The sole director of over-the-counter (OTC) derivative issuer Forex Capital Trading (Forex CT) and four former employees have been banned by the Australian Securities and Investments Commission (ASIC).
Shlomo Yoshai, chief executive, responsible manager and sole director, has been banned for 10 years after ASIC found his lack of understanding or regard for compliance was so serious it justified the banning period.
Yoshai was found to have been involved in Forex CT’s breaches of the Corporations Act, which included:
- Failure to do all things necessary to ensure the financial services are provided efficiently, honestly and fairly; and
- Failure to have in place adequate arrangements for the management of conflicts of interest. This included Forex CT’s commission structure which entitled team leaders and account managers to a percentage of client “net deposits” (deposits less withdrawals).
ASIC found Yoshai was involved in Forex CT’s trading floor culture, an environment that had been likened by former account managers to ‘The Wolf of Wall Street’, where a bell or a gong was rung when clients deposited funds of certain amounts into their trading accounts and account managers could participate in incentive ‘games’ such as ‘wheel of fortune’, roulette tables and dice games to win cash if certain client deposit targets were met.
Yoshai put pressure on account managers to implement high pressure sales tactics when engaging with clients, offer incentives to clients to encourage deposits, recommend trading strategies that would increase a client’s exposure to the market, pressure clients to deposit funds into their trading accounts, and pressure clients to delay or cancel withdrawal requests.
ASIC banned former team leaders Jarrod Popuard for six years and Benjamin Esler, for four-and-a-half years. ASIC found they:
- Contributed to fostering Forex CT’s high-pressure sales culture;
- Did not comply with financial services laws. In the case of Poupard, this included making misleading representations to clients of Forex CT. Esler put pressure on Forex CT clients to deposit funds into their trading account and delay or cancel withdrawals in order to maximize his own remuneration that was based on ‘net deposits’, which amounted to unconscionable conduct;
- Instructed their teams to:
- Delay or prevent clients from proceeding with withdrawal requests;
- Use incentives, such as ‘credits’, and adopt various sales strategies to encourage clients to deposit funds into their trading accounts.
In banning former account managers Huy Minh (Andy) Hoang for five years and Andrew Tran for three years, ASIC found both men:
- Were involved in unfair practices, including encouraging client deposits, by offering valueless incentives and delaying client withdrawal requests;
- Made misleading representations to their clients, including that:
- Clients would make profits trading with Forex CT when there were no reasonable grounds for making such representations, given that an investment in a contract for difference (CFD) is a speculative high-risk investment; and
- They (and other Forex CT representatives) did not obtain any benefit from clients depositing funds into their trading account, in circumstances where they received a commission based on a percentage of client ‘net deposits’.
ASIC also found Hoang gave personal advice to clients while not understanding the nature of the financial products (CFDs and FX Contracts) about which he gave advice.
In making the banning orders, ASIC found all five men are not fit and proper persons to provide financial services.
ASIC had commenced civil proceedings in Federal Court against Forex CT and Yoshai last year.
