International Law

ASIC paper on over-the-counter contracts for difference

By David Jacobson

ASIC has released Consultation Paper 146 Over-the-counter contracts for difference: Improving disclosure for retail investors (CP 146 ), which includes a draft regulatory guide (RG) and proposes an ASIC benchmark-based disclosure model for OTC CFDs.

CFDs offer investors a leveraged position on future changes in the market price of a share or a commodity, or on the value of an index, or a currency exchange rate.

Product disclosure statements (PDSs) and ongoing disclosures would be required to address the benchmarks on an ?if not, why not? basis. Further, ASIC?s proposed guidance provides an indication of the standards ASIC would expect an issuer to meet when advertising OTC CFDs to retail investors.

The benchmarks are aimed at issuers of CFDs and focus on:

• ensuring client suitability
• disclosing counterparty-risk
• stewardship of client monies
• practices where issuers make margin calls on clients.

Full post as published by Australian Regulatory Compliance Review on November 18, 2010 (boomark / email).