The Australian Securities and Investments Commission (ASIC) stands as Australia’s namesake financial regulator, and has made an announcement today. This announcement was in regards to it launching a civil penalty proceeding against Forex Capital Trading Pty Ltd (Forex CT) within the Federal Court of Australia. Alongside this, Shlomo Yashai, besides having an unfortunate name, had proceedings launched against him as well, standing as the sole director of Forex CT.

Prioritizing Money Over Clients

Allegations made by ASIC against Forex CT, is that the entity engaged in a system of unconscionable conduct, with the aid of Yoshai. They did this through leveraging high-pressure sales tactics to encourage clients to transfer more money than they usually would to Forex CT, such as offering incentives like credits and rebates. Furthermore, the defendants recommended trading strategies that weren’t appropriate for the clients themselves. Lastly, the firm made a series of false or misleading statements to its clients, doing so with the aid of Yoshai.

According to ASIC, the defendants had also encouraged and implemented a trading floor culture that encouraged increasing client deposits and trading volume maximization. This comes in contrast to the culture of compliance with the legal requirements that apply to this matter, according to ASIC. Furthermore, ASIC states that the defendants established disincentives for clients to withdraw funds from their trading accounts, at the same time, implementing incentives for them to deposit within it.

The Many Allegations

While it should be evident with the accusations laid against the defendants, they were further charged of having failed to ensure that their practices comply with the financial services laws.

These conducts, aggregated, hold the maximum civil penalty of $420,000 for an individual, with a corporate body facing a maximum penalty of $2,100,000.

Further allegations against Forex CT, made by ASIC, is that it disobeyed an official ban on conflicted remuneration, as is stipulated under the Corporations Act. They did so by paying bonuses to account managers that are based primarily on the “net deposits” of the clients, which is the total deposits the clients made, subtracted by withdrawals.

Yoshia Failing At His Job

Further violations of the Corporations Act come from failing to act in the best interest of their clients when it comes to giving personal advice. This can lead up to a maximum civil penalty of $1,000,000 for a corporate body.

Yoshai, in turn, had failed to exercise his powers do his rightful duties as a director, as per the Corporations act s.180(1). This can see a maximum civil penalty of $200,000 for Yoshai.