The Federal Court of Australia has slapped a total pecuniary fine of AUD75 million (around $53.19 million) on three companies: AGM Markets Pty Ltd (AGM), OT Markets Pty Ltd (OTM), and Ozifin Tech Pty Ltd (Ozifin), in an order on Friday, propagating a strong message to the brokers.
The fine was in connection to a court battle between the brokers and the Australian Securities and Investments Commission (ASIC), who started investigating the companies after it received a large number of complaints from retail investors.
Last February, the court sided with the regulator, blaming the companies for their engagement in ‘systemic unconscionable conduct’ in selling over-the-counter (OTC) derivatives products. Investors of these companies lost around AUD32 million (~$22.7 million).
ASIC first moved against these companies in February 2018 and canceled AGM’s license later that year.
Changing the Face of AML with Self Service AnalyticsGo to article >>
“The serious nature of the contraventions and the need to send a clear message to the limited number of licensees who are dealing in OTC derivatives justifies high penalties,” the judge stated in the order.
Fines Will Send a Message
AGM was ordered to pay AUM35 million (~24.8 million), while the other two have to pay AUD20 million (~14.19 million) each.
“The overall penalty for AGM be higher than that for OTM and Ozifin, reflecting the failure by AGM to discharge its obligations as the holder of an AFSL,” the judge noted. “Such a penalty will stand as a deterrent to other AFSL holders, particularly those who are participants in the OTC derivatives market, from failing properly to supervise the conduct of their authorized representatives.”
All three companies will have to initiate a refund process to the affected 10,000 trading clients. The court also appointed liquidators for all three companies.
“The retail OTC derivatives sector remains a focus for ASIC, given misconduct identified across the sector,” ASIC deputy chair, Daniel Crennan QC said. “AGM, OTM, and Ozifin engaged in systemic unconscionable conduct, targeting unsophisticated investors and harming vulnerable consumers. The penalties handed down demonstrate the serious consequences for firms who engage in this sort of misconduct.”