The Australian Securities and Investment Commission (ASIC) today (Thursday) temporarily banned two former directors of XTrade, a forex and contracts for differences (CFDs) broker that lost its operational licences in the country, for their failure to manage conflict of interest and ensure compliance.
Major Failure to Ensure Compliance
One of the directors, Shay Zakhaim, is facing a three-year ban from carrying out any financial services business as a director or responsible manager, while the other, Anthony Anderson, is facing a five-year ban.
The regulator highlighted that the two directors failed to have adequate measures to manage conflict of interest and stop aggressive sales tactics by company representatives to Aussie clients. Further, the duo took steps in February 2022 to ensure the brokerage representatives complied with local financial services laws.
“ASIC has reason to believe that Mr Zakhaim and Mr Anderson are not fit and proper, nor adequately trained or are not competent to provide financial services, act as an officer of, or control a financial services business,” the regulator stated in its announcement.
A Troubled Broker
XTrade operated as a retail over-the-counter (OTC) derivatives issuer, offering risky CFDs and FX contracts to its customers. CFDs offer leveraged trading opportunities, allowing traders to speculate on the change in value of an underlying asset.
The ban on the two directors came about three months after the Aussie regulator cancelled the Australian Financial Services (AFS) licence of XTrade.AU Pty Ltd, which operated the XTrade brand in the country, over failure to comply with the general obligations of an AFS licence holder.
According to the Australian regulator, XTrade did not meet the general obligations of an AFS licence holder between June 2018 and September 2022. The broker was accused of engaging in “unconscionable conduct.”
Moreover, the regulator highlighted that XTrade did not “take reasonable steps to ensure that its representatives complied with financial services laws” and lacked “adequate arrangements for the management of conflicts of interest.” The broker also failed to ensure that its “retail product distribution was consistent with its target market determination” and that its services were offered “efficiently, honestly and fairly.”
In addition to these operational deficiencies, the regulatory investigation revealed that the broker had “put its own interests above those of its clients and did not act in good faith.” The brokerage representatives had been involved in misconduct for many years, and the broker did not ensure they received adequate training.
Although XTrade no longer holds the AFS licence, the brand still offers services in overseas markets with its licences from Belize and South Africa.
