The Australian Securities and Investments Commission (ASIC) has announced a temporary ban on two former directors of XTrade, a forex and contracts for difference (CFD) broker that lost its licenses to operate in the country.

The bans resulted from their failure to manage conflicts of interest and enforce financial regulations.

Shai Zahaim, one of the directors, faces a three-year ban from participating in any financial business as a director or responsible manager. Meanwhile, another director, Anthony Anderson, has been issued with a five-year ban. ASIC's decision highlights the seriousness of compliance breaches under their leadership.

ASIC's investigation found that Zakheim and Anderson failed to take adequate measures to manage conflicts of interest or curb aggressive sales tactics used by company representatives against Australian customers. Despite taking some measures in February 2022 to ensure compliance with local financial services laws, these measures were found to be inadequate.

“ASIC has reason to believe that Mr. Zakheim and Mr. Anderson are not fit and proper to provide financial services, act as an officer or supervise a financial services business,” the regulator said in a statement.

It is worth noting that the ban on the two directors followed ASIC's revocation of the Australian Financial Services (AFS) license of XTrade.AU Pty Ltd, which operated the XTrade brand in Australia. This revocation, which occurred three months ago, was due to the broker's failure to meet the general obligations of an AFS license holder.

Between June 2018 and September 2022, XTrade failed to meet these obligations and was charged with “bad faith conduct”. In particular, ASIC noted that XTrade failed to take reasonable steps to ensure its representatives complied with financial services laws and did not have adequate arrangements in place to manage conflicts of interest.

ASIC's investigation also found that XTrade failed to ensure that its retail distribution of products met the definition of its target market and failed to offer services efficiently, fairly and honestly. Broker representatives had been involved in misconduct for years and the company failed to provide them with adequate training.

In addition to these operational deficiencies, regulatory investigations revealed that XTrade put its own interests above those of its clients and acted in bad faith.

Despite the loss of its AFS license, XTrade continues to offer services in overseas markets with licenses from Belize and South Africa.

ASIC's actions reflect its commitment to ensuring that financial service providers operate with integrity and put the interests of their customers first.

For the financial community, this case highlights the critical need for robust compliance structures and ongoing monitoring of regulatory obligations.