ASIC is proposing new rules that would introduce financial requirements for issuers of OTC derivates such as contracts for difference (CFDs) or margin foreign exchange to retail investors.
With the growth of the market, particularly to Mum and Dad investors, and the highly publicised collapse of Sonray Captial last year, ASIC believes it is time to make sure that such issuers have adequate financial backing to ensure the success of their business and compliance with financial services laws.
Proposals in the Consulation Paper include:
- Requirement for rolling 12 month cash flow projections
- Removing the current requirements to hold surplus liquid funds (SLF) and adjusted surplus liquid funds (ASLF) and replacing these with a requirement to hold net tangible assets (NTA) of at least the greater of $1million or 10% of average revenue
- Specifying the NTA liquidity requirements for issuers
- Introducing a reporting framework concerning the NTA held by issuers, and
- A staged implementation process.
What’s next?
ASIC is seeking feedback on its proposals. Comments should be sent by 4 July 2011 to:
Martin Joy
Senior Lawyer
Investment Banks
Australian Securities and Investments Commission
GPO Box 9827
Melbourne Vic 2011
Facsimile: (03) 9280 3444
Email: policy.submissions@asic.gov.au
A regulatory guide is expected to be released in October 2011.
For further information:
ASIC media release: 11-92MR
Link to the ASIC Consultation Paper 156 Retail OTC derivative issuers: financial requirements: here