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ASIC Finalises Investigation into Saxo Bank Following Sonray Collapse

ASIC has finalised its investigation into Saxo Bank A/S, the former provider of the trading platform for collapsed broker, Sonray Capital Markets Pty Ltd (in liquidation) (Sonray).

Following the conclusion of that investigation, which focused on the risk management practices of Saxo Bank, ASIC has agreed with Saxo Bank that additional licence conditions will be included on the Australian financial services (AFS) licence under which it will continue to conduct its business in Australia.

The additional licence conditions agreed with Saxo Bank, which apply to Saxo Capital Markets (Australia) Pty Ltd (SCMA) require SCMA to:

engage an expert to review and report on the adequacy of SCMA’s risk management systems to properly address credit risk, client risk and compliance risk
implement any recommendations made by the expert over a six month period
engage the expert for further reviews and reporting over an 18 month period following the initial expert report, and
provide ASIC, on a bi-annual basis, independent verification of client monies being held by SCMA.

Since September 2004, Saxo Bank has held an AFSL authorising it to provide financial services on a wholesale basis. Under that wholesale licence, Saxo Bank contracted with a number of retail licensees in Australia, including Sonray, to facilitate the trading of various financial products on a trading platform, Saxo Trader.

Saxo Bank will now provide financial services in Australia to retail clients directly through the entity SCMA. This follows Saxo Bank, in late December 2011, acquiring control of Commodity Broking Services Pty Ltd by purchasing the shares of Logos Commodities Pty Ltd, the holding company of CBS. At the same time, CBS changed its name to Saxo Capital Markets (Australia) Pty Ltd.

ASIC Chairman, Greg Medcraft, said the additional licence conditions on Saxo Bank’s AFSL reflected ASIC’s priority to improve industry standards amongst financial services licensees. He added that the new licence conditions were an important part of restoring investor confidence in the broader broking area and providing reassurance that compliance procedures are in place to ensure risk management practices are of the standard required under the law.

Background

The additional licence conditions agreed with Saxo Bank are the result of an ASIC investigation into Saxo Bank following the collapse of Sonray in June 2010. ASIC’s investigation focused upon the risk management practices of Saxo Bank arising out of its relationship with Sonray, one of its white label clients operating in Australia.

On 22 June 2010, John Lindholm and George Georges of Ferrier Hodgson were appointed voluntary administrators of Sonray and on 27 October 2010, Sonray was placed into liquidation.

On 14 October 2011, the former chief executive officer of Sonray Scott Murray was sentenced to five years imprisonment, to serve a minimum of two years and six months before he is eligible for parole (refer ASIC Advisory 11-222 Former Sonray CEO jailed).

On 27 September 2011, the sole director of Sonray, Mr Russell Johnson, was arrested and charged with 24 offences (refer ASIC Advisory 11-212 Sonray director arrested and charged).

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