Embattled Australian broker Forex Capital Trading Pty Ltd (Forex CT), which recently had its license canceled by the Australian Securities and Investments Commission (ASIC) is now in further legal trouble as the financial regulator indicated they are filing a civil suit against the brokerage for “unconscionable conduct” and “conflicted remuneration” as a result of actions taken by one of its employees.
ASIC alleges that Shlomo Yoshai, a director of ForexCT allegedly engaged in the below conduct, which warrants civil penalties of up to $420,000 for an individual and $2,100,000 for a corporation.
- 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 maximizing 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.
Further to this, ASIC will attempt to prove that the following additional violations took place, which warrants a fine of up to $1,000,000 for the company.
- contravened a ban on conflicted remuneration under the Corporations Act by paying account manager bonuses primarily based on client “net deposits” (total client deposits fewer withdrawals); and
- failed to act in the best interests of clients when giving personal advice, as required under the Corporations Act.
While this case may not be of precedent for Australia, it does indeed highlight the aggressive nature of pursuing penalties against firms that are accused of wrongdoing during their time of offering FX and CFD services as an authorized online brokerage firm in the country, echoing concerns raised previously by many local market participants in the country.
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