Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 4)
[2024] FCA 1481
•20 December 2024
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 4) [2024] FCA 1481
File number(s): NSD 2064 of 2019 Judgment of: WIGNEY J Date of judgment: 20 December 2024 Catchwords: CORPORATIONS – where defendants USG, EuropeFX and TradeFred offered risky financial products known as contracts for difference (CFDs) and margin foreign exchange contracts (Margin FX contracts) – where USG was licensed to provide general financial product advice under its Australian Financial Service License (AFSL) – where USG authorised EuropeFX and TradeFred to provide financial services on its behalf, including general financial product advice – consideration of Corporations Act s 911A – where ASIC alleged defendants breached their authorisations by providing personal financial product advice on over 2000 separate occasions – where USG and TradeFred filed submitting notices but allegations were contested by EuropeFX – where the voluminous evidence, written submissions and schedules would have required a judgment of War and Peace dimensions – where ASIC ultimately agreed to narrowed case and pressed for fewer findings in respect of contraventions – various personal advice contraventions established
CORPORATIONS – where ASIC alleged EuropeFX made over 1,400 representations that were false, misleading or deceptive in breach of ASIC Act ss 12DA and 12DB – where alleged contraventions again set out in lengthy schedules – where ASIC agreed to narrow case and press for fewer findings – consideration of representations in respect of future matters – ASIC Act s 12BB(2) – whether reasonable grounds for statements – where some of the alleged misrepresentations were incoherent – where no reasonable grounds for some statements – various contraventions established – some contraventions not established
CORPORATIONS – unconscionable conduct – where ASIC alleged that EuropeFX engaged in a system of conduct or pattern of behaviour that was unconscionable – ASIC Act s 12CB(4)(b) – where EuropeFX submitted that a finding of systemic unconscionability could not be made because ASIC’s case relied primarily on the evidence of only 30 customers referred to as the EFX30 – where EuropeFX argued the EFX30 were an unrepresentative sample – Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155 considered – where ASIC’s pleadings also relied on extensive documentary evidence – where pleadings not limited to the EFX30 – Unique distinguished – where evidence that EuropeFX had a system that targeted or was indiscriminate about onboarding people who were vulnerable because of their limited knowledge and experience in relation to the financial products offered – evidence that EuropeFX account managers routinely exercised undue influence and pressure on their customers – evidence that EuropeFX account managers regularly employed unfair trading strategies, gave personal advice where they were not authorised to do so and regularly made false, misleading and deceptive statements – evidence that EuropeFX profited from customers’ losses – evidence that account managers were effectively incentivised to engage in misconduct as account managers were remunerated based on amount of money deposited by customers – conduct far outside acceptable norms in respect of provision of financial services – systemic unconscionability case established
CORPORATIONS – unconscionable conduct – where ASIC also pressed for individual unconscionability findings in respect of eight EuropeFX customers known as the EFX8 – where EFX8 each gave evidence and were cross-examined at length – indicia of unconscionability – where the EFX8 were routinely given personal advice by their account managers when not authorised to do so – where EuropeFX representatives failed to provide any adequate explanations or disclosures about the risks involved in trading in CFDs and Margin FX contracts – where the EFX8 were vulnerable or at a disadvantage because they had low financial literacy – where EuropeFX representatives made misrepresentations to the EFX8 – where EuropeFX placed pressure on the EFX8 and induced the EFX8 to make large deposits into their trading accounts – where account managers fostered the EFX8’s reliance on them by telling the EFX8 they would sustain losses or miss opportunities if they did not follow the account manager’s suggestions or directions – where the complaints resolution process was unfair – contraventions established for each individual customer
Legislation: Australian Securities and Investments Commission Act 2001 (Cth) ss 12BAA, 12BB, 12CB, 12CC, 12DA, 12DB, 12GH
Corporations Act 2001 (Cth) ss 5, 9, 471B, 500, 760A, 761D, 761E, 763A, 764A, 766A, 766B, 766C, 766D, 769B, 796B, 796C, 908DD, 911A, 911D, 912A, 916A, 1041E, 1041H, 1317E
Evidence Act 1995 (Cth) ss 97, 98, 136, 140
Federal Court of Australia Act 1976 (Cth) s 37M
Trade Practices Act 1974 (Cth) s 51A
Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth) s 21
Regulations of the People’s Republic of China on the Administration of Foreign Exchange (China)
1994 Notice Concerning Strictly Investigating Illegal Activities Involving Foreign Exchange Transactions (China)
Cases cited: ASIC v AGM Markets Pty Ltd (in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57
ASIC v MLC Nominees Pty Ltd [2020] FCA 1306; (2020) 147 ACSR 266
Australasian Brokerage Ltd v Australian and New Zealand Banking Corporation Ltd (1934) 52 CLR 430
Australia Securities and Investments Commission v Westpac Securities Administration Ltd [2019] FCAFC 187; (2019) 272 FCR 170
Australian Competition and Consumer Commission v Cornerstone Investments Aust Pty ltd (in liq) (No 4) [2018] FCA 1408
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 388 ALR 577
Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1
Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) and Others (No 3) [2020] FCA 208; (2020) 275 FCR 57
Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) [2020] FCA 1442; (2020) 277 FCR 223
Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liq) [2012] FCA 414; (2012) 88 ACSR 206
Australian Securities and Investments Commission v Cassimitis (No 9) [2016] FCA 1023; (2016) 336 ALR 209
Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd [2019] FCA 1932; (2019) 140 ACSR 561
Australian Securities and Investments Commission v Forex Capital Trading Pty Limited [2021] FCA 570
Australian Securities and Investments Commission v Forex Capital Trading Pty Ltd [2021] FCA 570
Australian Securities and Investments Commission v Get Swift Limited (Liability Hearing) [2021] FCA 1384
Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345
Australian Securities and Investments Commission v Lending Centre Pty Ltd (No 3) [2012] FCA 43; (2012) 213 FCR 380
Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1
Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 2) [2020] FCA 1871
Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (Trial Ruling No 2) [2023] FCA 333
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 147
BHP Group Ltd v Impiombato [2022] HCA 33; (2022) 405 ALR 402
Bing! Software v Bing Technologies [2009] FCAFC 131; (2009) 180 FCR 191
Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94; [2001] ATPR 46-210
Briginshaw v Briginshaw (1938) 60 CLR 336
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592
Chubb Insurance Company of Australia Ltd v Moore [2013] NSWCA 212; (2013) 302 ALR 101
Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97; (2023) 411 ALR 315
Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199
Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149
Guthrie v Spence (2009) 78 NSWLR 225
Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157
Islam v Director-General, Justice and Community Safety Directorate [2022] ACTSC 124
Jenyns v Public Curator (Qld) (1953) 90 CLR 113
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Mackay v Commercial Bank of New Brunswick (1874) LR 5 PC 394
Mayfair Wealth Partners Pty Ltd v ASIC [2022] FCAFC 170; (2022) 292 FCR 106
Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170
McGrath; in the matter of Pan Pharmaceutical Ltd (in liq) v Australian NaturalcareProducts Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230
Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992)110 ALR 449
North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60; (2010) 269 ALR 262
North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; (2012) 285 ALR 217
Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191
PCH Offshore Pty Ltd v Dunn [2009] FCA 553
Productivity Partners Pty Ltd (trading as Captain Cook College) v Australian Competition and Consumer Commission [2023] FCAFC 54; (2023) 297 FCR 180
Productivity Partners v Australian Competition and Consumer Commission [2024] HCA 27
Re EncoreFX (Australia) Pty Ltd in Liq (No 2) [2021] FCA 27
Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555
Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; (2023) 277 CLR 186
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262
SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) [2014] FCAFC 50; 314 ALR 35
Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1
Sykes v Reserve Bank of Australia [1988] FCA 1405; (1998) 88 FCR 511
The Juliana (1822) 2 Dods 504 at 521; 165 ER 156
Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155; (2018) 266 FCR 631
Australian Securities and Investments Commission v Park Trent Properties Group Pty Ltd (No 3) [2015] NSWSC 1527
Waller v Freehills (2009) 177 FCR 507; [2009] FCAFC 89
Westpac Securities Administration Ltd v Australia Securities and Investments Commission [2021] HCA 3; (2021) 270 CLR 118
Yammie v Lantrak Holdings Pty Ltd (No 2) [2023] FCA 162
Bant E (ed), The Culpable Corporate Mind, Bloomsbury Publishing, (2023) p 183
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 1806 Date of hearing: 13 February 2023-24 March 2023
21 August 2023-25 August 2023
Counsel for the Plaintiff: Mr L Livingston SC with Mr D Birch Solicitor for the Plaintiff: Clayton Utz Counsel for the Second Defendant: Ms M Painter SC with Mr F Tao and Ms C Brain Solicitor for the Second Defendant: Piper Alderman ORDERS
NSD 2064 of 2019 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: UNION STANDARD INTERNATIONAL GROUP PTY LTD
First Defendant
MAXI EFX GLOBAL AU PTY LTD
Second Defendant
BRIGHTAU CAPITAL PTY LTD
Third Defendant
ORDER MADE BY:
WIGNEY J
DATE OF ORDER:
20 DECEMBER 2024
THE COURT ORDERS THAT:
1.The matter be listed for a further case management hearing at 9.30 am 19 February 2025, or such other date that is agreed by the parties and suitable to the Court.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
USG, EUROPEFX AND TRADEFRED AND THEIR BUSINESSES
[28]
USG
[29]
EuropeFX
[34]
EuropeFX
[36]
Marketing and promotions
[38]
Sourcing and “onboarding” of customers
[40]
Trading and account managers
[45]
Remuneration of account managers
[49]
Compliance and dispute resolution
[51]
EuropeFX
[53]
Termination of EuropeFX’s CAR with USG
[62]
TradeFred
[63]
TradeFred
[64]
The way TradeFred provided its services
[67]
TradeFred
[71]
Losses incurred by TradeFred customers
[73]
Termination of the CAR and appointment of liquidators
[74]
CFDS AND MARGIN FX CONTRACTS
[75]
OVERVIEW – ALLEGED CONTRAVENTIONS AND KEY ISSUES
[101]
Alleged contraventions by EuropeFX
[102]
Personal advice contraventions
[103]
False, misleading or deceptive representations or conduct
[110]
Systemic unconscionability
[118]
Unconscionable conduct in respect of each of the EFX30
[121]
Alleged contraventions by TradeFred
[127]
Personal advice contraventions
[129]
Misleading or deceptive representations or conduct
[131]
Systemic unconscionable conduct
[134]
Unconscionable conduct in respect of each of the TF20
[136]
Alleged contraventions by USG
[139]
Misleading or deceptive conduct
[141]
Liability for the contravening conduct of EuropeFX and TradeFred
[143]
Failure to ensure financial services provided efficiently, honestly or fairly
[144]
Burden and standard of Proof
[146]
THE EVIDENTIARY LANDSCAPE
[151]
ASIC’s evidence in its case against EuropeFX - overview
[152]
EuropeFX
[159]
ASIC’s evidence in its case against TradeFred
[168]
ASIC’s evidence in its case against USG
[171]
THE EVIDENCE OF THE EFX8
[174]
Mr Wilson (EFX1)
[206]
Initial contact with EuropeFX and the opening of an account
[209]
Understanding of CFDs, Margin FX Contracts and trading risks
[214]
Trading and communications with EuropeFX account managers
[223]
Complaints
[243]
Ms Love (EFX2)
[244]
Initial contact with EuropeFX and the opening of an account
[249]
Understanding of CFDs, Margin FX Contracts and trading risks
[262]
Trading and communications with EuropeFX account managers
[276]
Complaints
[297]
Mr Kalusinghe (EFX3)
[299]
Initial contact with EuropeFX and the opening of an account
[302]
Understanding of CFDs, Margin FX Contracts and trading risks
[304]
Communications with EuropeFX account managers and trading
[315]
Complaints
[338]
Ms Elford (EFX4)
[347]
Initial contact with EuropeFX and the opening of an account
[350]
Understanding of CFDs, Margin FX Contracts and trading risks
[357]
Communications with EuropeFX account managers and trading
[369]
Complaints
[390]
Ms Nikiforos (EFX6)
[391]
Initial contact with EuropeFX and the opening of an account
[393]
Understanding of CFDs, Margin FX Contracts and trading risks
[395]
Communications with EuropeFX account managers and trading
[402]
Complaints
[416]
Ms Sapor (EFX8)
[419]
Initial contact with EuropeFX and the opening of an account
[422]
Understanding of CFDs, Margin FX Contracts and trading risks
[426]
Communications with EuropeFX account managers and trading
[447]
Complaints
[474]
Ms Boden (EFX9)
[477]
Ms Boden’s credibility and reliability
[480]
Initial contact with EuropeFX and the opening of an account
[489]
Understanding of CFDs, Margin FX Contracts and trading risks
[493]
Communications with EuropeFX account managers and trading
[507]
Complaints
[532]
Ms Kuhn (EFX11)
[535]
Initial contact with EuropeFX and the opening of an account
[538]
Understanding of CFDs, Margin FX Contracts and trading risks
[543]
Communications with EuropeFX account managers and trading
[557]
Complaints
[591]
EVIDENCE RELATING TO THE EFX22
[594]
Miriam Battersby (EFX5)
[608]
Paul Bonini (EFX7)
[617]
Darren Singleton (EFX10)
[623]
Xiaodong (Joan) Liu (EFX12)
[628]
Toni Aldous (EFX13)
[634]
John Isaacs (EFX14)
[641]
Sami Ayoub (EFX15)
[648]
Anne Marie Robinson (EFX16)
[656]
Lewis Stubna (EFX17)
[663]
Zina Curtin (EFX18)
[668]
David Grubb (EFX19)
[676]
Ken Geering (EFX20)
[681]
Nathan Lapham (EFX21)
[686]
Adam Cartwright (EFX22)
[691]
James Chircop (EFX 23)
[696]
Jessica Green (EFX24)
[701]
Ariel Larsen (EFX25)
[707]
Patrick Hillier (EFX26)
[714]
Zina Sofer (EFX27)
[720]
Margaret Scott (EFX28)
[726]
Mark Dand (EFX29)
[732]
Joe Costa (EFX30)
[739]
Summary of findings and conclusions in respect of the EFX22
[744]
OTHER LAY WITNESSES IN ASIC’S CASE AGAINST EUROPEFX
[752]
Mr Parry
[753]
Evidence of “quality control” officers
[757]
THE EXPERT EVIDENCE
[776]
Mr Blundell
[780]
Mr Dowd
[781]
General observations
[782]
THE PERSONAL ADVICE CONTRAVENTIONS - OVERVIEW
[789]
Statutory provisions and relevant principles
[790]
ASIC’s alleged categories of personal advice
[809]
Position Statements
[810]
Signal Provider Statements
[814]
Deposit Statements
[817]
Trading Strategy Statements
[820]
Customer objectives, financial position, or needs
[823]
PERSONAL ADVICE CONTRAVENTIONS
[827]
ASIC’s personal advice case against EuropeFX as originally pleaded
[828]
Contraventions admitted by EuropeFX
[838]
ASIC’s narrowed personal advice case against EuropeFX
[843]
Findings in relation to the disputed personal advice allegations
[850]
Did each of the statements amount to a recommendation or statement of opinion?
[851]
Could each of the statements reasonably be regarded as having been intended to influence the EuropeFX customer to whom it was made in relation to a CFD or Margin FX Contract?
[864]
Were the statements made in circumstances where a reasonable person might expect that the EuropeFX representative had considered one or more of the EuropeFX customer’s objectives, financial situation and needs?
[867]
Summary of findings and conclusions in relation to EuropeFX personal advice contraventions
[883]
PERSONAL ADVICE CONTRAVENTIONS
[889]
ASIC’s limited case in respect of personal advice contraventions by TradeFred
[891]
Findings
[894]
Summary of findings and conclusions in relation to TradeFred personal advice contraventions
[901]
FALSE OR MISLEADING REPRESENTATIONS AND MISLEADING OR DECEPTIVE CONDUCT CONTRAVENTIONS – OVERVIEW
[902]
Statutory provisions and relevant principles
[903]
The categories of allegedly false or misleading representations
[915]
Profit Representations
[917]
Revenue Representations
[921]
Money Risk Representations
[926]
Withdrawal Representations
[930]
Loss Recovery Representations
[934]
Equities Representations
[938]
Bank Account Representations
[942]
Plan Representations
[946]
Regulation Representations
[950]
Location Representations
[954]
Bonus Representations
[958]
FALSE OR MISLEADING REPRESENTATIONS OR MISLEADING OR DECEPTIVE CONDUCT – EUROPEFX
[960]
ASIC’s false, misleading or deceptive statements case against EuropeFX as originally pleaded
[961]
ASIC’s narrowed false, misleading or deceptive statements case against EuropeFX
[964]
Contraventions admitted by EuropeFX
[969]
Findings
[976]
Profit Representations
[977]
Profit Representation 5
[982]
Profit Representation 7
[1012]
The remaining 45 contested Profit Representations
[1031]
Contraventions of s 12DB(1) of the ASIC Act?
[1041]
Summary of conclusions in respect of the 47 contested Profit Representations
[1043]
Revenue Representations
[1044]
Money Risk Representations
[1057]
Withdrawal Representations
[1073]
Loss Recovery Representations
[1085]
Equities Representations
[1100]
Bank Account Representations
[1105]
Regulation Representations
[1114]
Location Representations
[1129]
Summary of findings in relation to EuropeFX false, misleading or deceptive representations
[1135]
MISLEADING OR DECEPTIVE REPRESENTATIONS – TRADEFRED
[1139]
Profit Representations
[1148]
Revenue Representations
[1150]
Money Risk Representations
[1152]
Withdrawal Representations
[1154]
Loss Recovery Representations
[1157]
Equities Representations
[1160]
Bank Account Representations
[1163]
Plan Representations
[1168]
Regulation Representations
[1171]
Bonus Representations
[1174]
Summary of findings in respect of TradeFred misleading and deceptive representations
[1178]
MISLEADING OR DECEPTIVE REPRESENTATIONS – USG
[1179]
USG
[1185]
Rob Clayton Report Representations
[1190]
Rob Clayton Representations
[1194]
Summary of findings in relation to USG misleading and deceptive representations
[1198]
UNCONSCIONABLE CONDUCT CONTRAVENTIONS – GENERALLY
[1199]
Statutory provisions and relevant principles
[1200]
UNCONSCIONABLE CONDUCT BY EUROPEFX - OVERVIEW
[1218]
UNCONSCIONABLE CONDUCT BY EUROPEFX – SYSTEM OF CONDUCT AND PATTERNS OF BEHAVIOUR
[1232]
Misleading advertising and promotions
[1238]
“Onboarding” of inexperienced customers
[1273]
Inadequate training or a deliberate strategy?
[1299]
Profiting from customers’ losses
[1304]
Incentives and the remuneration of account managers
[1308]
Patterns of behaviour of account managers
[1312]
Knowledge that dealing with inexperienced and vulnerable customers
[1323]
Inadequate explanations of concepts and risks
[1331]
Impermissible provision of personal advice
[1344]
Misleading and deceptive representations
[1352]
Encouraging reliance
[1359]
Pressure to trade and deposit funds
[1363]
Unfair promotions
[1374]
Encouraging use of inappropriate funds
[1382]
Impediments to withdrawals
[1390]
Inappropriate or unfair trading strategies
[1395]
Encouraging ongoing trading by reference to trading balance
[1403]
Inadequate training of account managers
[1406]
EuropeFX
[1416]
Unfair complaints resolution process
[1427]
Section 12CC ASIC Act considerations
[1440]
EuropeFX
[1444]
Conclusion – EuropeFX engaged in systemic unconscionable conduct
[1457]
UNCONSCIONABLE CONDUCT BY EUROPEFX TOWARDS THE EFX8
[1460]
Outline of ASIC’s case in respect of unconscionable conduct towards the EFX8
[1465]
Outline of EuropeFX’s defence or case in response
[1487]
Some general observations
[1508]
Unconscionable conduct – Ben Wilson
[1513]
Vulnerability
[1514]
Failure to ensure an adequate understanding of the financial services and risks
[1520]
Personal advice
[1522]
Misleading or deceptive representations
[1524]
Pressure to invest and deposit, encouraging reliance and unfair inducements
[1525]
Other unfair conduct
[1529]
Section 12CC considerations
[1531]
Conclusion
[1533]
Unconscionable conduct – Lesley Love
[1535]
Vulnerability
[1536]
Failure to ensure an adequate understanding of the financial services and risks
[1540]
Personal advice
[1543]
Misleading or deceptive representations
[1545]
Encouraging reliance
[1546]
Other unfair conduct
[1549]
Section 12CC considerations
[1550]
Conclusion
[1552]
Unconscionable conduct – Prasanna Kalusinghe
[1554]
Vulnerability
[1555]
Failure to ensure an adequate understanding of the financial services and risks
[1560]
Personal advice
[1563]
Misleading or deceptive representations
[1566]
Pressure to invest and deposit, encouraging reliance and unfair inducements
[1568]
Other unfair conduct
[1574]
Section 12CC considerations
[1575]
Conclusion
[1577]
Unconscionable conduct – Deborah Elford
[1579]
Vulnerability
[1580]
Failure to ensure an adequate understanding of the financial services and risks
[1583]
Personal advice
[1588]
Misleading or deceptive representations
[1589]
Pressure to invest and deposit, encouraging reliance and unfair inducements
[1590]
Other unfair conduct
[1592]
Section 12CC considerations
[1594]
Conclusion
[1596]
Unconscionable conduct – Jennifer Nikiforos
[1598]
Vulnerability
[1599]
Failure to ensure an adequate understanding of the financial services and risks
[1604]
Personal advice
[1606]
Reliance, encouraging reliance and pressure to invest
[1607]
Other unfair conduct
[1610]
Section 12CC considerations
[1613]
Conclusion
[1615]
Unconscionable conduct – Sandrine Sapor
[1617]
Vulnerability
[1618]
Failure to ensure an adequate understanding of the financial services and risks
[1623]
Personal advice
[1627]
Misleading or deceptive representations
[1628]
Reliance, encouraging reliance and pressure
[1629]
Risky trading strategies
[1631]
Other unfair conduct
[1632]
Section 12CC considerations
[1634]
Conclusion
[1636]
Unconscionable conduct – Julie Boden
[1638]
Vulnerability
[1639]
Failure to ensure an adequate understanding of the financial services and risks
[1648]
Personal advice
[1650]
Misleading or deceptive representations
[1651]
Encouraging reliance
[1652]
Other unfair conduct
[1657]
Section 12CC considerations
[1659]
Conclusion
[1661]
Unconscionable conduct – Leanne Kuhn
[1663]
Vulnerability
[1664]
Failure to ensure an adequate understanding of the financial services and risks
[1670]
Personal advice
[1673]
Misleading or deceptive representations
[1676]
Pressure to invest and deposit, encouraging reliance and unfair inducements
[1677]
Other unfair conduct
[1680]
Section 12CC considerations
[1682]
Conclusion
[1684]
Conclusion
[1686]
UNCONSCIONABLE CONDUCT BY TRADEFRED – SYSTEM OF CONDUCT AND PATTERNS OF BEHAVIOUR
[1687]
UNCONSCIONABLE CONDUCT BY TRADEFRED TOWARDS THE TF4
[1701]
OTHER CONTRAVENTIONS BY USG
[1714]
USG
[1715]
Failure to ensure financial services provided efficiently, honestly and fairly
[1726]
Applicable statutory provisions and principles
[1729]
Relevant facts
[1736]
Were USG’s actions illegal as a matter of Chinese law?
[1745]
Was it illegal for USG’s Chinese customers to trade in USG’s financial products?
[1760]
The territoriality issue – can the provision of financial services or financial products to customers who reside in a foreign jurisdiction found a contravention of s 912A(1)(a)?
[1765]
Can the provision of financial services in contravention of a foreign law result in a contravention of s 912A(1)(a)?
[1794]
Did USG ensure that its financial services were provided “efficiently, honestly and fairly”?
[1800]
SUMMARY OF FINDINGS AND CONCLUSIONS
[1802]
Appendix A – Defined Terms
Appendix B – Key Individuals & Entities
WIGNEY J:
This case concerns the conduct of three Australian companies that operated on the fringes of the financial services market between about 2017 and early 2020. Those three companies provided their customers, many of whom had little or no prior investment or securities trading experience, with a market and trading platform through which they could trade in highly risky over-the-counter derivative products known as contracts for difference (CFDs) and margin foreign exchange contracts (Margin FX Contracts). One of the companies, Union Standard International Group Pty Ltd (USG) held an Australian Financial Services Licence (AFSL). The other two companies, Maxi EFX Global AU Pty Ltd (EuropeFX or EFX) and Bright AU Capital Pty Ltd (TradeFred) were USG’s corporate authorised representatives. Many, if not most, of the day-to-day operations of EuropeFX and TradeFred were outsourced and performed by entities or individuals who were located overseas.
USG, EuropeFX and TradeFred profited handsomely from their derivatives trading business. Most of their customers did not.
The Australian Securities and Investments Commission (ASIC) commenced an investigation into the conduct of USG, EuropeFX and TradeFred in 2019 and in due course commenced this proceeding. ASIC alleged that each of the companies contravened various provisions in the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
Specifically, ASIC alleged that EuropeFX: contravened s 911A of the Corporations Act on numerous occasions by providing personal advice to its customers in circumstances where it was only permitted to provide general advice; contravened ss 12DA and 12DB of the ASIC Act and ss 1041E and 1041H of the Corporations Act on numerous occasions by making false or misleading representations to its customers, or engaging in misleading or deceptive conduct, in connection with the provision of financial services; contravened s 12CB of the ASIC Act (by virtue of s 12CB(4)(b) of the ASIC Act) by engaging in a system of conduct or pattern of behaviour which was unconscionable; and contravened s 12CB of the ASIC Act on multiple occasions by engaging in unconscionable conduct in relation to certain identified customers. ASIC ultimately did not press the Court to make findings in relation to the alleged contraventions of ss 1041E and 1041H of the Corporations Act.
In relation to TradeFred, ASIC alleged that it: contravened s 911A of the Corporations Act on numerous occasions; contravened ss 12DA and 12DB of the ASIC Act on numerous occasions; and contravened s 12CB of the ASIC Act, both by engaging in a system of conduct or pattern of behaviour which was unconscionable, and by engaging in unconscionable conduct towards certain identified customers.
In relation to USG, ASIC alleged that it: contravened ss 12DA and 12DB of the ASIC Act on numerous occasions; separately contravened s 911A of the Corporations Act and ss 12DA and 12DB of the ASIC Act in respect of each of EuropeFX’s and TradeFred’s contraventions of those provisions on the basis that EuropeFX and TradeFred were acting as USG’s agents when they made the impugned statements and representations; contravened s 12CB of the ASIC Act in respect of each of EuropeFX’s and TradeFred’s contraventions of that provision, again on the basis that EuropeFX and TradeFredwere acting as USG’s agent when they engaged in the impugned conduct; and contravened s 912A(1)(a) of the Corporations Act by failing to do all things necessary to ensure that the financial services covered by its AFSL were provided efficiently, honestly and fairly.
The proceeding was actively and vigorously defended by EuropeFX, though EuropeFX did ultimately admit some of the alleged contraventions of s 911A of the Corporations Act and ss 12DA and 12DB of the ASIC Act.
USG and TradeFred did not actively defend the proceeding insofar as the allegations against them were concerned. That is because both companies were wound up before the matter proceeded to trial. The Court granted ASIC leave to proceed against USG and TradeFred pursuant to ss 471B and 500(2) of the Corporations Act respectively: see Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 2) [2020] FCA 1871. Submitting notices were filed on behalf of both companies. The Court did, however, hear submissions by amicus curiae in respect of the allegation that USG contravened s 912A of the Corporations Act.
ASIC’s case against EuropeFX, TradeFred and USG was large and complex. ASIC adduced a huge volume of evidence. The evidence included, in summary: affidavit evidence from several customers of EuropeFX and TradeFred; affidavit evidence from two former employees of EuropeFX; expert opinion evidence from a person with specialised knowledge in respect of derivative markets in Australia; and voluminous documentary evidence, including business records of the three companies in question and hundreds of recordings and transcripts of telephone conversations between USG, EuropeFX and TradeFred sales and account representatives and their customers.
ASIC’s case in respect of the alleged contraventions of s 911A of the Corporations Act by EuropeFX and TradeFred mainly hinged on the characterisation of statements made by representatives of EuropeFX and TradeFred during their telephone conversations with the customers. The critical issue was whether those statements, considered in context, were made in circumstances where a reasonable person might expect the representatives to have considered the customers’ circumstances, financial situation and needs. ASIC initially alleged that EuropeFX, TradeFred and USG contravened s 911A on thousands of occasions. Ultimately, however, it agreed to narrow its case and require the Court to make findings only in relation to just over a hundred statements by EuropeFX (in addition to those that it admitted constituted personal advice) and twenty statements by TradeFred.
ASIC’s case in respect of the alleged contraventions of ss 12DA and 12DB of the ASIC Act also largely hinged on the characterisation of statements or representations made by representatives of EuropeFX, TradeFred and USG during their telephone conversations with customers. ASIC alleged that the representatives made well over a thousand representations that fell within various defined categories, many of which related in some way to the profits or income that customers might expect to earn by trading in CFDs and Margin FX Contracts, or the nature and extent of the risks involved in such trading, or the circumstances or manner in which the companies conducted their business. ASIC’s case was that representations that fell within those defined categories were false, misleading or deceptive for various reasons. ASIC initially alleged that the false, misleading or deceptive representations not only constituted contraventions of ss 12DA and 12DB of the ASIC Act, but also ss 1041E and 1041H of the Corporations Act. ASIC ultimately agreed to limit its case to contraventions of ss 12DA and 12DB of the ASIC Act. It also agreed to press the Court to make findings in relation to a much smaller number of representations.
Perhaps the most contentious and complex aspect of ASIC’s case was its allegation that EuropeFX engaged in unconscionable conduct, both by way of a system of conduct or pattern of behaviour and in respect of certain identified customers. ASIC relied on affidavit evidence from eight individual customers of EuropeFX. Those customers, who were referred to during the proceeding as the EFX8, were extensively cross-examined. ASIC tendered all the recordings and transcripts of telephone conversations between EuropeFX representatives and the EFX8, and all the transcripts and recordings of telephone conversations between EuropeFX representatives and another 22 customers (the EFX22), that had been produced to it during its investigation. ASIC did not adduce affidavit evidence from any of the EFX22 and they were not called or made available as witnesses in the proceeding. The EFX8, together with the EFX22 customers, were referred to during the proceeding as the EFX30. ASIC relied on the evidence of and relating to the EFX30 both in relation to its systemic unconscionability case, and its case of unconscionable conduct in respect of the customers themselves.
As has already been noted, ASIC adduced expert opinion evidence from a witness with specialised knowledge in respect of derivative markets in Australia, including the markets for CFD and Margin FX Contracts. EuropeFX also adduced expert opinion evidence from a person who had specialised knowledge in respect of securities trading. The expert evidence addressed several questions and issues relevant to ASIC’s case of unconscionable conduct. It also addressed questions relevant to some of the allegedly false or misleading representations.
ASIC also adduced evidence from two former Australian-based employees of EuropeFX. Those employees did not engage directly with EuropeFX’s customers, but rather were involved in monitoring the conversations between EuropeFX representatives and their customers for the purposes of quality control. EuropeFX ultimately did not adduce evidence from any of its representatives who dealt with the EFX30 or were otherwise involved in the conduct of its business.
EuropeFX vigorously maintained that ASIC had failed to prove that it had engaged in an unconscionable system of conduct or pattern of behaviour, or that its conduct in respect of the EFX30 was unconscionable.
ASIC’s principal case was that EuropeFX engaged in unconscionable conduct by way of its system or systems of conduct and patterns of behaviour. It initially claimed that EuropeFX engaged in unconscionable conduct in relation to each of the EFX30, but ultimately agreed to narrow its case in respect of the identified customers to the EFX8, at least if the Court found that EuropeFX had engaged in systemic unconscionable conduct.
ASIC’s case that TradeFred engaged in unconscionable conduct was similar to its case against EuropeFX. It was, however, slightly narrower in scope and not as contentious, particularly given that TradeFred filed a submitting appearance.
The parties agreed, and the Court ordered, that issues concerning liability be heard and determined separately and before any issues relating to relief. This judgment accordingly only addresses whether USG, EuropeFX and TradeFred contravened the Corporations Act and ASIC Act as alleged by ASIC.
I will address the multitude of complex issues that are thrown up by ASIC’s case in the following manner.
I will first provide a short summary of the facts and evidence concerning the general nature of the businesses conducted by USG, EuropeFX and TradeFred. It will, in that context, be necessary to provide a short description of the nature of CFDs and Margin FX Contracts, including the risks involved in trading in derivatives of that nature. I will then provide a short outline of ASIC’s case against EuropeFX, TradeFred and USG and the key issues that must be addressed and determined in respect of the alleged contraventions.
After providing an overview of the evidence adduced by the parties, I will then summarise the key features of the evidence of and relating to the EFX8. I will then summarise the evidence relating to the EFX22, though in considerably less detail than the evidence of the EFX8. It is necessary to consider the evidence of and relating to the EFX30 at the outset because it is relevant to most of the alleged contraventions. It will, however, be necessary to revisit some of the evidence relating to both the EFX8 and the EFX22 in the context of the specific alleged contraventions by EuropeFX, particularly the unconscionable conduct allegations.
Having considered the evidence of the EuropeFX and TradeFred customers, I will then briefly address the evidence of the other lay witnesses called by ASIC in its case against EuropeFX. I will also provide an overview of, and make some general findings concerning, the evidence of the expert witnesses called by ASIC and EuropeFX. Specific aspects of the evidence of the expert witnesses will also be considered in more detail when addressing the specific alleged contraventions.
The first group of alleged contraventions which will be considered will be the personal advice contraventions by EuropeFX and TradeFred. The second group of alleged contraventions which will be considered will be the misleading or deceptive representation contraventions by EuropeFX, TradeFred and USG. It is necessary to consider those groups of contraventions first because some of the factual findings made in the context of those alleged contraventions are likely to be relevant to the allegations concerning unconscionable conduct. ASIC alleged, for instance, that the indicia of unconscionable conduct on the part of EuropeFX included the making of many personal advice statements and misleading or deceptive representations to customers. The alleged personal advice and false or misleading representations contraventions by TradeFred will be dealt with in brief terms given that it did not file a defence or adduce any evidence.
I will then address the allegations of unconscionable conduct. I will first address the allegation of systemic unconscionability on the part of EuropeFX. In addressing that allegation, it will be necessary to consider, among other things, whether the evidence as a whole, including the of and relating to the EFX8, and the evidence relating to the EFX22, supports a finding that EuropeFX engaged in patterns of behaviour and systems of conduct that were, in all the circumstances, unconscionable. Having addressed ASIC’s case of systemic unconscionability, I will then consider and address whether ASIC made out its case that EuropeFX engaged in unconscionable conduct in respect of each of the EFX8. The allegations of unconscionability on the part of TradeFred will then be addressed, though again fairly briefly given the absence of any defence on the part of TradeFred.
Finally, I will address ASIC’s allegation that USG was liable in respect of contraventions by both EuropeFX and TradeFred, as well as ASIC’s allegation that USG contravened s 912A(1) of the Corporations Act by failing to do all things necessary to ensure that the financial services covered by its AFSL were provided efficiently, honestly and fairly.
To assist the comprehension of these reasons a list of defined or technical terms and abbreviations is provided in appendix A, and a list of relevant individuals and entities is provided in appendix B.
References in these reasons to a dollar amount refers to Australian dollars, unless an alternate currency is specifically referenced.
USG, EUROPEFX AND TRADEFRED AND THEIR BUSINESSES
It is useful at the outset to provide a brief outline of the nature of the businesses carried on by USG, EuropeFX and TradeFred and how they went about conducting those businesses. Some more contentious aspects of EuropeFX’s business will be addressed in more detail later in the context of the allegations concerning unconscionable conduct.
USG
USG was a corporation incorporated and registered in Australia. Its directors at various times during the period from 2017 to 2019 were Mr James Clinnick, Mr Anthony Alexander, Mr John Martin, Mr Darren Burns, Ms Anya Victoria and Mr Soe Hein Minn. The evidence indicated that its Chief Executive Officer during that period was Mr Shay Zakhaim. Mr Martin was USG’s Responsible Manager and Head of Compliance.
USG obtained an AFSL on 1 February 2016. The AFSL authorised USG, in relation to retail and wholesale clients, to: provide general financial product advice for derivatives and foreign exchange contracts; to deal in those financial products; and to make a market in relation to those financial products. The AFSL did not permit USG to provide personal financial advice. The meaning of personal financial advice, in that context, is discussed in more detail later.
USG authorised EuropeFX and TradeFred to provide certain specified financial services on its behalf. A company who is so authorised is generally called a corporate authorised representative (or CAR). It is unclear precisely when EuropeFX and TradeFred were appointed as USG’s CARs, though it appears that TradeFred was appointed between about July and September 2017, and EuropeFX was appointed by at least March 2018.
The business conducted by USG included dealing in derivatives by issuing and making a market for CFDs and Margin FX Contracts. It was common ground that, in conducting that business, USG dealt (within the meaning of s 766C of the Corporations Act) in financial products (within the meaning of Pt 7.1 Div 3 of the Corporations Act and s 12BAA of the ASIC Act) and carried on a financial services business.
The nature and features of CFDs and Margin FX Contracts are discussed in more detail later. It suffices at this point to note that USG was the principal and counterparty to all positions opened not only by its own customers, but also EuropeFX’s and TradeFred’s customers, by reason of, and pursuant to the terms of, Product Disclosure Statements (PDS) issued by it, EuropeFX and TradeFred. As the counterparty to all the positions, and by virtue of its arrangements with EuropeFX and TradeFred, USG generated revenue when its customers and EuropeFX’s and TradeFred’s customers made losses as a result of closing positions that had moved against them. The basis upon which USG, EuropeFX and TradeFred generated revenue and profits is discussed in more detail later.
EuropeFX
EuropeFX was a corporation incorporated and registered in Australia. Its director at the time of its registration on 28 March 2018 was Mr Pedro Sasso.ASIC’s records indicated that Mr Sasso resigned as a director on 20 September 2018 and Mr Martin was appointed a director in his stead. Mr Martin subsequently resigned as a director on 20 April 2019 and Mr Sasso was reappointed a director on the same day. The sole shareholder of EuropeFX was Addnet Solutions Pty Ltd. Mr Sasso was the sole director and shareholder of Addnet Solutions, though Mr Sasso held his shares in Addnet Solutions on trust for Maxiflex Global Investments Limited (later named Maxiflex Limited), a company based in either Cyprus or Israel. While Mr Sasso was EuropeFX’s sole director, he took instructions in relation to the conduct and management of EuropeFX’s business from a man named Mr Gal Amar, who was said to be an adviser to Maxiflex. Mr Sasso considered Maxiflex to be the true owner of EuropeFX. Mr Sasso’s responsibilities at EuropeFX appeared to be largely limited to accounting or financial recording.
It should be noted in this context that, despite having filed an affidavit sworn by Mr Sasso, EuropeFX ultimately did not call Mr Sasso as a witness in its case. Nor did it call Mr Martin or adduce evidence from Mr Amar or any other person who was involved in the day-to-day business of EuropeFX.
EuropeFX’s business – overview
As noted earlier, by at least March 2018 USG had appointed EuropeFX to be one of its CARs. As USG’s CAR, EuropeFX was authorised to provide, on USG’s behalf, the financial services that USG was authorised to provide under the terms of its AFSL. Shortly after its appointment as USG’s CAR, EuropeFX commenced its business of offering CFDs and Margin FX Contracts to its customers through an online trading platform known as MetaTrader4 (MT4). That trading platform was accessed via EuropeFX’s website. There was essentially no dispute that, in conducting that business, EuropeFX dealt (within the meaning of s 766C of the Corporations Act) in financial products (within the meaning of Pt 7.1 Div 3 of the Corporations Act and s 12BAA of the ASIC Act) and carried on a financial services business.
It is of some relevance that, while EuropeFX was an Australian registered corporation, and was only able to deal in financial products as a result of it being a CAR of USG, also an Australian registered corporation and the holder of an AFSL, EuropeFX outsourced virtually all aspects of its day-to-day business to entities or individuals who resided outside Australia. The activities or functions that EuropeFX outsourced to foreign corporations included marketing and promotions, the sourcing or “onboarding” of customers in Australia and elsewhere, and the engagement with, and provision of advice to, customers, including customers in Australia.
Marketing and promotions
EuropeFX outsourced its “e-marketing” to a company called Affilimedia Global Ltd, a company apparently based in Belize. Affilimedia operated websites and EuropeFX agreed to pay it a fee for every person who, as a result of interacting with an Affilimedia website, ended up interacting with EuropeFX’s website and becoming a EuropeFX customer. EuropeFX also entered into agreements with BAFF Affiliate Networks Ltd and Bolacom Ltd, both being companies incorporated in Cyprus, which involved the provision, by those companies, of platforms or services aimed at attracting new EuropeFX customers by way of online “traffic”.
As discussed in more detail later in the context of the unconscionability allegations, the evidence indicated that the initial contact that many customers had with EuropeFX occurred shortly after they had interacted with, or responded in some way to, online “pop-up” advertisements, promotions or other marketing devices. Those advertisements or promotions were often on social media platforms such as Facebook. The evidence indicated that the pop-up advertisements or promotions that many EuropeFX customers initially responded to or interacted with related to what was said to be an automated Bitcoin or cryptocurrency trading platform which had supposedly generated profits or wealth for several well-known businesspeople or celebrities. Those advertisements or promotions were, it may be inferred, generated or operated by Affilimedia, BAFF or Bolacom, or both. They were intended to, and did, direct “traffic” – prospective customers – to the likes of EuropeFX. Once a prospective customer interacted with one of those advertisements or promotions, they were generally contacted by telephone by someone acting on behalf of EuropeFX.
Sourcing and “onboarding” of customers
EuropeFX also outsourced the sourcing and registration of new customers to a company called Global Win Solutions Ltd, a company based in Belize, which provided call centre services. The evidence indicated, or supported the inference, that it was sales representatives employed or retained by Global Win who first interacted by telephone with prospective customers of EuropeFX. They were responsible for the process of registering or “onboarding” new customers.
The evidence concerning the on-boarding and registration process will be considered in more detail later in these reasons in the context of the unconscionability allegations. As has already been noted, the evidence suggested that prospective customers who had clicked on or otherwise responded to online or social media advertisement or promotions operated by Affilimedia, BAFF or Bolacom, subsequently received a telephone call from someone who said they were from EuropeFX. It may be inferred that such persons were sales representatives employed or retained by Global Win. Those representatives generally endeavoured to persuade prospective customers to register with EuropeFX and to deposit funds for the purpose of trading.
If the customer was persuaded to register and open a trading account, the online registration process required the customer to complete an online questionnaire. That questionnaire required the customer to provide information concerning their personal and financial circumstances, including their income, their financial resources and their experience, if any, in respect of trading in various financial products, including CFDs. The questionnaire also required the customer to tick a box indicating that they had read a risk disclosure notice and had read and understood various other documents, including EuropeFX’s PDS and Terms of Business.
The evidence concerning the completion of the online questionnaire by prospective EuropeFX customers will be considered in detail later in these reasons. Suffice it to say at this point that the evidence concerning the “onboarding” of prospective customers by Global Win sales representatives, acting on behalf of EuropeFX, supports the inference that the representative rushed the customer through those parts of the questionnaire which involved the customer acknowledging that they had read and understood the risk disclosure notice and PDS. Indeed, the evidence supports the inference that the customer was often discouraged from reading, or at least not encouraged to read, those documents. Rather, they were encouraged to simply tick the boxes and were told that a EuropeFX account manager would later explain everything to them. The overall inference that was available from the evidence was that the onboarding process was intended to encourage, or at least not discourage, prospective customers to open a trading account, even if they had no prior knowledge of or experience trading in CFDs, Margin FX Contracts, or any similar financial products. At the very least, the process was undiscriminating in that regard.
As will be seen, virtually none of the EFX8 or the EFX22 had any relevant knowledge of, or relevant experience in relation to, CFDs, Margin FX Contracts, or any similar financial products. Indeed, most had no, or very little, financial or investment experience at all. They were all nevertheless encouraged to open EuropeFX trading accounts.
Trading and account managers
Perhaps most significantly, the evidence indicated that EuropeFX outsourced all trading and trading account interactions with its customers to a company called XYX Media Technologies Ltd, a company based in Israel which provided call centre services. The overwhelming inference available from the evidence was that it was employees of XYX, mostly residents of Israel, who performed duties as “account managers” in respect of EuropeFX’s customers. Among other things, they spoke with EuropeFX customers over the telephone about their trading and trading activities. As has already been adverted to, much of the evidence tendered by ASIC in its case against EuropeFX comprised recordings and transcripts of telephone conversations between account managers and customers. It may be inferred that those account managers were employees of XYX who were acting on behalf of EuropeFX pursuant to the agreement between EuropeFX and XYX. EuropeFX did not adduce any evidence to counter or rebut that inference. While the account managers may have been employed by XYX, they will generally be referred to throughout these reasons as EuropeFX representatives or account managers given that they were acting for and on behalf of EuropeFX in their interactions with EuropeFX customers.
The evidence concerning the interactions between the account managers and EuropeFX customers, in particular the EFX8 and the EFX22, will be addressed in considerable detail later in these reasons. It suffices at this point to note that the account managers interacted extensively with the customers about their trading throughout the period that they traded with EuropeFX. Not surprisingly, given their lack of relevant knowledge and trading experience, the customers were heavily reliant on the account managers.
The evidence clearly indicates that the account managers frequently and routinely gave the customers advice or recommendations about trades they should place (CFD or Margin FX buy or sell positions they should open or close), often based on information said to have been gleaned from third-party market information websites. The recommendations were frequently accompanied by promises, assurances or at least suggestions about the profits the customers could expect to earn if they carried out the recommended trade. Those recommendations often escalated to the point where the customers were effectively being pushed or pressured to open more and larger trades. The customers were also frequently pressured to deposit further money into their trading accounts, either to allow more trading, or to provide necessary margin for their existing positions. As will be seen, the recommendations in most, if not all, cases plainly constituted personal advice, even though EuropeFX was only authorised to provide general advice to its customers. As will also be seen, the account managers also frequently made false, misleading or deceptive representations to EuropeFX customers about matters relating to their trading or the financial services provided by EuropeFX.
The conduct of the EuropeFX account managers lies at the heart of ASIC’s case that EuropeFX engaged in unconscionable conduct, both systemically and towards the relevant identified customers. ASIC contended that the account managers, among other things: failed to take any, or any reasonable, steps to ensure that the customers had a sufficient understanding of the relevant financial services and products and the risks of trading before actively encouraging them to trade; gave each of the EFX30 personal advice in circumstances where they knew they were not permitted to do so; made misleading statements to, or engaged in misleading or deceptive conduct towards, the customers; fostered and encouraged the customers to blindly rely on them and follow their recommendations; on occasion pressured each of the EFX30 to trade and deposit more funds into their trading accounts, sometimes by employing unfair tactics and promotions; and often encouraged the customers to engage in risky trading strategies.
Remuneration of account managers
There was evidence that the remuneration of the account managers who were employed by XYX and who, it may be inferred, provided services for, and engaged with customers on behalf of, EuropeFX, included commission based on the amount of the deposits made by the customers. ASIC tendered an email from Mr Amar to Mr Zakhaim which attached a document that was said to be an example of an employment agreement between XYX and a person employed as a “Sales Representative – Retention”. The terms of that agreement included (at cl 10 of Appendix A) that the employee would receive “Additional Benefits” including commissions calculated on the basis of 1.5% for every deposit by a customer.
It may be inferred that the account managers who interacted with customers on behalf of EuropeFX were relevantly incentivised by the commission payable to them to obtain deposits from their customers. The more deposits the account managers were able to secure, the more money they received. It is perhaps not surprising in those circumstances that, as has already been noted, the account managers frequently encouraged and at times pressured their customers to deposit more funds into their trading accounts.
Compliance and dispute resolution
EuropeFX’s complaint and dispute resolution processes were also mostly outsourced to and managed by Mr Ari Amsalem, who appears to have been an officer or employee of Maxiflex who resided overseas. The evidence concerning the complaint and dispute resolution process will be discussed in detail in the context of ASIC’s case concerning unconscionable conduct. It suffices at this point to note that ASIC contended that process was one-sided and unfair. ASIC alleged that the evidence established that customers were almost invariably told that their complaints had no merit. They were also discouraged from engaging their own lawyers, discouraged from lodging complaints with ASIC or the Australian Financial Complaints Authority (AFCA) and pressured into entering into paltry settlements.
As will be seen, EuropeFX did employ at least two people in Australia who performed duties as “quality control” officers. They did not deal directly with EuropeFX’s customers or their complaints. Rather, they randomly reviewed some recordings of conversations between EuropeFX account managers and their customers for the purpose of determining whether there had been any misconduct by the account managers. They reported their findings to EuropeFX’s overseas “compliance team”. As will be seen, they regularly reported that EuropeFX account managers were engaging in misconduct, or inappropriate conduct, towards their customers.
EuropeFX’s revenue and income stream
ASIC submitted that the evidence established that EuropeFX’s revenue was primarily derived from and calculated by reference to the aggregate net losses incurred by its clients. I accept that submission.
The documentary evidence tendered by ASIC indicated that EuropeFX’s revenue from its business was primarily derived from fees payable and paid to it pursuant to the terms of its CAR agreement with USG. The CAR agreement provided, among other things, that EuropeFX was to be paid between 86% and 90% of USG’s profits derived from trades by EuropeFX customers who were allocated to USG’s B Book. Trades by EuropeFX customers in USG’s B Book were not hedged by default by USG, whereas trades in USG’s A Book were hedged with a hedging counterparty. While provision was also made for the calculation of the fees payable to EuropeFX by referance to lots traded by customers in USG’s “A Book”, the evidence indicated that the overwhelming majority (95% to 99%), if not all, of EuropeFX’s customers were allocated to USG’s B Book.
As noted earlier, because USG was the counterparty to all the trades, it derived profit from trades by customers in the B Book when those customers made a loss in respect of those trades. That fact, combined with the fact that, as just noted, EuropeFX received fees calculated on the basis of a very large percentage of USG’s profits derived from trading by virtually all of EuropeFX’s customers, meant that EuropeFX’s revenue was essentially derived from, or based on, the net trading losses incurred by its customers. In short, the more its customers lost, the more revenue it earned.
That conclusion was supported by relevant EuropeFX financial records obtained by ASIC during its investigation. An analysis of those documents indicated that EuropeFX’s monthly income invariably corresponded with the net amount lost by its customers. Conversely, in those very rare months when EuropeFX’s customers, in aggregate, made profits, USG invoiced EuropeFX, and EuropeFX paid USG, a “fee” representing those net profits. It should also be noted in this context that the losses suffered by EuropeFX’s customers, and the income derived by EuropeFX as a result of those losses, were substantial. For example, in the period from 1 August 2018 to 17 December 2019, the total net loss suffered by EuropeFX customers was $69,894,004. It may be inferred that during that period EuropeFX derived fees corresponding with those losses.
EuropeFX contended that the evidence did not support the proposition that its revenue was primarily derived from the losses made by its clients. It submitted that the allocation of customers between USG’s A Book and B Book was a matter for USG, that there was no evidence that EuropeFX was aware of USG’s allocation of its customers between its A Book an B Book, that the evidence did not clearly establish that all, or virtually all, if its customers were allocated to the B Book, and that it was possible that USG may have engaged in some manual or internal hedging in its B Book.
In my view, those submissions have no merit. There was some documentary evidence which indicated that EuropeFX was able to arrange for its customers to be assigned to USG’s A Book, but there was no evidence to suggest that it put any such arrangements into effect. I am also satisfied that the evidence supports the inference that Mr Sasso, and most likely other EuropeFX officers were well aware of the source of its revenue and how it was calculated, as one might expect. EuropeFX’s own financial records reflected the fact that most, if not all, of its customers were allocated to USG’s B Book and that EuropeFX’s revenue had been calculated on that basis. The evidence indicated that Mr Sasso was involved in producing or approving EuropeFX’s accounts and financial records. It may plainly be inferred that he was aware of what they recorded.
The suggestion that USG might have engaged in some manual or internal hedging in its B Book is not only somewhat beside the point, but is in any event at best speculative and unsupported by any evidence. It is also contrary to the opinion evidence of ASIC’s expert witness, Mr John Blundell, which I accept, that retail CFD businesses like EuropeFX do not have a client base sizable enough to internally hedge by offsetting and internalising client trades.
EuropeFX disputed that its financial records supported the inference that it derived its income from the losses incurred by its clients. It appeared to accept that its financial records indicated that the net losses of its retail clients equalled its net income or revenue, though it characterised that equivalence as an “arithmetical coincidence”. In my view, the arithmetical equivalence is no coincidence. EuropeFX also argued that if, as ASIC contended, 95-99% of its customers had been allocated to USG’s B Book, it followed that 1 to 5% of its customers must have been in USG’s A Book. It followed, so it was submitted, that the fact that its own financial records indicated that its net revenue equalled the net losses of its retail clients, meant that the financial records were either incorrect, or it had consistently been overpaid by USG. In EuropeFX’s submission, the suggestion that it was overpaid by USG was implausible. I am unable to see any merit in those submissions. The more plausible or probable inference is that either all EuropeFX’s customers were allocated to the B Book, or that for whatever reason it was remunerated on that basis. In any event, even if it was the case that 1-5% of EuropeFX’s customers were in USG’s A Book, which appears doubtful, it nevertheless still follows that the vast bulk of its revenue was derived directly from the losses incurred by its clients.
It should finally be noted that the inference that EuropeFX’s revenue was derived directly from the losses incurred by its client may be more safely drawn given that EuropeFX did not call Mr Sasso, or any of its other employees or agents, to give evidence concerning the source of its revenue. Mr Sasso was EuropeFX’s sole director and was an Australian resident. He was a qualified accountant and was responsible for EuropeFX’s financial statements. He could readily have given evidence concerning the sources and calculation of EuropeFX’s revenue. He was not called. EuropeFX conceded that a Jones v Dunkel inference (cf Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298) was available in respect of its failure to call Mr Sasso. In my view, the inference that EuropeFX profited from its client’s losses was overwhelming and inescapable in all the circumstances.
Termination of EuropeFX’s CAR with USG
EuropeFX’s CAR with USG was terminated with effect from 31 January 2020.
TradeFred
TradeFred was a corporation registered in Australia. Its 100 shares were initially held by Mr Sasso and at some point by BrightFX Capital Limited, a company incorporated in the United Kingdom. Its sole shareholder as at the time it entered into administration, was TradeFred Holdings Ltd. The controlling shareholder of TradeFred Holdings appears to have been Mr Alex Misiev, an Israeli citizen. Mr Sasso was TradeFred’s sole director from 12 June 2017 until he was replaced by Mr John Martin in September 2018.
TradeFred’s business
TradeFred and USG entered into an agreement pursuant to which TradeFred was appointed as a CAR of USG. As noted earlier, that agreement appears to have been entered some time between July and September 2017. As USG’s CAR, TradeFred was authorised to provide, on USG’s behalf, the financial services that USG was authorised to provide under the terms of its AFSL. USG and TradeFred also entered into a “White Label Agreement” in September 2017 pursuant to which TradeFred was permitted to offer a financial product using its branding through USG’s platform. TradeFred also offered CFDs and Margin FX Contracts issued by USG to its customers through that online trading platform.
In conducting that business, TradeFred dealt (within the meaning of s 766C of the Corporations Act) in financial products (within the meaning of Pt 7.1 Div 3) of the Corporations Act and s 12BAA of the ASIC Act) and carried on a financial services business.
TradeFred had a much smaller client base than EuropeFX. By the end of 2019, TradeFred had about 1,649 clients who had made at least one trade and had a positive account balance. Of those clients, 572 were Australian residents, 716 resided in the United Kingdom and the balance lived in other countries.
The way TradeFred provided its services
Like EuropeFX, TradeFred outsourced almost all its day-to-day business activities to offshore service providers.
There is evidence that TradeFred outsourced its “sales support, customer account data and marketing activities” to TradeMagnet UK Limited, a company incorporated in England and Wales. TradeMagnet was a subsidiary of TradeFred Holdings. The “marketing activities” under the agreement between TradeFred and TradeMagnet included “engaging a third party to provide sales services” on TradeFred’s behalf. A company named Capital Unit Media Limited appears to have been engaged to provide those sales services. The evidence suggested that Capital Unit was based in Israel. The sales services provided by Capital Unit included the provision of sales representatives who contacted prospective customers and encouraged them to open accounts, and account managers who engaged with those customers in respect of their trading.
The sales representatives who were retained to provide sales services on behalf of TradeFred received bonuses of up to US$75 per client depending on how many new clients they converted. A sales representative who signed up between 8 and 15 new clients would receive a bonus of $20 per client and a sales representative who signed up more than 60 clients would receive a bonus of $75 per client.
The evidence suggested that the individuals who provided account management services to TradeFred customers on behalf of TradeFred were, like the EuropeFX account managers retained by XYX, most likely based in Israel. Like the account managers who were retained to act on behalf of EuropeFX, the account managers who were retained to provide services on behalf of TradeFred earned commissions which were based on a percentage of the net deposits made by the customers with whom they engaged. They received commission of 2.5% of the customer’s net deposits if the net deposits were between $10,000 and $29,999 and up to 6.5% commission if the customer’s net deposits were between $500,000 and $749,000.
TradeFred derived income from its customers’ losses
Documentary evidence tendered by ASIC supported the inference that TradeFred effectively earned its income from its clients’ trading losses. The While Label Agreement between TradeFred and USG indicated that TradeFred would pay USG a fee calculated as a percentage of the losses incurred by the TradeFred customers who were assigned to USG’s B Book. That fee was between 10% and 12% depending on the size of the loss. It is implicit in the agreement that TradeFred would retain the balance of the net revenue in USG’s B Book – which meant that it effectively derived income of somewhere between 88% and 90% of the losses of its B Book clients. The agreement also provided that TradeFred would pay fees in respect of A Book customers calculated on the basis of the lots traded. The evidence, however, indicated that TradeFred had no arrangement in place with USG in respect of the assignment of its customers to USG’s A Book. The available financial records indicated that the payments that TradeFred made to USG were calculated on the basis TradeFred’s customers were in USG’s B Book.
TradeFred’s financial records for May and June 2019 record that the net losses of TradeFred’s customers were treated as TradeFred’s income and that TradeFred was required to pay USG fees of between 10% and 12% of that income. TradeFred’s financial report for the 2019 financial year also recorded that TradeFred paid USG about 10% of its “trading revenue” which, it may be inferred, represented its customers’ losses.
Losses incurred by TradeFred customers
In the period between March 2018, when it commenced trading, and November 2019, when ASIC intervened, TradeFred’s clients made trading losses of over $8 million, not including commission. Reconciliation reports prepared by TradeFred representatives indicate that, in the period between 30 August 2018 and 17 December 2019, TradeFred’s clients incurred net losses exceeding $13 million.
Termination of the CAR and appointment of liquidators
On 3 March 2020, USG terminated its CAR agreement with TradeFred with effect from 10 March 2020. On 10 March 2020, liquidators were appointed to TradeFred in a voluntary winding up.
CFDS AND MARGIN FX CONTRACTS
As has already been made clear, the businesses conducted by USG, EuropeFX and TradeFred primarily, if not exclusively, involved trading in over-the-counter derivatives known as CFDs and Margin FX Contracts. Those financial products are both complex and inherently risky in nature.
A CFD, put simply, is a contract between a market-maker and a trader to exchange, at the closing of the contract, the difference in price between the opening price and the closing price in the underlying asset, multiplied by the number of units of that asset specified in the contract. The underlying asset might be a commodity (such as a barrel of oil or a quantity of gold) a stock market index (such as the All Ordinaries, ASX 200 or Dow Jones) or shares traded on a securities market, or bonds. The trader does not acquire any interest in the underlying asset. Rather, the trader takes a position on whether the price of the underlying asset will increase or decrease over time.
The issuer or market maker for a CFD makes the market by taking the opposite position to the trader. The market maker also effectively sets the prices, known as “bid” and “ask” prices. The bid price is the price at which the market maker will sell the particular CFD to a trader. The ask price is the price at which the market maker will buy the CFD from a trader. There is generally a difference between the bid and ask prices and the price of the underlying asset on the exchange on which the underlying asset is traded. The difference is referred to as the “spread”.
A trader opens a position in respect of a CFD by either acquiring it at the then bid price, or selling it at the then ask price. The trader closes the position by trading in the opposite position to the original trade: selling the CFD at the new ask price (where the original trade was to acquire the CFD), or buying the CFD at the new bid price (where the original trade was to sell the CFD). The trader is thereby exposed to movements in the value of the underlying asset during the period when the trader’s position is open. If the original trade was to buy a CFD and the price of the underlying asset increases by the time the position is closed, the trader will make a profit, subject to the payment of any applicable commissions or other fees. If, on the other hand, the price of the underlying asset decreases before the position is closed, the trader will make a loss.
Margin FX Contracts are very similar to CFDs and operate in more or less the same way. The only material difference is that, in the case of a Margin FX Contract, instead of agreeing to exchange the difference between the opening and closing price of an underlying asset, the parties agree to exchange the difference between the opening and closing value of one currency relative to the other. Examples of common “currency pairs” that may be the subject of a Margin FX Contract are the US Dollar against the British Pound and the US Dollar against the Euro.
Both CFDs and Margin FX Contracts are highly leveraged. That is because the trader is only required to outlay or deposit a small fraction of the actual price or value of the underlying asset or currency to open the position. The trader, however, is exposed to the totality of the movement in the price of the underlying asset or currency. In that way, a relatively small outlay may generate a relatively large profit. Equally, however, that small outlay might generate a relatively large loss.
Because CFDs and Margin FX Contracts are highly leveraged, the customer is ordinarily required to deposit funds in the dealer’s trading account with the dealer which provide a sufficient margin to cover any potential losses. The amount that is required to be maintained in the trading account is generally referred to as the margin or margin level. If the market moves against the trader’s open position and the trader has an insufficient margin, the dealer may make a margin call and require the trader to deposit more funds. Worse still, if the margin call is not met, or the market moves significantly against the trader, the trader’s position may be automatically closed by the dealer and the trader’s loss crystalised. Typically, all the funds in the trader’s deposit account are exposed to adverse price movements when the trader has an open position.
EuropeFX’s PDS for CFDs described them in the following terms:
A Contract for Difference ("CFD") is a leveraged financial instrument that changes in value by reference to fluctuations in the price of an underlying thing such as the price of gold, silver or an index (such as the S&P500/UK 100 Index). We refer to those underlying things as “instruments”.
When trading CFDs, you and USG agree to exchange the difference in value of the CFD between when the CFD is opened and when it is closed. You will either be entitled to be paid an amount of money (if the value of the CFD has moved in your favour) or will be required to pay an amount of money (if the value of the CFD has moved against you).
You can keep a CFD trade open for as long as you are able to meet your margin requirements (including a minimum Margin Level). CFD transactions are closed by you taking an offsetting, opposite position, or by us/USG under our Forced Liquidation procedures where applicable.
EuropeFX’s PDS for Margin FX Contracts described them in the following terms:
Margin FX trading contracts are agreements between you and USG which allow you to make a gain or loss, depending on the movement of underlying currencies. The Contract derives its value from underlying currencies (usually referred to as a currency pair) which is never delivered to you, and you do not have a legal right to, or ownership of such underlying currencies. Rather, your rights are attached to the contract itself. The money you will receive will depend on whether the currency you choose moves in your favor. If it does, then you will make a gain and your account will be credited. If it does not, then you will make a loss and your account will be debited. The contracts only require a deposit which is much smaller than the contract size (this is why the contract is “margined” or “leveraged”).
While it is possible to describe CFDs and Margin FX Contracts in conceptually simple terms, there could be little doubt that they are, in practice, very complex financial products which carry a high degree of risk.
As for the complexity of those financial products, ASIC’s expert witness, Mr Blundell, who had relevant training and experience in relation to CFDs and Margin FX Contracts, expressed the following opinion:
Having been employed by a margin FX and CFD issuer for over the past seven years, I firmly believe that Margin FX and CFDs are complex financial products. They are derivatives that use leverage to potentially earn a high amount of profit on each transaction but are also high-risk products than can equally generate large losses on any transaction. Anyone trading Margin FX and CFDs must have a strong understanding of leverage, margin and the effect that price movements in the underlying asset have on margin level.
EuropeFX maintained that CFDs were not complex instruments. EuropeFX’s submission that CFDs and Margin FX Contracts were not complex appeared to be based on the proposition that CFDs can be relatively easily traded and that it is only the complex “back-end” processes that are complex. I reject that submission. If the expression “back-end” processes or operations is intended to refer to or include, for example, the identification and calculation of figures for the leverage, margin, total margin, equity and net equity referable to a CFD or Margin FX Contract or a customer’s CFD or Margin FX trading account, it can readily be accepted that the processes are very complex. Only someone with some level of training, knowledge and experience in respect of CFDs and Margin FX Contracts would be able to readily understand those processes.
I do not, however, accept the proposition that CFDs can be easily accessed and traded. Indeed, the evidence indicated that most of EuropeFX’s customers, and the EFX8 in particular, could not access or trade CFDs with ease, at least until they had been trading for some time. Rather, in most cases the EuropeFX account managers effectively had to tell the customers exactly what to do to “access” and open or close a position in respect of a CFD or Margin FX. That often occurred in circumstances where the account manager had access to or visibility of the customer’s trading screen and told the customer where to move the mouse, what icons to click on and what numbers to enter in fields on the trading screen. Most of the customers simply did as they were told.
A screenshot of EuropeFX’s MT4 trading platform was in evidence. It could not seriously be suggested that someone with little or no trading experience could readily comprehend all or the information on that platform, or could readily navigate through it. Indeed, the trading screen may as well have been in hieroglyphics. It included figures for “balance”, “equity”, “margin”, “free margin” and “margin level”. An inexperienced investor, however, would effectively have little or no ability to ascertain how those figures were calculated, or what they represented or meant. Indeed, in cross-examination, even EuropeFX’s expert witness, Mr George T Dowd III, had some difficulties identifying what the figure for “balance” took into account. He also accepted that there was no way that the figure for “margin” on the screen could be calculated using just the information on the screen and conceded that he would have needed a calculator to work out how the figure for “equity” was calculated.
More fundamentally, the mere fact that a customer might be able to easily access and trade CFDs does not mean that CFDs and Margin FX Contracts are not complex. The fact that a customer might be able to open or close a particular position in a CFD or Margin FX Contract does not mean that they know what they are doing, or understand exactly what the implications of opening or closing that position may be. Indeed, a customer might be able to trade in CFDs and Margin FX Contracts without really knowing what they are doing. The effect of Mr Blundell’s evidence, which I accept, is that a customer cannot knowingly, safely or successfully trade in CFDs or Margin FX Contracts unless the customer has a sound knowledge or understanding of concepts such as leverage, margin and the effect that price movements in the underlying asset or currencies have on margin level. A customer who trades without a sound understanding of those matters is, to put it colloquially, flying blind. As will be discussed in detail below, the evidence revealed that most of the EFX30 were flying blind during most, if not all, of the time that they traded in CFDs and Margin FX Contracts.
Mr Dowd, an experienced discretionary foreign exchange, stock index and commodity derivatives trader, expressed the view that CFDs and Margin FX Contracts were “simple products to understand and trade” and that the “associated profit and loss calculations require only simple math”. I will discuss my comparative assessment of the opinion evidence of Mr Blundell and Mr Dowd, where their opinions differ, in more detail later in these reasons. It suffices at this point to note that I do not accept Mr Dowd’s opinion concerning the simplicity of CFDs and Margin FX Contracts. His evidence in that regard was plainly given from the perspective of a highly experienced institutional investor with expertise in respect of derivatives. It may, of course, be accepted that highly educated, trained, experienced and financially sophisticated traders of derivatives, in particular institutional traders, might consider that CFDs are not particularly complex. It is, however, doubtful that persons with little or no training or experience in relation to derivatives or similar financial products would easily or quickly grasp the nature and essential features of CFDs and Margin FX Contracts. It is particularly unlikely that inexperienced or financially unsophisticated persons would be able to easily or quickly grasp fundamental concepts such as leverage and margin. A sound understanding of those concepts would be necessary to fully appreciate the nature and extent of the risks inherent in CFD and Margin FX Contract trading.
In cross-examination, Mr Dowd to a large extent accepted that to trade successfully in CFDs, an investor would have to understand how the profit or loss from a trade is calculated, which would require the customer to understand the effect of the change in price of the underlying asset and also the amount of commissions and fees payable in respect of the trade. Perhaps more significantly, Mr Dowd in effect accepted that, for an investor to have a sound understanding of a CFD and how it is traded, the investor would have to understand the meaning and operation of concepts of leverage, margin (including “total margin” and “margin level”) and “net equity” and how they are calculated. Those concepts are plainly not self-explanatory and would need to be learned, as Mr Dowd in effect accepted. Moreover, to successfully trade in CFDs, an investor would have to understand the relationship between margin level, net equity and total margin, and also understand what a margin call is and in what circumstances it might arise. Mr Dowd effectively accepted that to be so. He also accepted that, for an investor to successfully trade, it would be necessary for the investor to understand what a forced liquidation is and how margin calls and forced liquidation can be avoided. I do not accept that any of those concepts would be readily or easily understood by anyone with little or no prior knowledge of or experience in financial markets.
As for the nature and extent of the risk involved in trading in CFDs and Margin FX Contracts, in my view it is readily apparent that CFDs and Margin FX Contracts are highly risky financial products.
Mr Blundell’s opinion, based on his experience and observations as Head of Compliance at an Australian company that issued CFDs and provided trading services to retail clients, was that CFDs are risky financial products, particularly for inexperienced investors. His evidence was that “if a person does not have experience in successfully trading CFDs or Margin FX Contracts, and also lacks an understanding in the nature of those products and the concepts of margin and leverage, then it is more likely than not that person will lose all the funds deposited into a CFD trading account within a short period”. Even at the company where he worked, which had a strong and robust compliance structure, and did not permit inexperienced customers to trade until they demonstrated a certain level of relevant comprehension and competence, approximately 70% to 75% of the customers who traded in CFDs and Margin FX Contracts lost money over the course of the year.
In relation to making a market, s 766D of the Corporations Act deals with the meaning of making a market for a financial product. Section 766D(1) provides that a person makes a market for a financial product if, among other things, the person, “either through a facility, at a place or otherwise … regularly states the prices at which they propose to acquire or dispose of financial products on their own behalf”. There could be little doubt that when USG stated the prices at which it proposed to acquire or dispose of the Margin FX Contracts and CFDs it issued, it did so in and from Australia. As already noted, USG’s office was in Australia and it was undoubtedly from its Australian office, or through the facility (its website or trading platform) which it operated from that office, that USG regularly stated the prices at which it proposed to acquire or dispose of those financial products.
It follows that, even if s 912A(1)(a) of the Corporations Act is subject to the territorial limitation that the relevant financial services were provided in Australia, that territorial limitation was satisfied or met in the circumstances of this case, even though some of the customers who ultimately took advantage of those services were physically located in China. It was in Australia that USG issued the Margin FX Contracts and CFDs which those customers traded in. It was also in Australia that USG made a market in respect of those financial products. USG therefore provided the relevant financial services in Australia.
In all the circumstances, I reject the contention advanced by the amicus that USG cannot be found to have contravened s 912A(1)(a) of the Corporations Act in respect of the provision of financial services to customers located in China. In my opinion, ss 5(4) and 5(7) of the Corporations Act apply to s 912A(1)(a), with the result that s 912A(1)(a) can apply both in relation to acts or omissions of a financial services licensee which occur outside Australia and to natural persons who reside outside of Australia. I am not persuaded that the tenor, or the text and context, of s 912A(1)(a) contains any limitations which would suggest that ss 5(4) and 5(7) do not apply to it.
Alternatively, if it were necessary to identify the hinge or central conception of s 912A(1)(a), that hinge or central conception is the regulation of financial services provided by a financial services licensee, being services covered by the license. That hinge is not subject to any territorial limitation that the financial services be provided in Australia to a customer or consumer in Australia. If, however, that hinge is subject to a territorial limitation to the effect that the financial services be services provided in Australia, the relevant financial services which were provided by USG were provided in Australia, even where the consumers who ultimately took advantage of those services may have been located in China.
Can the provision of financial services in contravention of a foreign law result in a contravention of s 912A(1)(a)?
The amicus also submitted that, even if s 912A(1)(a) could be construed as applying in the case of the financial services provided by USG to customers in China, USG could nevertheless not be found to have contravened s 912A(1)(a) in relation to those services as contended by ASIC. That was said to be because the duty in s 912A(1)(a) is not, or cannot be, informed by the content of a foreign law. Put another way, it was contended that foreign law, in this case the domestic law of China, cannot be incorporated into Australian domestic law by construing the duty in s 912A(1)(a) as including that foreign law.
I do not accept that contention.
In my view, a financial services licensee may be found to have failed to ensure that its financial services were provided efficiently, honestly and fairly in circumstances where the licensee knew, or ought reasonably to have known, that its provision of the financial services to customers located in a foreign jurisdiction may result in it and its customers contravening the law in that jurisdiction. That is particularly if the licensee failed to warn the foreign based customers that it may be exposing them to civil or criminal liability.
That is not to say that the statutory duty is informed by the content of foreign law in question, or that the foreign law is somehow incorporated in Australian domestic law. The contravention of s 912A(1)(a) in those circumstances is not made out simply on the basis that the foreign law was contravened. Rather, it is made out on the basis that, by exposing its customers to potential civil or criminal liability, and failing to warn the customers of that potential liability, the financial services licensee, as a matter of fact, failed to ensure that its financial services were provided efficiently, honestly and fairly. The words “efficiently, honestly and fairly” are of wide import. I can see no reason why the statutory duty created by those words is not sufficiently broad to effectively require a licensee to take reasonable and appropriate steps to ensure that, it in providing its financial services, it not expose its customers to civil or criminal liability, or that it at least warn its customers that they might be so exposed, even if that liability might only arise under a foreign law.
As noted earlier, a breach of s 912A(1)(a) of the Corporations Act does not depend on any contravention of a separately existing legal duty or obligation. That is not to say, however, that a financial services licensee cannot be found to have breached s 912A(1)(a) because, in providing its services, the licensee breached a separately existing legal duty. In my view, a licensee may be found to have failed to provide the services covered by its AFSL “efficiently, honestly and fairly” if its provision of those services contravened a separately existing legal duty or obligation. Moreover, I can see no reason why there could not be a breach of s 912A(1)(a) in those circumstances where the separately existing legal duty or obligation was one established by a foreign law, accepting of course that a contravention of that foreign law could not itself directly give rise to any liability in Australia. It should also be noted in this context that ASIC did not contend that any breach of a foreign law would necessarily result in a contravention of s 912A(1)(a) of the Corporations Act.
The fact that ASIC was unable to point to any previous case in which a financial services licensee had been found to have contravened s 912A(1)(a) of the Corporations Act by exposing its customers to civil or criminal liability in a foreign jurisdiction is in my view neither here nor there. The question whether a financial services licensee failed to ensure that its financial services were provided efficiently, honestly and fairly is a question of fact to be decided in any given case. As Beach J observed in AGM Markets at [519], the statutory duty in s 912A(1)(a) can be applied to “an infinite variety of corporate delinquency and self-interested commerciality”.
Did USG ensure that its financial services were provided “efficiently, honestly and fairly”?
For the reasons effectively already given, I am comfortably satisfied that, on and from 13 March 2019, by continuing to offer and issue, and make a market for, Margin FX Contracts and CFDs to thousands of customers in China, USG failed do all things necessary to ensure that the financial services covered by the licence were provided efficiently, honestly and fairly. USG was aware, or ought reasonably to have been aware, from ASIC’s media release and email, that its actions in that regard most likely contravened the law in China, particularly in circumstances where USG had a physical presence in and actively solicited for customers in China. Perhaps more significantly, USG knew, or ought reasonably to have known, that its customers in China were also likely to be contravening Chinese law in trading in its financial products, yet it failed to take any, or any reasonable steps to warn its customers that it was exposing them to potential criminal and civil liability in China.
Accordingly, I find that USG contravened s 912A(1)(a) of the Corporations Act as alleged by ASIC.
SUMMARY OF FINDINGS AND CONCLUSIONS
As was noted at the outset, the parties agreed, and the Court ordered, that issues concerning liability be heard and determined separately and before any issues relating to relief. This judgment has accordingly only addressed whether USG, EuropeFX and TradeFred contravened the Corporations Act and ASIC Act as alleged by ASIC. For the detailed reasons that have been given, I have found that USG, EuropeFX and TradeFred engaged in various forms of conduct in contravention of both the Corporations Act and the ASIC Act.
In the case of EuropeFX, I have found (including in respect of admitted contraventions) that EuropeFX:
(1)Contravened s 911A(1) of the Corporations Act on 185 occasions by providing personal advice to customers, through its account managers or representatives, in circumstances where it was not licensed to do so.
(2)Contravened s 12DB(1) of the ASIC Act on 190 occasions by making, in trade or commerce, in connection with the supply or possible supply or financial services, or in connection with the promotion of such services, false or misleading representations that the services were of a particular standard or quality, or that the services had certain performance characteristics or benefits.
(3)Contravened s 12DA(1) of the ASIC Act on 18 occasions by engaging in conduct, in trade and commerce and in relation to financial services, where that conduct was misleading or deceptive, or likely to mislead or deceive.
(4)Contravened s 12CB(1) of the ASIC Act on one occasion by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services, where that conduct comprised or constituted a system of conduct or pattern of behaviour that was, in all the circumstances, unconscionable.
(5)Contravened s 12CB(1) of the ASIC Act on eight occasions by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services to a person, where that conduct was, in all the circumstances, unconscionable.
In the case of TradeFred, I have found that it:
(1)Contravened s 911A of the Corporations Act on 20 occasions by providing personal advice to customers, through its account managers or representatives, in circumstances where it was not licensed to do so.
(2)Contravened s 12DB(1) of the ASIC Act on 54 occasions by making, in trade or commerce, in connection with the supply or possible supply or financial services, or in connection with the promotion of such services, false or misleading representations that the services were of a particular standard or quality, or that the services had certain performance characteristics or benefits.
(3)Contravened s 12DA(1) of the ASIC Act on 2 occasions by engaging in conduct, in trade and commerce and in relation to financial services, where that conduct was misleading or deceptive, or likely to mislead or deceive.
(4)Contravened s 12CB(1) of the ASIC Act on one occasion by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services, where that conduct comprised or constituted a system of conduct or pattern of behaviour that was, in all the circumstances, unconscionable.
(5)Contravened s 12CB(1) of the ASIC Act on four occasions by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services to a person, where that conduct was, in all the circumstances, unconscionable.
In the case of USG, I have found that it:
(1)Contravened s 12DB(1) of the ASIC Act on 56 occasions by making, in trade or commerce, in connection with the supply or possible supply or financial services, or in connection with the promotion of such services, false or misleading representations that the services were of a particular standard or quality, or that the services had certain performance characteristics or benefits.
(2)Contravened s 911A of the Corporations Act on 306 occasions, those being contraventions arising from the fact that, on each of the occasions when EuropeFX and TradeFred engaged in conduct that contravened s 911A of the Corporations Act, they did so as agents of USG by reason of s 769B(1)(a) of the Corporations Act.
(3)Contravened:
(a) s 12DB(1) of the ASIC Act on 282 occasions;(b) s 12DA(1) of the ASIC Act on 20 occasions; and
(c) s 12CB(1) of the ASIC Act on 14 occasions;
those being contraventions arising from the fact that, on each of the occasions when EuropeFX and TradeFred engaged in conduct that contravened ss 12DB(1), 12DA(1) and 12CB(1) of the ASIC Act, they did so as agents of USG by reason of s 12GH(2)(a) of the ASIC Act.
(4)Contravened s 912A(1)(a) of the Corporations Act by failing to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly.
It will be necessary to convene a further hearing to receive evidence and hear submissions concerning the granting of appropriate relief in respect of those contraventions. I will order that the proceeding be listed for a case management hearing in the near future for the purpose of making appropriate procedural orders in respect of the conduct of that further hearing.
I certify that the preceding 1806 numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney. Associate:
Dated: 20 December 2024
Appendix A – Defined Terms
The following terms are defined in the Reasons for Judgment (paragraph references are to paragraphs in the Reasons):
(a)A Book: [54] an internal categorisation at USG for customer trades, including those made via a CAR, which were hedged with a hedging counter-party;
(b)AFSL: [1] an Australian Financial Service Licence, which authorises the licensee to provide particular financial services;
(c)B Book: [54] an internal categorisation at USG for customer trades, including those made via a CAR, which were not hedged with a hedging counter-party;
(d)Bank Account Representations: [942] a category of representations that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate greater returns by investing their money with EuropeFX or TradeFred (as the case may be) by trading CFDs or Margin FX Contracts than by keeping it in a bank account, i.e. an account with an Australian deposit-taking institution;
(e)Bonus Representations: [958] a category of representations that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that customers would receive and would be reasonably able to access “Bonus Credits” when they deposited a certain amount of money to their trading account;
(f)CAR: [31] a corporate authorised representative, a status which authorises the CAR to provide particular financial services on behalf of the holder of the AFSL, subject to the terms of the AFSL;
(g)CFD or Contract for Difference: [1], [76]-[78] an “over-the-counter” derivative financial product, being a contract between a market maker and a trader to exchange, at the closing of the contract, the difference between the opening and closing prices of the underlying asset, multiplied by the number of units of that asset specified in the contract.
(h)Deposit Statement: [817] a category of alleged personal advice statements, comprising statements to the effect that customers should deposit further funds to, or not withdraw funds from, their trading account;
(i)Equities Representations: [938] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that, by reducing investments in equities (including those held in a superannuation account) and increasing investment in the derivatives products offered by EuropeFX (or TradeFred as the case may be): (i) customers would reduce their exposure to risk; or (ii) it was reasonably likely, or there was a reasonable prospect, that customers would increase their returns;
(j)Location Representations: [954] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that: (i) EuropeFX (or TradeFred, as the case may be) had main offices, headquarters or offices from which it conducted a substantial part of its business located in Australia; or (ii) the account managers were located in Australia;
(k)Loss Recovery Representations: [934] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that: (i) positions that had moved against a customer represented only “temporary” losses, and that it was reasonably likely, or that there was a reasonable prospect, that such positions would become profitable; or (ii) it was reasonably likely, or there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, profits sufficient to recover realised and unrealised losses suffered by the customer from their trading;
(l)Margin FX Contract or Margin Foreign Exchange Contract: [1], [79] an “over-the counter” derivative financial product, being a contract between a market maker and a trader to exchange, at the closing of the contract, the difference between the opening and closing value of one currency relative to another currency, multiplied by the number of units specified in the contract.
(m)Money Risk Representation: [926] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that, with regards to the risk associated with depositing money to a trading account: (i) by increasing the amount of money in the customer’s trading accounts, customers would reduce the level of risk to which they were exposed; (ii) the risk associated with transferring additional funds to the customer’s trading account would carry an equivalent risk to holding money in a bank account, i.e. an account with an Australian deposit-taking institution; or (iii) only those funds in the customer’s trading account used to open CFD or Margin FX Contract positions would be exposed to adverse movement in the price of the asset underlying the relevant position;
(n)MT4: [36] the online trading platform through which EuropeFX offered trading in CFDs and Margin FX Contracts.
(o)PDS: [33] a Product Disclosure Statement for a financial product;
(p)personal advice statements: [103] - [104] statements that were alleged to constitute “personal advice”, as defined by s 766B(3) of the Corporations Act, comprising the categories of Deposit Statements, Position Statements, Signal Provider Statements, and Trading Strategy Statements. The personal advice statements were particularised in Annexure A.1 to the SOC;
(q)Statement of Narrowed Case: [846] the Statement of Narrowed Case with respect of EuropeFX, filed by ASIC on 22 August 2024;
(r)Plan Representations: [946] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that a plan would be developed, or had been developed, for the customer which was designed to meet the customer’s objectives or needs and improve the customer’s financial position;
(s)Position Statements: [810] a category of the alleged personal advice statements, comprising statements to the effect that customers should open, close or leave open specific CFD or Margin FX Contract positions;
(t)Profit Representations: [917] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts: (i) profits consistent with a specific figure or percentage return on investment stated by the account manager; (ii) income sufficient for the customer’s trading to be their main source of income; or (iii) income sufficient to constitute a “secondary income”;
(u)Regulation Representations: [950] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that EuropeFX or TradeFred (as the case may be) were “regulated” by ASIC, such that the customer was exposed to less risk that would otherwise be the case;
(v)Revenue Representations: [921] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that: (i) USG would not make a market for any CFD or Market FX Contract positions opened by the customer; (ii) EuropeFX (or TradeFred as the case may be) would generate revenue when the customer made money; (iii) EuropeFX or TradeFred would generate revenue based solely on commissions or fees which applied when a customer opened a CFD or Margin FX Contract position (such as spread or commission) and/or when a customer kept open a CFD or Margin FX Contract position (swap charges); (iv) EuropeFX or TradeFred would not make money when a customer lost money; or (v) the account managers would earn commission based solely on commissions or fees which applied when a customer opened a CFD or Margin FX Contract position (such as spread or commission) and/or when a customer kept open a CFD or Margin FX Contract position (swap charges);
(w)Rob Clayton Reports: [1181] the alleged reports which were the subject of the Rob Clayton Report Representations and the Rob Clayton Representations;
(x)Rob Clayton Report Representations: [1179], [1181] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising statements to the effect that an analyst engaged by USG named Rob Clayton prepared reports (the Rob Clayton Reports) which would be emailed to the customer and: (i) would provide the customer with advice regarding opening particular positions, including details such as when to buy or sell particular assets, or details such as the stop loss or take profit which should be used on particular positions; and/or (ii) would result in an accuracy or success rate of 80% or greater if followed; and/or (iii) were circulated to the major Australian banks;
(y)Rob Clayton Representations: [1179], [1182] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising statements to the effect that an analyst engaged by USG named Rob Clayton was: (i) in his previous role at Westpac, the head, or the head technical analyst, of Westpac and/or responsible for advising or directing Westpac as to what the bank should trade; and/or (ii) paid by USG millions of dollars a year to write the Rob Clayton Reports;
(z)Signal Provider Statements: [814] a category of the alleged personal advice statements, comprising statements to the effect that customers should open, close or leave open CFD or Margin FX Contract positions in accordance with indicators on third-party websites;
(aa)SOC: [103] the Statement of Claim filed by ASIC on 12 April 2021;
(bb)Trading Strategy Statements: [820] a category of the alleged personal advice statements, comprising statements to the effect that customers should adopt a trading strategy as advised by the account manager in relation to CFD or Margin FX Contracts;
(cc)USG Profit Representations: [1179], [1180] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that customers trading CFDs or Margin FX Contracts: (i) would make a profit, either by reference to a specific figure or percentage return on investment; or generally (ii) would earn “income” of $100 to $200 per week; or (iii) would be able to close 90% or more of their trades in a profitable position;
(dd)Withdrawal Representations: [930] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that customers would be able to withdraw money deposited into their trading accounts: (i) in the same manner as money held in a bank account, i.e. an account with an Australian deposit-taking institution; or (ii) within a particular period of time as specified by the account manager, including immediately or at any time;
Appendix B – Key Individuals & Entities
The following key individuals and entities are referred to in the Reasons for Judgment (paragraph references are to paragraphs in the Reasons):
(a)Addnet Solutions Pty Ltd: [34] the sole shareholder of EuropeFX, of which Mr Sasso was the sole director and shareholder (as trustee for Maxiflex);
(b)AFCA: [51] the Australian Financial Complaints Authority;
(c)Affilimedia Global Pty Ltd: [38] a company, apparently based in Belize, to which EuropeFX outsourced its “e-marketing”;
(d)Ms May Ajaz: [154] a former employee of EuropeFX during the relevant period, who was employed as a “quality control” officer and supervised by Mr Martin;
(e)Mr Gal Amar: [34] a person who was said to be an adviser to Maxiflex and from whom Mr Sasso took instructions in relation to the conduct and management of EuropeFX’s business during the relevant period;
(f)amicus curiae: [8], [1728] Ms Sera Mirzabegian SC (with Ms Talia Epstein) appointed pursuant to orders of 13 December 2022;
(g)Mr Ari Amsalem: [51] an employee of Maxiflex who was responsible for managing EuropeFX’s complaints and dispute resolution process;
(h)ASIC: [3] the Australian Securities and Investment Commission, the plaintiff;
(i)BAFF Affiliate Networks Ltd: [38] a Cypriot company which provided services to EuropeFX aimed at attracting new customers through online traffic;
(j)Mr John Blundell: [59], [780] the Head of Compliance at City Index and ASIC’s expert witness with respect to trading in over-the-counter derivatives trading, as well as retail customer engagement in relation to trading in those financial products;
(k)Ms Julie Boden: [477]ff one of the EFX8, referred to as EFX9;
(l)Bolacom Ltd: [38] like BAFF, a Cypriot company which provided services to EuropeFX aimed at attracting new customers through online traffic;
(m)Capital Unit Media Ltd: [68] a company likely located in Israel and apparently engaged by TradeMagnet to provide sales services to TradeFred, including the provision of sales representatives to contact prospective customers and account managers to engage with onboarded customers in respect of their trading;
(n)CSRC: [1746] the China Securities Regulatory Commission;
(o)City Index: [155] the trading name of StoneX Financial Pty Ltd, the employer of ASIC’s expert witness, Mr Blundell, and an Australian company which provides trading in over-the-counter derivatives to retail customers.
(p)Mr George Dowd III: [88], [781] an experienced discretionary foreign exchange, stock index and commodity derivatives trader and EuropeFX’s expert witness with respect to derivatives and derivatives trading;
(q)EFX8: [12] the group of eight EuropeFX customers who provided affidavit evidence and testified at the hearing in this proceeding, comprising Mr Wilson (EFX1), Ms Love (EFX2), Mr Kalusinghe (EFX3), Ms Elford (EFX4), Ms Nikiforos (EFX6), Ms Sapor (EFX8), Ms Boden (EFX9) and Ms Kuhn (EFX11);
(r)EFX22: [12] the group of 22 EuropeFX customers in respect of whom ASIC tendered evidence in this proceeding, but who did not provide affidavit evidence or testify at the hearing, comprising Ms Miriam Battersby (EFX5), Mr Paul Bonini (EFX7), Mr Darren Singleton (EFX10), Ms Xiaodong (Joan) Liu (EFX12), Ms Toni Aldous (EFX13), Mr John Isaacs (EFX14), Mr Sami Ayoub (EFX15), Ms Anne Marie Robinson (EFX16), Mr Lewis Stubna (EFX17), Ms Zina Curtin (EFX18), Mr David Grubb (EFX19), Mr Ken Geering (EFX20), Mr Nathan Lapham (EFX21), Mr Adam Cartwright (EFX22), Mr James Chircop (EFX23), Ms Jessica Green (EFX24), Ms Ariel Larsen (EFX25), Mr Patrick Hillier (EFX26), Ms Zina Sofer (EFX27), Ms Margaret Scott (EFX28), Mr Mark Dand (EFX29) and Mr Joe Costa (EFX30);
(s)EFX30: [12] the EFX8 and EFX22 collectively;
(t)Ms Deborah Elford: [347]ff one of the EFX8, referred to as EFX4;
(u)EuropeFX: [1] the trading name or abbreviation of Maxi EFX Global AU Pty Ltd, the second defendant in this proceeding and a corporate authorised representative of USG;
(v)ForexCT: [477] a trading business through which Ms Boden had previously traded currencies prior to her derivatives trading with EuropeFX;
(w)Mr John Fraser: [169] one of the TF4, referred to as TF1;
(x)Global Win Solutions Ltd: [40] a company based in Belize which provided call centre services for EuropeFX, including the provision of sales representatives to contact and “onboard” prospective customers;
(y)Dr Andrew Godwin: [1745] ASIC’s expert witness with respect to the relevant operation of Chinese domestic law;
(z)Ms Dolores Goodey: [169] one of the TF4, referred to as TF2;
(aa)Mr James Spencer Greene: [161] a database expert who formatted certain EuropeFX trading data so that the trading positions of nine EuropeFX customers were able to be reproduced into a readable spreadsheet;
(bb)Mr Prasanna Kalusinghe: [299]ff one of the EFX8, referred to as EFX3;
(cc)Ms Leanne Kuhn: [535]ff one of the EFX8, referred to as EFX11;
(dd)Mr Xu (Kidd) Liu: [154] a former employee of EuropeFX during the relevant period, who was employed as a “quality control” officer and supervised by Mr Martin;
(ee)Ms Lesley Love: [244]ff one of the EFX8, referred to as EFX2;
(ff)Mr John Martin: [29], [34] USG’s “Responsible Manager” in respect of its AFSL and its Head of Compliance, as well as a director of EuropeFX during the period from 20 September 2018 until 30 April 2019;
(gg)Maxiflex Global Investments Limited (or Maxiflex Limited): [34] a company based in Cyprus or Israel, which was the beneficial owner of Addnet Solutions.
(hh)Ms Fiona Musgrave: [169] one of the TF4, referred to as TF6;
(ii)Ms Jennifer Nikiforos: [391]ff one of the EFX8, referred to as EFX6;
(jj)Mr Steven Parry: [153], [753] a prospective EuropeFX customer who provided affidavit evidence and testified in this proceeding;
(kk)Ms Sandrine Sapor: [419]ff one of the EFX8, referred to individually as EFX8;
(ll)Mr Pedro Sasso: [34] a director of EuropeFX during the relevant period, including as sole director prior to 20 September 2018 and after 30 April 2019;
(mm)TF4: [169] the group of four TradeFred customers who provided affidavit evidence in this proceeding, comprising Mr John Fraser (TF1), Ms Dolores Goodey (TF2), Ms Mensch Zdraveska (TF5) and Ms Fiona Musgrave (TF6);
(nn)TF16: [128] the 16 TradeFred customers in respect of whom ASIC tendered evidence in this proceeding but who did not provide affidavit evidence;
(oo)TF20: [128] the TF4 and TF16 collectively;
(pp)TradeFred: [1] the trading name or abbreviation of BrightAU Capital Pty Ltd, the third defendant in this proceeding and a corporate authorised representative of USG. Its sole shareholder was TradeFred Holdings Pty Ltd;
(qq)TradeMagnet UK Limited: [68] a company incorporated in England and Wales and a subsidiary of TradeFred Holdings that conducted sales support, customer account data and marketing activities for TradeFred, including engaging Capital Unit to provide sales services for TradeFred;
(rr)USG: [1] Union Standard International Group Pty Ltd, the first defendant and the holder of the AFSL, in relation to which EuropeFX and TradeFred were each authorised as CARs;
(ss)Mr Trent Whitbourn: [162] a digital forensics expert who forensically reproduced copies of EuropeFX’s former website;
(tt)Mr Ben Wilson: [206]ff one of the EFX8, referred to as EFX1;
(uu)XYX Media Technologies Ltd: [45] a company based in Israel which provided call centre services for EuropeFX, including the provision of account managers to engage with customers in relation to their trading;
(vv)Mr Shay Zakhaim: [29] the Chief Executive Officer of USG during the relevant period;
(ww)Ms Mench Zdraveska: [169] one of the TF4, referred to as TF5.
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