ASIC secures record $300m penalty over 'egregious' CFD misconduct

The Federal Court has imposed record penalties totalling more than $300 million against collapsed contracts for difference (CFD) issuer Union Standard International Group and two of its former authorised representatives.

ASIC described the court action as one of the most serious cases of financial services misconduct it has pursued.

Justice Michael Wigney ordered penalties of $156.7 million against Union Standard, $114.1 million against Maxi EFX Global AU, which traded as EuropeFX and $29.4 million against BrightAU Capital, trading as TradeFred.

The case centred on systemic unconscionable conduct between 2018 and 2020 that resulted in customers of EuropeFX and TradeFred losing more than $83 million.

ASIC chair Sarah Court said the outcome represented the largest penalties ever secured in connection with an AISC matter.

"These record penalties reflect the egregious nature of CFD issuer misconduct in this case," Court said.

"Union Standard, EuropeFX and TradeFred operated business models that deliberately targeted inexperienced and vulnerable people using aggressive sales tactics to pressure them to trade in highly risky CFD products," she said.

The court previously found EuropeFX and TradeFred derived most of their revenue from client losses, incentivised account managers to encourage larger deposits, made misleading representations about potential profits, and pressured customers to fund trading through superannuation accounts and credit cards.

Justice Wigney described EuropeFX's conduct as "unquestionable egregious, deliberate and flagrant", adding that the firm "systematically exploited many vulnerable and financially naïve and gullible customers for its own financial gain".

"I find it difficult in this case to envisage a more serious case of contravening conduct," he said.

The judgment also marks the first time a civil penalty has been imposed on a financial services licensee for failing to ensure services were provided efficiently, honestly and fairly by marketing CFDs to customers in China despite the risk of breaching local laws.

In addition to the penalties, EuropeFX was permanently restrained from providing financial services, ordered to publish adverse publicity notices and directed to refund customers' net deposits.

Court said the decision reinforced that Australian financial services licensees remain fully accountable for misconduct conducted under their licences.

"Entities that profit from their client's losses will face serious consequences," she said.

The penalty orders have been stayed until July 13 pending further proceedings.