ASIC Sues USGFX, Two Representatives for Doing FX Business in China

The Australian Securities and Investments Commission (ASIC) is suing three forex brokers for chasing business in a gray area of China’s online trading sector, even after it warned Aussie firms over illegal Chinese activities.

The corporate regulator alleges that Union Standard International Group Pty Ltd (USGFX) provided leveraged FX trading and other financial services to Chinese clients. ASIC launched the investigation into the Sydney-based firm and its two former representatives – BrightAU Capital Pty Ltd and Maxi EFX Global AU Pty Ltd. The firms are trading as TradeFred and EuropeFX, respectively.

FX trading in the world’s most populous nation has been restricted by a ban on currency margin trading, in which investors borrow money to trade. However, USGFX and its representatives appeared to have exploited Beijing’s regulatory loopholes, notably the fact their systems are based offshore.

Those curbs were the subject of ASIC’s concerns. Specifically, Aussie brokers were put on notice by the Australian regulator that it reviews any breaches of overseas laws. Further, the watchdog has been reviewing whether AFS licensees are making misleading or deceptive statements about the scope and application of their authorization.

The brokers in question offered forex margin trading in China though the practice is officially banned. This may have put their Chinese clients in trouble as they can trade currencies only through commercial banks and without leverage.

“ASIC alleges Union Standard’s conduct placed its China-based clients at risk of contravening Chinese law, and thereby exposed them to potential administrative and criminal penalties under Chinese law,” the watchdog explains.

USGFX troubles are not confined to Australia, and its activities in China have not gone unnoticed. Some angry Chinese customers stormed the company’s offices in Shanghai three years ago.

ASIC’s statement further alleges that EuropeFX and TradeFred provided personal advice to clients without being authorized to do so and used high-pressure sales tactics to encourage clients to deposit or trade more. Furthermore, both brands are accused of making misleading representations about risks involved or profits the clients can make.

The Australian arm of USGFX has collapsed into administration amid an investigation by the corporate watchdog into its trading platforms. The cancellation of USGFXs AFS licence follows on from the broker being ordered to enter into liquidation by the Federal Court of Australia in August.

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