An Australian Federal Court has ruled against Forex Capital Trading Pty Ltd, known by its trade name Forex CT, ordering the broker to pay a penalty of AUD20 million for its involvement in ‘systemic unconscionable conduct’.
Additionally, Shlomo Yoshai, the company’s sole director and the former Chief Executive Officer, has been ordered to pay AUD400,000 in fines. Earlier, the Australian financial market regulator banned him for ten years from providing any financial services, but the court cut short his ban to eight years. His behaviour was deemed as ‘incompetent and irresponsible’.
Many other Forex CT employees were earlier banned from activities in the financial services industry for years.
Following Pressurized Sales Tactics
The Australian Securities and Exchange Commission (ASIC) moved against the forex and CFDs provider in 2019, alleging the broker for misconduct, misleading clients and failure to manage conflicts of interest.
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It was blamed for using a highly pressurized sales culture at the company as accounts managers were pushing risky financial instruments to the investors. Moreover, the company recommended inappropriate trading strategies to clients, along with misleading or deceptive representations.
The company maintained a trading floor culture that was focused on maximizing trading volume and client deposits and failed to ensure compliance with financial service laws. Furthermore, Forex CT ran an employee remuneration scheme and rewarded account managers with commissions based on net deposits.
The regulator canceled Forex CT’s Australian Financial Services (AFS) license for the violations and dragged it to court. In addition, ASIC received a court order against the company to prevent it from transferring assets or client money overseas.
Commenting on the penalty, ASIC Commissioner Cathie Armour said: ”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.”