ASIC bans Mark Jennings for unlicensed CFD trading with “guaranteed returns”

Rick Steves

The Australian Securities and Investments Commission has banned Queensland-based CFD trader Mark Jennings from providing financial services and carrying on a financial services business for 10 years.

According to ASIC, he advertised guaranteed investment returns and traded Contracts for Difference (CFDs) using client funds when he was not licensed.

Mark Jennings was the director of Suncoast Trading Pty Ltd, which is now in liquidation after suffering significant losses trading client monies.

“50%, 100% or 200% per year GUARANTEED RETURNS”

The CFD trader advertised under the name Equity Trade that he could make ‘50%, 100% or 200% per year GUARANTEED RETURNS*’, while also stating that ‘[o]ur investments are recession proof, we profit in both rising and falling markets’.

Suncoast Trading, Equity Trade, and Mr. Jennings did not hold the necessary Australian Financial Services license or authorization to provide financial services.

ASIC has decided to ban Mark Jennings after finding that he:

  • carried on a financial services business without holding an AFS license;
  • had some clients deposit their funds into his personal trading account and traded CFDs without consulting them;
  • made false or misleading statements as the returns were not guaranteed and there was no genuine basis to make the statement that the trades would be profitable in both rising and falling markets;
  • gave false or misleading information to ASIC about the number of Equity Trade’s clients and the extent of losses suffered;
  • is not adequately trained or competent to provide financial services; and
  • is likely to contravene a financial services law.

Mark Jennings is banned from providing any financial service, controlling an entity that carries on a financial services business, and performing any function involved in carrying on a financial services business.

Even if this CFD trader held an AFS license, he wouldn’t be allowed to make such statements, especially to retail consumers. Last year, ASIC implemented restrictions on the leverage and marketing of CFD products for retail clients.

The regulator imposed restrictions on CFDs issued to retail clients, including:

  • leverage ratio limits ranging from 30:1 to 2:1
  • standardization of margin-close out rules
  • negative balance protection
  • prohibitions on offering or giving of certain inducements

ASIC also beefed up enforcement action to address misconduct, surveillance projects and public warnings, and promoted retail client education campaigns and guidance for CFD issuers.

One year later, the Australian regulator decided to renew the order for five more years after noting that during the order’s first six months of operation:

a 91% reduction in aggregate net losses by retail client accounts (from $372 million to $33 million aggregate net loss per quarter on average)
51% fewer loss-making retail client accounts per quarter on average
an 87% decrease in margin close-outs affecting retail client accounts per quarter on average
an 88% reduction in negative balance occurrences for retail clients per quarter on average.

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