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Home Forums Australian Financial Services Licensing (AFSL) Forum What are the proposed financial requirements for providers of forex platforms (eg. MT4 or MT5)?

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  • #2356 Reply

    ASIC is proposing to increase the financial requirements for issuers of OTC derivative products to retail clients in Australia, in its Consultation Paper 156.  ASIC proposes:

    1. Increasing projection requirementsASIC is proposing 12-month rolling cashflow projections.  As you know, a breach of the current 3-month rolling projection requirement amounts to a breach of your AFSL.  So, most people project 4 or more months.  If ASIC changes this, the projections will probably need to be 13-months or more, updated monthly.  The new 12-month requirement would be imposed regardless of which option (1-5) under RG 166 you have been previously operating.
    2. Increasing financial adequacy requirementsIssuers will need to hold net tangible assets (NTA) of $1m or 10% of average revenue (whichever is greater).  This replaces the old Surplus Liquid Funds (SLF) and Adjusted SLF requirements ($50,000 plus 5% of adjusted liabilities, etc).  50% of the required NTA will be required to be held in cash but excluding client trust money.
    3. Increasing reporting requirementsYour NTA position will need to be reported to ASIC as part of your annual financial audit.  Also, if your position is 110% of required NTA or less, you must notify ASIC and continue to do so monthly until is exceeds the 110% threshold.  There are other requirements, too (eg. if your position is 75% of required NTA or less, you cannot trade with clients unless certain things are done).
    What next? You can make a submission to ASIC about these requirements before 4 July 2011.  If you want us to make a submission on your behalf, just tell us.  It may be that a few of our OTC Derivative clients have the same issues with this consultation paper.  If we get enough interest, we can also run a live webex meeting to have a discussion.  Please email us or comment below if you are interested in having this kind of consultation.  We would also get an accountant to sit in on the meeting.
    If you want to make sure your current SLF and ASLF calculations are correct, or if you want to conduct an analysis on how these changes may impact upon your cash flow, then we know of two accountants who are familiar with OTC Derivatives and the new consultation paper:
    Andrew Jeffers
    Shuriken Consulting Pty Ltd
    Level 2, 19-21 Hunter Street, Sydney
    Direct: 02 9114 8544    Mob: 0423 308 442
    Paul Carr
    Deloitte Touche Tohmatsu
    550 Bourke Street, Melbourne
    Direct: 03 9671 7530   Mob: 0410 579 698
    PA: Jacqui Taylor
    Direct: 03 9671 6723
    Author: Paul Derham
    #3118 Reply

    The proposed reforms are now clarified, and will come into effect from 31 January 2013.  Here is ASIC’s article clarifying the issue:


    #3121 Reply

    We’ve summarised ASIC’s article and put in a bit of our own commentary, here:–NTA–Requirements-fo.aspx


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