The Federal Court in Australia has fined Forex CT for $20 million in a case that was pursued by the Australian Securities and Investment Commission (ASIC) for unconscionable conduct including the use of high-pressure sales tactics.
The case follows the banning of the CEO of Forex CT, Shlomo Yoshai, in March 2021 by the ASIC from providing financial services for a period of 10 years. The court has fined him separately for $400,000.
The court ruled that the deficiencies and non-compliance had led to large losses for clients and this could be directly traced back to the dishonesty of the company and its employees. Yoshai had placed a lot of pressure on the sales managers to bring in clients and make them deposit funds for trading highly risky products, make them increase exposure to the markets more than what is deemed safe, and also pressure the client to cancel withdrawal requests.
“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,” ASIC commissioner Cathie Armour said.
The ASIC and the court believe that the amount of fine that has been imposed is based on the seriousness of the violations. The CEO had imposed a very toxic culture within the company similar to what was seen in movies like Wolf of Wall Street with bells being rung for every deposit and the employees and sales managers being constantly pushed to bring in more clients and deposits without much regard to providing them with a safe and regulated environment for trading.
The legal firm Norton Rose Fulbright had advised ASIC in this case with its regulatory disputes team.
Andrew Riordan, a partner at the legal firm, commented:“We are pleased to have assisted ASIC in securing this Federal Court decision, in which Justice Middleton ordered significant penalties for ‘systemic compliance deficiencies’.”
This is one more in a series of actions undertaken by the ASIC against violations of its regulatory requirements over the past few months though most of those involved fines and settlements of much smaller size. It is indeed saddening that even after so many controls, licensing, and regulations, such financial crimes continue to happen and this continues to push down the trust that the clients placed on the company and on the financial services domain as a whole.