$2533 a week is ball-dust, mate! Australian regulator slaps $30,600 fine on FX broker for dubious advertising

Notoriously observant Australian financial services regulatory authority ASIC has today announced that it has issued a $30,600 penalty to OCM Capital Markets for as a result of advertisements and emails which promoted the company’s FX platform.

Whilst those outside Australia may not be so familiar with this particular name, it is the Australian-market brand name of CySec regulated XForex.

During the last year, ASIC has made it clear to the investing public and to those in the FX industry that it has begun to take an extremely conservative view with regard to how leveraged margin FX is marketed and provided to retail customers.

Actions by the regulator have included several indications on its bi-annual enforcement reports that it is concentrating on ensuring that customers do not fall foul of FX scams, and that bona fide companies provide the correct risk warnings to their customers. ASIC has closed down companies, as well as revoked licenses, and has begun to show reluctance toward issuing new licenses to startup FX companies, preferring to concentrate on encouraging traditional investment and financial services in its jurisdiction.

According to ASIC, in this particular case, OCM made a number of claims in its advertisements and emails about the advantages of depositing into its retail FX offering, including “$2533 in Just 7 Days!” and “Learn how you can increase your monthly income”.

The regulator issued three fines, each to the value of $10,200, equaling $30,600 in total, the full amount of which has been paid by OCM Capital Markets forthwith.

ASIC believed that the advertisements and emails were misleading because:

They gave the impression that OCM’s service could be relied upon to provide substantial profits quickly and to consistently increase one’s monthly income, and also that they did not adequately convey that trading in margin foreign exchange derivatives and contracts for difference is high risk, provides volatile returns and does not guarantee consistent profits.

Thirdly, ASIC concldued that while they referred to risks and contained disclaimers, these messages were in fine print and were ineffective to correct the dominant message created by the headline claims.

ASIC Commissioner Greg Tanzer said “Margin foreign exchange and derivative trading is high risk and gives volatile returns. Consumers should not be misled by false claims about the level or consistency of returns achievable from such trading.”

Interestingly, ASIC considers the payment of an infringement notice not to be an admission of a contravention of the ASIC Act consumer protection provisions. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.