Thursday, April 08, 2010

A punt is a punt, except when ASIC says its a "derivative". ASIC shuts down RBA betting

Oh my. They may be wrong in law, but who's going to fight them

Punters think of them as bets, but to ASIC they are apparently "derivatives".

The Securities and Investments Commission has threatened the Northern Territory based bookmaker Centrebet with a court order "shutting down your business" if it continues to run take bets on the outcome of monthly Reserve Bank board meetings without a financial services licence.

Centrebet has taken nearly $1 million in bets on the outcome of Reserve Bank board meetings in the past two years without complaint from ASIC. The markets have received wide publicity and have been listed on its website along with markets on elections and sporting events.

Yet in a letter to Centrebet dated March 26 ASIC's senior manager, market participants and stockbrokers Jonathan Coultas says "it has come to the attention of ASIC that you may be carrying on a financial services business without holding a financial services licence"...

"In particular we believe the financial bets you offer over the ASX 200 share index and RBA interest rate changes may be 'derivates', as defined in the Corporations Act," the letter continues.

"Carrying on a financial services business without an Australian financial services licence is an offence punishable by a fine not exceeding $22,000 or imprisonment for 2 years or both".

"ASIC may also decide to take other actions in relation to your conduct. For example... ASIC can seek court orders shutting down your business."

Centrebet public relations manager Neil Evans described himself as "totally shattered, and a little bit confused".

"We founded interest rate betting in this country in 2008, and not a word was said."

"Our operating licence from the Northern Territory government allows us to bet on financial markets."

ASIC confirmed that it had sent that letter but would not answer questions about why it had done so now rather than earlier in the life of the widely publicised market.

The answer might lie in Centrebet's action in March in establishing a betting market on the ASX 200 shareprice index which had the effect of competing with products offered by the ASX itself.

There are few precedents to guide either ASIC or Centrebet should the matter go to court.

ASIC has given the agency until Friday to respond.

In the meantime Mr Evans said Centrebet will not take bets on either Reserve Bank decisions or the share price index. In the language used by ASIC, it will not sell derivatives.

Published in today's SMH and Age

Asic to Centrebet

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. When is punting on the economy "utterly irresponsible"?

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. Who'd take on Centrebet?