The Australian Securities and Investments Commission (ASIC) says it will be closely monitoring certain trading tools when it takes over the supervision of financial markets later this year. New powers awarded to the regulator will enable it to search records, tap phone calls, issue search warrants and call in investors for questioning where it suspects illegal conduct. The regulator will be able to hand out fines of up to $500,000 for individuals and $5 million for companies.
‘The most obvious change is that we can make direct inquiries of clients of market participants [stockbrokers],’ stated ASIC executive Greg Yanco.
Meanwhile, ASIC will also increase its surveillance of derivatives contracts amid concerns they could be used to mask insider trading, The Australian reports.
ASIC deputy chair Belinda Gibson says the corporate regulator will soon release a discussion paper warning of the potential risks of trading in CFDs.
‘Contracts for Difference are products that are largely sold to the retail end of the sector and we just want to make sure that retail investors fully understand the nature of them and some of the risks associated with them when they take them up,’ Ms Gibson said.
‘CFDs effectively are leveraged entry to the equities market. The ones that aren’t listed on the stock exchange, the ones which most CFD trading is, with individual proprietors, there’d be a PDS (product disclosure statement) and people need to understand if you like the counter-party risk with those persons.’
ASIC will takeover from the ASX as the primary market supervisory sometime in August. The move also could be read as a stab at the Australian Securities Exchange which is a major promoter of CFD trades, the paper reports. CFDs, which turn over $10 billion per month according to some estimates, represented seven per cent of all cash market trades on the ASX in May, according to The Australian.