According to the Australian Securities and Exchange Commission (ASIC), since March 2021, eight over-the-counter derivative issuers that have violated financial services laws have paid or promised to pay over AUD 17.4 million to over 2000 retail customers.
Seven price difference contract issuers
Starting from March 2021, seven issuers have paid or promised to pay AUD 4.3 million to 1500 retail customers due to the issuance of price difference contracts with excessive leverage restrictions.
Affected customers suffered losses in over 150000 price difference contracts. There are approximately 100 types of contract for difference instruments that exceed the maximum leverage limit.
These seven suppliers of price difference contracts are:
Capital Com Australia Pty Ltd
CMC Markets Asia Pacific Pty Ltd
Eightcap Pty Ltd
IG Australia (IG Markets Limited and IG Australia Pty Ltd)
Pepperstone Group Limited
Saxo Capital Markets (Australia) Limited
StoneX Financial Pty Ltd trading as City Index
These issuers have reported the situation of excessive leverage to ASIC on their own and proposed remedial measures, with each requiring compensation ranging from tens of thousands of dollars to millions of dollars. It is reported that the main reasons for the violations are insufficient change management and manual errors.
ASIC also found some shortcomings in these remedial plans. When estimating customer losses, three companies used specific behavioral assumptions, resulting in their calculated compensation amount being less than the compensation amount for non leveraged violations. Moreover, these three companies and another issuer did not compensate for the fees and interest incurred by the illegal issuance of price difference contracts. After review by ASIC, these four companies have agreed to compensate retail customers with an additional AUD 2.8 million.
In addition, between May and September this year, Oztures Trading Pty Ltd (Binance) mistakenly classified retail customers as high-value investment customers, seriously violating financial services laws. The company needs to compensate approximately AUD 13.1 million to 523 customers
Due to the mistake of Coin An, these customers did not receive the protection they would normally receive when trading retail over-the-counter derivatives. Coin An has compensated them for the net transaction losses and expenses incurred between July 7, 2022 and February 25, 2023.
