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Unscrupulous FX traders are becoming the new frontier for unconscionable conduct

AGM Markets Pty Ltd, OT Markets Pty Ltd and Ozfin Tech Pty Ltd (AGM) all sold foreign exchange (FX) contracts to Australian retail investors via an online portal where clients were provided with financial product advice from account managers based in Israel, Cyprus and the Philippines.

ASIC commenced proceedings in Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq)(ACN 158 706 766) and Others (No 3) [2020] FCA 208 alleging the services provided under AGM’s AFSL contravened the Corps Act and ASIC Act. It sought:

  1. compensation for the retail investors;

  2. pecuniary penalties for the Commonwealth; and

  3. orders that the defendants be wound up on just and equitable grounds.

In his decision, Beach J of the Federal Court held that not only had AGM engaged in conduct that was unconscionable, but also that AGM’s business model established a system of behaviour that was unconscionable.

Unconscionable behaviour

Beach J identified several key concepts as supporting a finding of statutory unconscionability.

  1. Each of the investors was at a disadvantage because they were inexperienced about derivative and FX trading and lacked insight into the inherent risks of such complex trades

  2. The products being offered by AGM were highly leveraged and risky

  3. AGM's account managers made false, misleading and deceptive comments about the operation of the products they were advised to invest in.

  4. The account managers would resort to high pressure sales techniques to convince reluctant investors to enter additional trades and adopt trading strategies that were clearly inappropriate for the client, their objectives and their risk profiles.

  5. There were unreasonable impediments placed by AGM on clients withdrawing money from their investors’ trading accounts.

Unconscionable system of conduct

Beach J also found that each of the defendants had entered into an overall system of conduct or pattern of behaviour that was in and of itself unconscionable, finding:

1. Account managers were uniformly trained to implement a business model designed to require clients to enter multiple, unhedged, but adverse trading positions and create negative positions on some trades – with lost trades generating a premium fee for the account manager.

2. Account managers abused remote access to client computers to view and determine the maximum amount of money a client could access and transfer to their FX account.

3. Account managers ignored individual client needs and failed to undertake any assessment of their investment experience or determining whether FX trading was inline with their financial objectives.


His Honour highlighted the following behaviour as being indicative of AGM’s unconscionable conduct:

· Account manager using sales scripts the contained pre-drafted ‘rebuttals’ to questions about ASIC obligations and oversight.

· The use of standard phrases such as “take advantage of” ,“hold my hand”, “friend”, and “work together and as a team” to enter trades and encouraging investors to “ride the wave” when losses were suffered, describing them as “temporary”.

· Account Managers were trained to use surreptitious tactics that gained investors’ trust and engendered a false sense of security.

· Account Managers were trained to suggest they were experienced FX traders and experts in their field, when they clearly were not.

· Account Managers were trained that their main goal in dealing with clients was to get them to deposit as much money as they had access to and as many open positions as possible.

Beach J concluded that ASIC had established AGM, and AGM’s business model were both unconscionable, and had directed at the clear aim of encouraging inexperienced, vulnerable investors to enter into high volume FX trades that were highly likely to lose them their money. As a result of this system of unconscionable conduct, AGM netted more than $30m from unqualified investors in the 12 months between October 2017 and September 2018.

By Hannah Perrins, Louise Gehrig and Rob Norton


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