Australia’s financial sector regulator ASIC has accepted an enforceable undertaking (EU) from Halifax Investment Services Ltd (Halifax) following the regulator’s surveillance of the company over a period of time which found deficiencies in Halifax’s Risk Management and compliance procedures.
This particular contretemps with the authorities occurred on home soil; however it is not the company’s first experience this year of falling foul of the powers that be. In February, the CFTC in the United States filed a successful lawsuit against Halifax for soliciting US residents as clients, which is illegal under the CFTC’s regulations.
The United States witnessed a large scale clear out of overseas firms looking to solicit for business in the US, and sued 35 firms in 2011, and Halifax came under the spotlight as the company accepted funds from US clients whilst its application for registration with the CFTC as an IB to introduce US customers to a retail foreign Exchange dealer regulated with the commission was still in progress was at that point still pending.
With regard to this particular EU which has been accepted by ASIC, Halifax must appoint an independent consultant to review its business and develop a plan to rectify the deficiencies. The independent expert will report regularly to ASIC over the next year on Halifax’s implementation of the plan.
Over six months last year ASIC’s review of Halifax’s operations found license compliance issues with its financial services practices, in particular:
• supervision and monitoring of representatives
• having technological resources to supervise and monitor representatives
• oversight of the training and professional standards of representatives
• breach assessment and reporting processes, complaints assessment and handling
• processes for the authorisation and publication of marketing materials, and
• procedures and practices in assessing counterparty risks.
ASIC Deputy Chairman Belinda Gibson said today’s outcome should send a warning to securities dealers about the importance of having adequate compliance and governance standards.
“The EU requires Halifax to put in place a plan to rectify the deficiencies under the eyes of ASIC and an external independent expert. It requires Halifax to rethink significantly the way it monitors its representatives and to create a culture where compliance is central to the services it provides,” Ms Gibson said.
If the review identifies a client has been adversely impacted due to Halifax’s conduct, Halifax will be required to consider the circumstances and to rectify the adverse effect the client where appropriate.
ASIC acknowledges Halifax’s cooperation in the matter.
