Forex Capital sued for unconscionable conduct and conflicted remuneration
The corporate watchdog has commenced civil penalty proceedings in the Federal Court of Australia against over-the-counter (OTC) derivatives trader Forex Capital Trading and its sole director, Shlomo Yoshai.
The Australian Securities and Investments Commission (ASIC) allege the firm engaged in a system of unconscionable conduct that was aided by Yoshai.
The alleged conduct would attract a maximum penalty of $420,000 for an individual and $2,100,000 for a body corporate.
This alleged conduct included:
- Using high pressure sales tactics, such as offering incentives (credits and rebates) to encourage clients to transfer more money to Forex CT;
- Recommending trading strategies that were inappropriate to clients;
- Making false or misleading statements to clients;
- Implementing and encouraging a trading floor culture that was directed towards maximising trading volume and client deposits rather than promoting a culture of compliance with applicable legal requirements;
- Establishing and implementing incentives for clients to deposit funds and disincentives for clients to withdraw funds from their trading accounts; and
- Failing to ensure compliance with financial services laws.
ASIC also alleged that the firm contravened a ban on conflicted remuneration under the Corporations Act by paying account manager bonuses primarily on client “net deposits” and failed to act in the best interests of clients when giving personal advice.
These contraventions could attract a maximum penalty of up to $1,000,000 for a body corporate.
ASIC also alleged that Yoshai failed to exercise his powers and discharge his duties as a director and this could attract a maximum penalty of $200,000.
“ASIC seeks declarations that Forex CT engaged in misleading or deceptive conduct and, as the holder of an Australian Financial Services (AFS) licence, contravened its obligations under s912A of the Corporations Act,” ASIC said.
“This includes failing to do all things necessary to ensure that the financial services covered by the AFS licence were provided efficiently, honestly and fairly.”
Recommended for you
With candidate retention a concern after a professional year, two large licensees have shared how they are structuring their programs to successfully ensure candidates are keen to remain beyond the year.
Evidentia Private has appointed PIMCO’s Haydn Scott as principal for private wealth solutions, focusing on asset consulting and private markets.
Financial advisers have been urged to consider the role they are using AT1 hybrids for in client portfolios when it comes to deciding on a suitable fixed income replacement, particularly for their retiree clients.
Private wealth manager Escala Partners has shared the difficult conversations that advisers need to have with their clients as strong sharemarkets prompt a portfolio rebalance.
