Australian Court finds AGM Markets engaged in unconscionable conduct

Maria Nikolova

The judgment follows ASIC’s investigation into AGM Markets, OT Markets and Ozifin Tech amid a large number of complaints from retail investors.

The Australian Securities and Investments Commission (ASIC) today informed investors of developments concerning its investigation into OTC derivatives issuer AGM Markets Pty Ltd, whose license was cancelled by the regulator in November 2018.

Today, ASIC announced that the Federal Court has determined that AGM Markets Pty Ltd, OT Markets Pty Ltd and Ozifin Tech Pty Ltd engaged in systemic unconscionable conduct while providing over-the-counter (OTC) derivative products to retail investors in Australia. The Court found that Australian investors lost over $30 million as a result of the conduct.

The companies used account managers, often located offshore, to engage with retail investors in Australia. The Court found that the account managers:

  • provided personal advice to clients when the companies were not licensed to do so;
  • provided advice that was not in the best interests of the companies’ clients; and
  • made representations that were false, misleading or deceptive, including representations with respect to the risks of investing in derivative products, the risks to which funds deposited by clients into their trading accounts would be exposed to and the profits that clients were likely to generate from their trading.

The Court concluded that the companies engaged in misleading and deceptive conduct, provided unlicensed personal advice, and advice which was not in the best interests of their clients.

According to the Court’s finding, AGM contravened its Australian financial services licensee obligations under s912A(1) of the Corporations Act to provide financial services “efficiently, honestly and fairly.”

ASIC commenced its investigation into the companies following a large number of complaints from retail investors who described being subjected to high pressure sales tactics and misleading statements about the potential profitably of entering particular trades.

Let’s recall that, shortly after ASIC cancelled AGM’s AFS license, it banned the company’s director Yossef Ashkenazi, also known as Yossi Ashkenazi, from providing financial services for a period of eight years.

The size of the Australian market for OTC retail derivatives has grown considerably over recent years through the increase in the number of clients and transactions, as well as gross annual turnover. With that growth, there has been a steep increase in complaints to ASIC in relation to conduct relating to OTC retail derivates, the regulator explains.

The regulator has several ongoing investigations relating to AFS licensees and others that offer OTC retail derivatives, and claims to continue to take strong enforcement action against AFS licensees and their related parties in relation to the offering of OTC retail derivatives when misconduct is detected.

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