ob体育 has commenced civil penalty proceedings in the Federal Court against Union Standard International Group Pty Ltd (Union Standard) (in liquidation) (trading as usgfx) and its former corporate authorised representatives, Maxi EFX Global AU Pty Ltd (trading as EuropeFX) and BrightAU Capital Pty Ltd (trading as TradeFred) (in liquidation).
ob体育 alleges Union Standard provided financial services including trading in margin FX products to clients in China in circumstances where it was illegal for Chinese residents to deal or trade in those foreign exchange contracts. ob体育 alleges Union Standard鈥檚 conduct placed its China-based clients at risk of contravening Chinese law, and thereby exposed them to potential administrative and criminal penalties under Chinese law.
ob体育 alleges that Union Standard failed to comply with its obligation to do all things necessary to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly (s912A(1)(a) of the Corporations Act).
ob体育 also alleges that each of EuropeFX and TradeFred:
- provided personal advice聽to clients when not licensed to do so;
- made false or misleading聽representations to clients including about the level of risk to which聽clients鈥� funds were exposed and the profits which clients could expect to generate; and
- engaged in unconscionable conduct, including by:
- using high-pressure sales tactics to encourage clients to deposit more money, open more positions or discourage clients from withdrawing funds;
- facilitating trading by clients who were at a disadvantage, for example, by virtue of the client鈥檚 trading inexperience, low level of income and lack of understanding of the complex products issued by Union Standard; and
- failing to adequately聽explain or disclose to clients the risks involved in investing in its financial products.
ob体育 also alleges Union Standard:
- as the Australian financial services licensee, is liable for the above conduct of its corporate authorised representatives by operation of the general responsibility provisions of the Corporations Act and ob体育 Act; and
- made false or misleading representations to potential clients.
ob体育 is seeking a range of relief including declarations of contraventions and pecuniary penalties.
A case management hearing is set for 8 March 2021.
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Prohibition on retail OTC products by overseas regulators
Regulators in many jurisdictions have restricted or prohibited the provision to retail investors of certain OTC derivatives, such as binary options, margin foreign exchange and other contracts for difference (CFDs).
In April 2019, ob体育 put AFS licensees on notice that in addition to overseas consequences of potential breaches of overseas law, ob体育 will consider whether breaching overseas law is consistent with obligations under Australian law to provide services 鈥榚fficiently, honestly and fairly鈥� (19-088MR).
Product Intervention Order
ob体育 has made a product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) to retail clients.
ob体育鈥檚 order strengthens consumer protections by reducing CFD leverage available to retail clients and by targeting CFD product features and sales practices that amplify retail clients鈥� CFD losses. It also brings Australian practice into line with protections in force in comparable markets elsewhere (20-254MR).
Union Standard Background
Union Standard was a Sydney-based retail over-the-counter (OTC) derivatives issuer offering clients opportunities to trade in margin foreign exchange contracts and contracts-for-difference (CFDs). Union Standard and its former corporate authorised representatives, EuropeFX and TradeFred operated under Union Standard鈥檚 Australian financial services (AFS) licence 302792.
In December 2019, ob体育 obtained asset restraint orders in the Federal Court against EuropeFX and TradeFred to protect customers鈥� funds while an investigation was underway. Union Standard gave an undertaking to the Court to keep specified monetary amounts in a separate bank account (19-373MR). On 8 July 2020, Union Standard entered into voluntary administration; liquidators were appointed on 3 September 2020. On 10 March 2020, TradeFred went into liquidation.
In July 2020, ob体育 suspended the AFS licence of Union Standard and in September 2020, ob体育 cancelled its AFS licence (20-216MR).
Editor's note:
The case management hearing on 8 March 2021 was vacated and is now set for 19 April 2021.
Editor's note 2:
ob体育 has filed its聽听补苍诲听. A case management hearing has been set down for 13 May 2021.聽
Editor's note 3:
A further case management hearing has been set down for 29 June 2021.
Editor's note 4:
The case management hearing was adjourned to 5 August 2021.
Editor's note 5:
A further case management hearing has been set down for 1 November 2021.
Editor's note 6:
The case management hearing on 1 November 2021 was vacated and has been set down for 29 November 2021.
Editor's note 7:
A hearing for an interlocutory application has been set down for 3 February 2022.
Editor's note 8:
A liability trial has been set down for 13 February 2023.
Editor's note 9:
The liability trial was adjourned following a six week trial commencing 13 February 2023. Further dates have been set down for continuation of the trial on 28 April 2023 and from 21 August 2023 to 25 August 2023.
Editor's Note 10:
On 25 August 2023, the liability trial concluded. Judgment has been reserved.
Editor's Note 11:聽
Judgment is scheduled to be delivered in this matter on 20 December 2024.
Editor's Note 12:
On 20 December 2024, judgement was delivered. See 24-287MR.