AFCA pauses complaints against FX brokers as claims hit $390 million
The Australian Financial Complaints Authority (AFCA) today said it had to pause receiving claims against financial firms impacted by insolvency.
As of June 2022, the AFCA had 2,447 open complaints involving 44 insolvent firm and estimated total consumer claims at more than $376 million. In addition, there were 306 unpaid determinations associated with 28 insolvent firms, involving compensations totaling $14.7 million.
Two of these firms were two FX brokers, the authority said without revealing the names of foreign exchange platforms in question. Nevertheless, it is almost certain that now-bankrupt forex broker USGFX is one of the FX firms referred to in the AFCA’s circular.
Earlier in March, BRI Ferrier, the liquidators of Union Standard International Group, known as USG or USGFX, said creditor claims have hit $357 million, and this amount may increase further.
The special administrators of USGFX’s ASIC-regulated brand also disclosed that the company was in terrible financial difficulty and that it had a heavy shortfall in client money of more than $348 million.
Liquidators to the rogue brokerage house voiced concerns that there is obviously “a substantial shortfall” for creditors and “real questions to be answered” as to where client funds have gone. Whilst a formal adjudication of the claims has not been conducted, a “substantial volume” of claims were already submitted by investors with the Australian Financial Complaints Authority (AFCA), they added.
The AFCA has permanently expelled USGFX from its membership after it was given numerous opportunities to rectify its shortfalls. Further, the move to pause complaints against the insolvent financial firm came as the authority is awaiting details of the scope and timing of a compensation scheme of last resort (CSLR).
Clients of USGFX who submitted their claims before November 12 were still entitled to benefit from the complaints authority’s coverage. Nevertheless, from that date onwards, AFCA cannot accept any more complaints against Union Standard International Group Pty Ltd.