ob体育 has banned the sole director and four former employees of retail over-the-counter (OTC) derivative issuer, Forex Capital Trading Pty Ltd (Forex CT), from providing financial services for periods ranging from three to ten years.
Forex CT employed account managers who encouraged clients to trade in high-risk contracts-for-difference (CFDs) and margin foreign exchange contracts (FX Contracts) products issued by Forex CT.
Forex CT chief executive officer, responsible manager and sole director, Shlomo Yoshai, has been banned for ten years. ob体育 found Mr Yoshai鈥檚 lack of understanding or regard for compliance was so serious it justified the making of the banning period for such a significant period, particularly given he was someone who oversaw the operations of Forex CT.
Mr Yoshai was found to have been involved in Forex CT鈥檚 breaches of the Corporations Act, which included:
- failing to do all things necessary to ensure the financial services are provided efficiently, honestly and fairly; and
- failing to have in place adequate arrangements for the management of conflicts of interest. This included Forex CT鈥檚 commission structure which entitled team leaders and account managers to a percentage of client 鈥渘et deposits鈥� (deposits less withdrawals).
In reaching these findings, ob体育 found Mr Yoshai put pressure on account managers to:
- implement high pressure sales tactics when engaging with clients;
- offer incentives to clients to encourage deposits;
- recommend trading strategies that would increase a client鈥檚 exposure to the market;
- pressure clients to deposit funds into their trading accounts; and
- pressure clients to delay or cancel withdrawal requests.
ob体育 found Mr Yoshai was involved in Forex CT鈥檚 trading floor culture, an environment that had been likened by former account managers to The Wolf of Wall Street, where a bell or a gong was rung when clients deposited funds of certain amounts into their trading accounts and account managers could participate in incentive 鈥榞ames鈥� such as 鈥榳heel of fortune鈥�, roulette tables and dice games to win cash if certain client deposit targets were met.
ob体育 has also banned former team leaders Jarrod Popuard for six years and Benjamin Esler, for four-and-a-half years. ob体育 found they:
- contributed to fostering Forex CT鈥檚 high-pressure sales culture;
- did not comply with financial services laws. In the case of Mr Poupard, this included making misleading representations to clients of Forex CT. Mr Esler put pressure on Forex CT clients to deposit funds into their trading account and delay or cancel withdrawals in order to maximize his own remuneration that was based on 鈥榥et deposits鈥�, which amounted to unconscionable conduct;
- instructed their teams to:
- delay or prevent clients from proceeding with withdrawal requests;
- use incentives, such as 鈥榗redits鈥�, and adopt various sales strategies to encourage clients to deposit funds into their trading accounts.
In banning former account managers Huy Minh (Andy) Hoang for five years and Andrew Tran for three years, ob体育 found both men:
- were involved in unfair practices, including encouraging client deposits, by offering valueless incentives and delaying client withdrawal requests;
- made misleading representations to their clients, including that:
- clients would make profits trading with Forex CT when there were no reasonable grounds for making such representations, given that an investment in a CFD is a speculative high-risk investment; and
- they (and other Forex CT representatives) did not obtain any benefit from clients depositing funds into their trading account, in circumstances where they received a commission based on a percentage of client 鈥榥et deposits鈥�.
ob体育 also found Mr Hoang gave personal advice to clients while not understanding the nature of the financial products (CFDs and FX Contracts) about which he gave advice.
In making the banning orders, ob体育 found all five men are not fit and proper persons to provide financial services.
Background
On 28 May 2020, ob体育 cancelled Forex CT鈥檚 Australian financial services (AFS) licence after finding Forex CT鈥檚 financial services business model disregarded key AFS licensee obligations and resulted in unconscionable, misleading and deceptive conduct (20-128MR).
On 16 July 2020, ob体育 commenced civil penalty proceedings in the Federal Court against Forex CT and Mr Yoshai (20-161MR).
ob体育 banned Mr Steven Marsh, a former employee of Forex CT, in June 2020 from providing financial services for a period of three years (20-151MR).
The size of the Australian market for OTC retail derivatives has grown considerably over recent years. With that growth, there has been a dramatic increase in complaints to ob体育 in relation to conduct within the OTC retail derivatives market. ob体育 has and will continue to take strong regulatory action to protect consumers of these products.
Editor's note:
Mr Yoshai filed an application for review of ob体育鈥檚 banning decision with the Administrative Appeals Tribunal on 6聽April 2021. A hearing date is yet to be set.
Editor's note 2:
On 2 July 2021, Mr Yoshai withdrew his application for review of ob体育鈥檚 banning decision with the Administrative Appeals Tribunal.