ASC fine offshore firm for unregistered trading

Company registered in British Virgin Islands hit with $200,000-plus settlement costs for activities spanning three years

ASC fine offshore firm for unregistered trading

The Alberta Securities Commission (ASC) has announced a settlement agreement with a company based in the British Virgin Islands for engaging in unregistered trading of contracts for difference (CFDs).

In the agreement dated January 16, 2020, the ASC said Ava Trade Ltd. opened and operated approximately 372 accounts for Alberta investors between May 2015 and August 2018. The company is not a reporting issuer in Alberta and is not registered with the commission.

“In the Alberta Accounts, Alberta investors traded CFDs through the Ava Trade Platform based on exposure to underlying assets,” the ASC said. The CFDs allowed Alberta investors to participate in the price movements of forex, cryptocurrencies, commodities, and other assets.

During the material time, the company collected around US$201,500 attributable to revenue from the Alberta accounts, including overnight interest charges, inactive account fees, and profits from bid-ask spreads. It also did not properly rely on exemptions available in Part 8 of National Instrument 31-103, Registrant Requirements, Exemptions and Ongoing Registrant Obligation.

While it did not specifically market to or target Alberta residents, Ava Trade admitted that it breached subsection 75(1)(a) of the Securities Act and acted contrary to the public interest.

The ASC noted a number of mitigating factors that it considered in its decision. Aside from proactively initiating a process to transfer Canadian resident clients to a registrant with the ASC, Ava Trade “implemented meaningful and significant internal controls and procedures to prevent Canadian residents from opening an account.” From October 16 to November 30, 2018, it went through a transition from only permitting trades liquidating Canadian client accounts to terminating all its Canadian client accounts.

The ASC also credited the company for its cooperation that “saved the Commission the time and expense associated with a contested hearing under the Act.”

As part of the settlement agreement, Ava Trade paid the ASC $30,000 plus disgorgement of $213,428, which was said to represent its net revenue on the trades that it facilitated over the material period, less 20% as credit for exemplary cooperation.


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