit from knowing that an ASIC-licensed broker operates with a certain level of accountability and credibility. For example, one of the key requirements for a licensed broker is to maintain segregated client accounts. This means traders’ funds must be kept separate from the broker’s operational funds, providing an extra layer of security in case the firm faces financial trouble. (When funds are not segregated, it is much more difficult for traders to get their money back in a bankruptcy hearing, since mixed money may go into the general pot used to pay all claimants.)
- Consumer Protection and Transparency ASIC’s consumer protection laws ensure that brokers and other financial service providers offer clear and honest information. These regulations prevent brokers from engaging in misleading advertising, offering false guarantees of returns, or hiding the risks involved in trading certain products, such as CFDs or forex. ASIC mandates that all financial firms provide clients with Product Disclosure Statements (PDS), which outline the risks and terms of the products they offer. This ensures that traders are fully informed before making any decisions. ASIC also enforces transparency rules regarding fees, commissions, and other trading costs, ensuring traders are not caught off guard by hidden fees or unfair terms.
- Leverage and Risk Control
One of the ways ASIC protects non-professional traders (retail traders) is by regulating leverage for them. High leverage is often offered by brokers as a way to attract traders, but it can lead to significant losses. To mitigate this risk, ASIC introduced leverage caps for retail traders. These limits, such as 30:1 for major currency pairs and 20:1 for minor pairs, reduce the potential for excessive losses. By capping leverage, ASIC ensures that retail traders, who may be less experienced or financially prepared for high-risk products, are kept a bit more shielded. The cap is not uncontroversial, since many retail traders feel they should be permitted to decide for them selves. There is also the risk that retail traders seek out unlicensed online brokers, or brokers licensed in more lenient contries, as such brokers can give them higher leverage. - Dispute Resolution Mechanisms
ASIC requires financial firms to offer fair and transparent dispute resolution processes. If a trader has an issue with their broker, such as withdrawal problems, platform manipulation, or incorrect charges, they can file a complaint. If the broker does not resolve the dispute satisfactorily, the trader can escalate the issue to the Australian Financial Complaints Authority (AFCA), an independent organization that handles disputes between consumers and financial firms. Bu ensuring that traders have access to impartial dispute resolution, ASIC is making it easier for individuals to recover funds or resolve complaints in a timely manner. Accessible dispute resolution is especially important for small-scale hobby traders, who many not feel they have the time or financial muscles required to take on a big trading firm in a conventional court case, especially if the disputed sum is small in relation to legal fees and similar costs. - Banning Very High-Risk Products
ASIC actively monitors exceedingly high-risk trading products and has the authority to ban or restrict the sale of these products to protect non-professional traders. For instance, in May 2021, ASIC implemented a permanent ban on binary options for retail traders in Australia. This decision came after extensive research showed that binary options were often associated with high losses and had been widely used in fraudulent schemes. By banning binary options, ASIC helped to protect non-professional traders from a product that is considered more of a gamble than a legitimate investment. ASIC has also restricted certain complex derivative products that pose significant risks to retail traders. - Market Surveillance and Enforcement
ASIC plays an active role in ensuring that the financial markets operate fairly and without manipulation. Through advanced market surveillance technology, ASIC monitors for insider trading, market manipulation, and unfair practices. If firms or individuals violate market laws, ASIC has the power to conduct investigations, impose fines, revoke licenses, or even prosecute offenders. For traders, this means ASIC is constantly working to maintain a fair playing field. Firms that engage in manipulative practices, such as price rigging or false order execution, face heavy penalties. Traders benefit from knowing that the regulator is actively enforcing laws that prevent market abuse.
ASIC in Action
ASIC has a history of taking strong enforcement actions to protect traders and maintain market integrity. The Commission is especially prone to enacting restrictions to protect non-professional traders (retail traders), and ASIC has for instance banned brokers from offering and selling binary options to non-professional traders in Australia. Offering CFDs is still permitted, but in 2021, ASIC introduced permanent leverage limits for CFDs to protect retail traders from excessive risk. This action followed a review that revealed high levels of retail investor losses due to leveraged CFD trading. Another example of how ASIC is acting to protect traders is their ongoing commitment to investigating and going after unlicensed brokers and brokers engaging in fraudulent activities. This includes freezing assets, canceling licenses, and taking legal action to ensure consumers are protected.
Examples of ASIC cases
September 2024 – Macquarie Bank fined 4.995 million AUD
In September 2024, Macquarie Bank Limited was fined a record-breaking 4.995 million AUD for failing to prevent suspicious orders being placed on the electric futures market. This is the largest fine ever imposed by the Markets Disciplinary Panel (MDP).
An ASIC investigation showed that from January to September 2022, Macquire breached market integrity rules on 50 occasions by allowing three of the bank´s clients to place suspicious orders on the electric futures market. Each order was placed within the last minute of market close, which caused it to have an effect on the daily settlement price in a way that was beneficial to the client´s interests in the ASX 24 market for energy derivatives.
Macquarie Bank is the largest market participant in the Australian energy derivatives market, and the record-breaking fine reflects the bank´s serious and prolonged failure to detect and prevent suspected price manipulation.
On multiple occasions, ASIC notified Macquarie Bank about suspicious orders, and the bank not only repeatedly failed to take timely action – it also continued to permit new suspicious orders of the same type.
The suspicious orders were placed during a period when energy supply issues related to the war in Ukraine were causing the global energy markets to experience extreme volatility.
September 2024 – ASIC cancels Prospero Markets AFS license
In September 2024, ASIC cancelled the Australian financial services (AFS) licence for Prospero Markets Pty Ltd; an over-the-counter (OTC) derivatives issuer. Prospero Markets had held an AFS license since 19 December 2012.
On 16 November 2023, ASIC launched an investigation into Prospero, because they suspected that the company had not followed the Corporations Act correctly since 1 March 2021. This investigation came on the heels of Operation Avarus-Nightwolf; an operation where the Australian Federal Police investigated Prospero Markets officers and managers for their possible involvment in money-laundering offences in October 2023 related to the Changjiang Currency Exchange money remitting chain.
The AFS license for Prospero Markets was suspended in December 2023, because Prospero had not lodged its audited financial accounts. Following an application by ASIC in April 2024, the Federal Court ordered the wounding up of Prospero Markets. The license was permanently cancelled effective from 25 September 2024.
In their decision, ASIC specified that Prospeor Markets must continue to be an Australian Financial Complaints Authority (AFCA) member until 25 March 2026. Prospero Markets must also continue to have arrangements in place for compensating retail clients until this date, and this includes holding professional indemnity insurance cover.