XTrade’s License Cancelled Due to Compliance Failures

XTrade’s license was canceled by ASIC due to severe compliance failures and regulatory lapses, preventing them from operating in Australia. The Australian financial regulator has revoked the license of XTrade.AU Pty Ltd, a retail forex and CFDs issuer, citing multiple lapses.

XTrade’s License Cancelled: ASIC’s Strict Enforcement

The broker approached the Administrative Appeals Tribunal (AAT) on April 29, 2024, to review and pause the Australian Securities and Investments Commission’s (ASIC) decision to cancel its Australian Financial Services (AFS) license. However, the AAT rejects the request for a stay, keeping the license cancellation in effect until a final decision.

XTrade functioned as a retail over-the-counter (OTC) derivatives issuer, providing customers with risky CFDs and FX contracts. CFDs enable leveraged trading, allowing traders to speculate on the price changes of underlying assets. Despite the cancellation of its AFS license preventing operations in Australia, the brand will continue its services in overseas markets with licenses from Belize and South Africa.

Severe Operational Violations

As per the Australian regulator’s findings, from June 2018 to September 2022, XTrade violated the general obligations expected of an AFS license holder, engaging in “unconscionable conduct.”

The regulator also highlighted XTrade’s failure to “take reasonable steps to ensure that its representatives complied with financial services laws” and “did not have adequate arrangements for the management of conflicts of interest.” Moreover, the broker did not ensure that its “retail product distribution was consistent with its target market determination” or that its services were “efficiently, honestly, and fairly.”

Additionally, the regulatory investigation uncovered that the broker prioritized “its own interests above those of its clients and did not act in good faith.” Furthermore, the brokerage representatives engaged in misconduct for many years, and the company did not ensure adequate training measures.

ASIC has heightened its scrutiny over CFD brokers lately, particularly concerning their services for retail traders. The broker has already implemented stringent measures in the industry, reducing leverage offerings to a maximum of 30:1. Additionally, the regulator has issued temporary cease orders for violations of design and distribution obligations (DDOs) against various prominent CFD brands, such as TMGM, Saxo, and Mitrade. Notably, it initiated legal action against eToro for DDO violations, marking the first such action against a broker.

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