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Forex CT hit with $20 million penalty for unconscionable conduct



Forex Capital Trading Pty Ltd (Forex CT) has been ordered by the Australian Federal Court to pay a penalty of around $20 million as a result of the company having engaged in unconscionable and systemic conduct. The Federal Court alleges that Forex CT paid conflicting remuneration to some of its account managers and team leaders, and in doing so, failed to act in its clients best interests.

Alongside the significant penalty for the company, Shlomo Yoshai, the firm’s sole director, has also been ordered to pay off a $400,000 fine due to having aided the unconscionable conduct found to be operating within Forex CT. Seeing his actions as a breach of his directorial duties, Shlomo Yoshai has also been formally disqualified from leading any corporations for a duration of eight years.

It has been revealed that Forex CT made it possible for its clients to trade in margin foreign exchange contracts as well as CFDs, which were issued by the firm itself. Forex CT has been accused of unconscionable conduct due to having offered incentive-based encouragements to get clients to make significant transfers into their Forex CT trading accounts, even if they could not afford to do so.

ASIC

The firm was also found to have employed high-pressure tactics when it came to making sales, recommended trading sales which were found to be inappropriate for its clients, made deceptive representations to clients, failed to comply with several financial services laws, and finally implemented remuneration schemes and a trading floor culture based on maximum trade volume rather than legal compliance.

The investigation from ASIC revealed that the trading floor culture consisted of bells being rung if a client deposited particular amounts into their accounts and games such as roulette and wheel of fortune being played in order to win cash prizes if deposit targets had been reached. His Honour Justice Middleton described such behaviour as a ‘culture of non-compliance’.

ASIC Commissioner Cathie Armour stated:

Cathie Armour, ASIC
Cathie Armour
Source: LinkedIn

The significant penalty handed down by the Court reflects the seriousness of this conduct. If corporations disregard the law and their client obligations, ASIC will take action and the consequences can be severe.

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Forex CT hit with $20 million penalty for unconscionable conduct

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