The corporate watchdog has kicked off civil penalty proceedings in the Federal Court of Australia against contracts-for-difference and FX broker Forex Capital, as well as its sole director.
If found guilty of all allegations, director Shlomo Yoshai could face a maximum penalty of $620,000, while Forex Capital could be forced to cough up $3.1 million.
ASIC alleges Forex Capital engaged in a system of unconscionable conduct, including the use of high pressure sales tactics, for example, by offering incentives to encourage clients to transfer more money to Forex.
It also claims that Forex Capital recommended trading strategies that were inappropriate to clients; made false or misleading statements to clients; and implemented and encouraged "a trading floor culture that was directed towards maximising trading volume and client deposits rather than promoting a culture of compliance with applicable legal requirements".
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In addition, ASIC alleges Forex Capital established incentives for clients to deposit funds into their trading accounts, while also implementing disincentives for clients to withdraw funds.
The corporate watchdog also claims the broker failed to ensure compliance with financial services laws.
If found guilty of the above allegations, Forex Capital could face a maximum penalty of $2.1 million, while Yoshai could face fines of $420,000.
The regulator also alleges that Forex Capital "contravened a ban on conflicted remuneration under the Corporations Act by paying account manager bonuses primarily based on client 'net deposits' (total client deposits less withdrawals); and failed to act in the best interests of clients when giving personal advice, as required under the Corporations Act".
These allegations carry a maximum civil penalty of up to $1 million for a body corporate.
ASIC also alleges that Yoshai failed to exercise his powers and discharge his duties as a director in accordance with s.180(1) of the Corporations Act. If found guilty, this contravention could cost Yoshai a maximum of $200,000.
"ASIC seeks declarations that Forex CT engaged in misleading or deceptive conduct and, as the holder of an Australian Financial Services (AFS) licence, contravened its obligations under s912A of the Corporations Act," the corporate watchdog said.
"This includes failing to do all things necessary to ensure that the financial services covered by the AFS licence were provided efficiently, honestly and fairly."