Australian Financial Services Licensing (AFSL) Forum

Home Forums Australian Financial Services Licensing (AFSL) Forum Advising clients on PAMM account traders

This topic contains 5 replies, has 2 voices, and was last updated by  Greg 3 years ago.

Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • #2876 Reply

    Hi 

    My first post here! 
    Hopefully this isn’t too confusing, my explanation that is. 
    We are an AFSL, licenced in derivatives and FX.

    We have been approached by a company seeking a Corporate Auth Rep off us.  My hesitation is the nature of his business.  He personally has all RG146 requirements covered etc. 

    He is giving general advice on FX trading, through his website.  This site promotes a FX trading platform whereby the cllients place money in PAMM accounts to be traded by other people (no experience and qualification requirements).  Most are overseas. 

    He then takes a number of PIPs as an Introducing Broker.
    I am confused as to whether this is covered by the AFSL legislation (especially if the traders are unlicenced and offshore) and if it is, as I believe it should be, is can I authorise my prospective AR to give advice on it. 
    Any help is appreciated

    #3091 Reply
    Our understanding is as follows: a trader (“the Trader”) creates a PAMM account (Percentage Allocation Management Module).  The PAMM account may provide information such as the Trader’s historical trading record.  People (“the Client”) can access that information and can then deposit funds into the trader’s PAMM account.  The Trader will trade the funds in the PAMM account.  The Trader will generally take a percentage of any profits made with Client funds.
    The provider of a PAMM account is likely to require an AFSL with authorisations in relation to operating a managed investment scheme or a managed discretionary account service (MDA).  Without an AFSL with these (or similar) authorisations, the provider of the PAMM account (and possibly the traders) would not be able to induce people from Australia to use/invest in these accounts.  Any provider who provides this financial service/product in Australia without an AFSL is in breach of Australian financial services laws.  Offshore providers of financial services are required to hold an AFSL if the provider carries on a financial services business in Australia or intends to induce Australians to use its financial services.
    Turning to your question, as a AFS licensee you are required to monitor and supervise the activities of your Authorised Representatives.  If your Authorised Representatives deal in an unlicensed financial product, by arranging for client to use an unlicensed PAMM account, it may expose your organisation to various types of liability.
    Feel free to contact our team if you wish to discuss further.
    Author: Chris Lim
    #3092 Reply

    Chris

    Thank you for your time.

    I really should have mentioned in my first post that the FX platform, and therefore PAMM provider is the holder of an AFSL!

    Is this all I need to be concerned about?  Not specifically the traders themselves?

    And hopefully, using my logic above, I can assume as the PAMM provider is licensed, that I have the ability to allow him to advise clients into a structure such as this?

    Thanks again for your time with my confusion

    #3102 Reply
    Making sure the PAMM provider has an AFSL helps you manage one risk – but your AFSL needs to cover the right activities, too.
    In order for you to authorise your contact to advice on PAMMs you would first need to have managed investment scheme and/or managed discretionary account authorisations (see our initial response) under your license.
    Further, as an authorising licensee, you would be legally responsible for the conduct of the authorised representative. There are lots of other risks you would want to manage (eg. via a well drafted authorised representative agreement and by conducting legal/compliance due diligence on the authorised representative).
    Author: Chris Lim
    #3135 Reply

    Hello Nufty,

    I agree with Chris. Your AFSL needs to

    cover the right activities.

    #5288 Reply

    Greg

    HI All,

    I disappoints me that as a successful trader, I cannot add my retired mum or any family member if they wish, to join in my success and make money from trading due to the laws we have in this country which while I understand why they are there hinder people to get ahead in life – maybe that is the real reason they are in place and not necessarily to protect people from the unscrupulous.

    I would love my retired mother to have  a better life by piggy backing off my success and by the way having to pay taxes for that success but no thats not allowed.

    Very disappointing.

     

    My 2 cents

    Greg

Viewing 6 posts - 1 through 6 (of 6 total)

Reply

Reply To: Advising clients on PAMM account traders

Your information:


<a href="" title="" rel="" target=""> <blockquote cite=""> <code> <pre> <em> <strong> <del datetime=""> <ul> <ol start=""> <li> <img src="" border="" alt="" height="" width="">

  • Free answers to common Financial Services Regulation (FSR), Consumer Credit and AML/CTF issues.

    Click here to join our LinkedIn group for responsible managers and compliance professionals.
    joinUsOnLinkedIn
  • Training

    Regulatory Compliance Training for Directors, Responsible Managers and Compliance Staff

    View Courses

  • Legal Advice

    Review your AFSL or ACL disclosure documents, conduct a licensee audit and more…

    Get Legal Advice

  • Compliance support

    The HN Hub – an online platform built to support Responsible Managers and Compliance Staff

    More