12-256MR City Index Australia pays infringement notice penalties
Monday 22 October 2012
City Index Australia Pty Ltd (City Index) has paid a total of $13,200 in penalties after ASIC served two infringement notices on the company.
ASIC alleged City Index contravened the Australian Securities and Investments Commission Act 2001 (ASIC Act) on two separate occasions.
The infringement notices were issued following an investigation by ASIC into statements made by City Index on its webpage and in an electronic newsletter. ASIC alleged these statements were in breach of prohibitions in the ASIC Act relating to false or misleading representations and misleading conduct in relation to financial services.
ASIC had reasonable grounds to believe City Index contravened provisions within the ASIC Act as follows:
Between about 2 November 2011 and 20 February 2012, City Index, in trade or commerce, engaged in conduct in contravention of subsection 12DF(1) of the ASIC Act by publishing or authorising the publication of a webpage at www.cityindex.com.au/client-money-protection.aspx (since removed) containing representations that client monies are “fully protected”, “always safe”, “Safe and Secure”, “are kept in a segregated account unless requested otherwise”, “will be held by us in trust for you at all times”, and that “you would be fully entitled to all of your account funds in the highly unlikely event of an insolvency”. The representations were inconsistent with the risks to, and possible uses of, client monies described in City Index’s Product Disclosure Statement and Customer Agreement, and accordingly, were liable to mislead the public as to the nature, the characteristic, or the suitability for their purpose of the financial services being offered; and
Between about 13 and 15 February 2012, City Index Australia Pty Ltd, in trade or commerce, in connection with the promotion of the supply of financial services by means of an electronic newsletter titled “e-News update”, “Issue #21 January 2012”, made a representation in contravention of paragraph 12DB(1)(i) of the ASIC Act, that “[i]n the unlikely event either our Bankers, or City Index lapse into bankruptcy, your client monies are fully protected”. The representation was inconsistent with the risks to, and possible uses of, client monies described in City Index’s Product Disclosure Statement and Customer Agreement, and accordingly, was false or misleading concerning the existence or effect of one or more condition, guarantee, right or remedy concerning client monies.
‘The City Index infringement notices are the first issued by ASIC under the Consumer Law provisions. These provisions enable ASIC to quickly and effectively take action in relation to the supply of credit and financial services. Infringement notices are just one regulatory tool ASIC has at its disposal in dealing with concerns that the law has been breached’, ASIC Commissioner, Greg Tanzer said.
‘The obligation on financial services businesses to provide accurate information that is not likely to mislead customers, is fundamental to the operation of a fair and efficient market with confident and informed investors.’
Mr Tanzer added City Index acted quickly to remove the statements from its website and amend its electronic newsletter once approached by ASIC.
City Index paid two penalties of $6,600 each on 12 October 2012 in compliance with the infringement notices. The applicable penalty is prescribed in the ASIC Act.
As provided by the ASIC Act, compliance with the notices is not an admission of guilt or liability and City Index is not regarded as having contravened the provisions specified in the notices.
City Index is a privately-owned company providing contracts for difference and foreign exchange in Australia.
ASIC administers the Australian Consumer Law as it applies to the supply of credit and financial services. ASIC has a statutory power to issue an infringement notice under the consumer protection provisions of the ASIC Act.
ASIC may issue an infringement notice if it has reasonable grounds to believe that certain consumer protection provisions of the ASIC Act have been contravened. These include provisions dealing with:
false or misleading representations
harassment or coercion in connection with the supply of credit or financial services
sending unsolicited credit or debit cards
failure to respond to a substantiation notice, and
giving false or misleading information in response to a substantiation notice.