Australian Securities and Investments Commission (ASIC) pinged two trading platforms last week, fining one US-headquartered online sharebroker and setting up a court battle with a crypto exchange.
In a case dating back to 2021, ASIC slammed the Australian arm of US online securities trading service, Interactive Brokers, for negligence in not identifying a suspicious transaction and “reckless” behaviour in allowing the client in question to continue trading.
Following a Market Disciplinary Panel (MDP) hearing, Interactive Brokers paid a fine of A$832,500 without admitting guilt or liability.
“The MDP considered that these circumstances demonstrated that Interactive Brokers did not have sufficient staff with the necessary skills, knowledge or experience to properly assess the alerts or those staff were not adequately supervised to ensure they were doing their job,” the ASIC release says.
“… The MDP characterised this failure by Interactive Brokers as negligent as it should have realised that it did not maintain the necessary ‘organisational and technical resources’ to ensure that trading messages submitted by it did not interfere with the efficiency and integrity of the market.”
Interactive Brokers is one of the largest securities trading platforms in the world and while it doesn’t have a formal presence in NZ, traders here can and do use the platform. Last year NZ trading platform, Blackbull Markets, inked a deal with the US business to offer a white-labelled cut-down version of the Interactive Brokers service.
Meanwhile, the Australian regulator also filed a civil case against Bit Trade, which fronts for the US Kraken crypto exchange across the Tasman, for breach of design and distribution obligations (DDO) by offering margin-trading products without properly identifying suitable end-users.
The Australian DDO rules came into force in October 2021, requiring all providers offering financial products and services to retail clients to clearly identify appropriate end clients in formal target market determination (TMD) notices.
According to the ASIC release, Bit Trade enabled Australian clients to access the margin-trading facility on the Kraken platform with the potential to leverage crypto exposures by up to five-times.
Sarah Court, ASIC deputy chair, said in the statement: “These proceedings should send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers.
“ASIC’s action should be a reminder of the importance to comply with the design and distribution obligations so that financial products are distributed to consumers appropriately.”
The regulator said since the DDO regime began, at least 1,160 Australian clients had used the Bit Trade margin product “incurring a total loss of approximately $12.95 million”.
Neither Bit Trade nor Kraken are registered for business in NZ but investors here can easily use them given the global nature of such platforms.