ASIC Cancels XTrade License Citing Client Exploitation

Story Highlights

• ASIC cancels XTrade license due to client exploitation and misconduct by representatives.
• The regulator found that XTrade prioritized profits and failed to manage conflicts and distribute products responsibly.
• ASIC crackdown on CFD brokers reflects industry concerns about protecting retail investors.

The Australian Securities and Investments Commission (ASIC) has revoked the license of retail forex and CFD issuer XTrade.AU Pty Ltd (operating as XTrade). This follows a series of investigations uncovering severe operational violations and prioritizing profits over client well-being.

While XTrade has appealed the decision to the Administrative Appeals Tribunal (AAT) and continues operating overseas, their Australian license remains canceled until a final ruling.

Unconscionable Conduct and Misconduct

ASIC’s investigation revealed a troubling pattern of behavior by XTrade between 2018 and 2022. The regulator found evidence of “unconscionable conduct,” suggesting XTrade exploited customers in their pursuit of profit.

Furthermore, XTrade failed to properly train its representatives, leading to misconduct that went unchecked for years. This raises concerns about the suitability of the products offered and the level of care provided to clients.

Conflicts of Interest and Misaligned Target Markets

The investigation also highlighted XTrade’s inadequate management of conflicts of interest. Additionally, the company failed to ensure its retail products were distributed following its target market determination. These combined factors raise questions about whether XTrade prioritized client suitability or simply pushed products.

The XTrade case isn’t an isolated incident. ASIC has been tightening its grip on CFD brokers, particularly their interactions with retail investors. This includes restrictions on leverage and recent stop orders issued against other major brands for violating design and distribution obligations (DDOs). ASIC even took legal action against eToro for DDO breaches, a first in the industry.

This regulatory crackdown reflects growing concern about the potential for CFDs and similar products to harm inexperienced investors. The high-risk nature of leveraged trading requires a responsible approach that prioritizes investor protection.

The outcome of XTrade’s appeal remains to be seen, but ASIC’s actions send a clear message: the Australian Financial Market Regulator expects CFD brokers to operate with the utmost integrity and prioritize client interests.