According to an official announcement released today by the Australian Securities and Investment Commission (ASIC) and following the issuance of two infringement notices for alleged misleading representation, the amount of $20,400 in penalties was paid by Invast Financial Services Pty Ltd (Invast), an Australian financial services (AFS) licensee based in Sydney.
ASIC’s concerns about the misleading representations related to statements that appeared on the Invast website in May 2014 and in an email to prospective clients in April 2014. More specifically, the website contained a link that invited investors to download a demonstration to undertake ‘risk-free trading’ of contracts for difference (CFDs) for foreign exchange.
Consequently, ASIC was concerned that a reasonable investor may be misled into believing that the platforms promoted in the demonstration involved risk-free trading, rather than understanding that the demonstration account was risk free.
Furthermore, and as stated in the announcement, ASIC was also concerned that a statement on the Invast website that ‘Forex CFDs allow you to buy one currency whilst simultaneously selling another’ was misleading because CFDs are derivatives and, by their nature, do not involve the actual acquisition or selling of the underlying asset.
In addition, ASIC was concerned that an email that was sent out to prospective clients which contained a statement claiming investors could access ‘low risk, high reward trading opportunities’ by viewing Invast’s video tutorial and ebook was inconsistent with disclaimers in the email. The disclaimers said, ‘trading in FX and derivatives can be risky and you may incur a loss that is far greater than the amount you invested.’
ASIC was concerned that, in general, both the email to prospective clients and statements on the website misled consumers about the inherent risks of trading foreign exchange and derivatives.
Deputy Chairman of ASIC Peter Kell pointed out that, ‘Trading in CFDs and other derivatives, by their nature, involve risks. It is important that consumers are aware of these risks and can make fully informed decisions when considering a particular investment strategy.’ He also highlighted that ‘AFS licensees should ensure the content of their promotional material does not contain any false or misleading statements that misstate or underplay these risks and create unrealistic expectations for consumers’.
In the announcement informing that the penalty was paid, ASIC acknowledges that Invast has since taken steps to correct its website and remove any possibly misleading references from it, while also clarifying that the payment of an infringement notice is not an admission of a contravention of the Australian Securities and Investment Commission Act 2001 consumer protection provisions, since ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.
Through this announcement it is believed that ASIC wishes to stress its determination to make its regulatory oversight of the retail forex industry in its jurisdiction more stringent, and follows up on its recent warnings to the investing public against unlicensed brokers.