ASIC Imposes Additional Licence Conditions on Corpay Subsidiary Over FX Compliance Failures

The Australian Securities and Investments Commission (ASIC) has imposed additional licence conditions on Cambridge Mercantile (Australia) Pty Ltd, an Australian financial services (AFS) licensee and subsidiary of NYSE-listed Corpay Inc., following significant compliance failures in its foreign exchange (FX) derivatives business.

ASIC’s intervention follows concerns that Cambridge misclassified more than 2,800 retail clients as wholesale clients when dealing in structured FX derivatives. This misclassification meant affected clients may not have received important statutory protections available to retail investors. ASIC also found deficiencies in Cambridge’s systems, record-keeping, and monitoring processes for determining whether clients were retail or wholesale.

The regulator further raised concerns that remediation for impacted clients was not initiated promptly, with total remediation expected to amount to millions of dollars. In addition, ASIC identified shortcomings in Cambridge’s conflict-of-interest management arrangements, including issues related to remuneration structures for representatives involved in the FX business.

ASIC also concluded that Cambridge failed to maintain adequate risk management systems and sufficient human resources to properly supervise compliance and risk functions. The company was additionally found to have breached its financial resource requirements.

ASIC stated that small business clients managing FX exposure in volatile market conditions are entitled to fair treatment and appropriate consumer protections under the law. Misclassifying retail clients can result in the loss of key safeguards, including access to disclosure documents, dispute resolution mechanisms, and product governance protections.

Under the newly imposed licence conditions, Cambridge must prepare and implement a comprehensive remediation plan addressing the compliance failures, including compensation for misclassified clients. The company is also required to appoint an independent expert to review the adequacy of its remediation plan and assess the effectiveness of corrective measures to prevent recurrence. The independent expert will report back to ASIC on both the remediation process and improvements to operational controls.

Cambridge has cooperated with ASIC and consented to the additional licence conditions.