Appeals Court affirms Australia’s ASIC refusal of derivatives/market maker licence to Clementine

Appeals Court affirms Australia’s ASIC refusal of derivatives/market maker licence to Clementine

ASIC

The Australian Securities and Investments Commission (ASIC)  said on Thursday its decision to deny Australian Financial Services (AFS) license to Clemente Group Holdings Pty Ltd. to provide various financial services, including to make a market in derivatives, has been confirmed by the Administrative Appeals Tribunal (AAT) of Australia.

The AAT ruled in favor of the ASIC on 29 September, 2016.

Clemente Group Holdings applies for an AFS license with the ASIC in late March 2014. It was seeking a license to launch financial advisory and dealing services and to make a market in derivatives. The company was seeking to service wholesale clients only. However, later in 2014 the Australian financial watchdog determined the license applicant lacked certain ability to deliver the requested financial services and would likely contravene the obligations that would apply if an AFS license were granted. The company then appealed the regulator’s decision to the AAT.

“There is sufficient reason to believe that the applicant is likely to contravene the obligations that will apply under s 912A if the license is granted […],”  AAT senior member J F Toohey was cited as saying in an ASIC notice. “In my assessment of the evidence, the applicant has not demonstrated that it has sufficient technical, human and financial resources to conduct the proposed business and mitigate the risks associated with it, and Mr Batten [the sole director, sole shareholder and its sole nominated responsible manager] does not appear seriously to have addressed those risks,” she added.

Section 912A1) (d), (e) and (h) of the Corporations Act, 2001 require an AFS licensee to:

  • have adequate resources (including financial, technological and human resources) to provide the financial services covered by the license and to carry out supervisory arrangements,
  • maintain the competence to provide those financial services, and  
  • have adequate risk management systems.

In late August this year, the AAT supported the ASIC’s decision regarding the authorization of another financial service provider. After canceling the license of forex broker IMS FX Services, trading as IMS FX, the ASIC removed the broker from the Australian financial services (AFS) register where only authorized entities are allowed. IMS FX, however, is appealing the delicensing and sought to revert the deregistration during the appealing process. However. The AAT rejected the broker’s objection to the ASIC’s decision to record the license cancellation in the register.

To read the AAT’s full decision regarding Clemente Group Holding’s appeal please click here.

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