“Mind The Gap!” – The life and times of a man on the move Episode 79

I get the transcripts from the Australian court and find that ASIC’s orders against USGFX have been overturned, and I spent Thursday and Friday inundated with extremely encouraging messages of support and anecdotes of odious approaches following my expose of con artist Hither Mann.

In this weekly series, I look back on what stood out, what was bemusing, amusing and interesting during my weekly travels, interesting findings within the FX industry and interaction with an ever-shrinking big wide world. This is purely observational and for your enjoyment

ASIC gets taken to task

It is quite rare for non-bank financial markets regulatory authorities in good quality, well recognized regions with a developed financial services business to be taken to task or even questioned by any corporate entity.

I would say that this is the case for two main reasons, the first being that in general, the NFA in North America, the FCA in the United Kingdom and ASIC in Australia generally do not victimize companies for tenuous reasons, and the second being that their research and surveillance of the industry is generally very accurate and decisions are therefore regarded as pretty much gospel.

This week, however, I managed to obtain some official transcripts of court documentation relating to the recent high profile case in which Australia’s USG FX was taken to court and censured by Australia’s renowned regulator AISC, which resulted in ASIC securing asset restraint orders against USGFX’s representatives Maxi EFX Global AU Pty Ltd (trading as EuropeFX) and BrightAU Capital Pty Ltd (trading as TradeFred)

These orders, obtained in mid December 2019, also restricted the overseas travel of John Carlton Martin (director of USGFX and TradeFred) and resulted in Pedro Eduardo Sasso (director of EuropeFX) having to give an undertaking that he would notify the regulator before leaving Australia.

Ordinarily, this type of restraint order would be – and has been in the past – taken as on on-the-chin procedure and accepted, however I have now received the documentation which has shown that USGFX decided to counter the decision.

The court then commenced a discussion as to whether any aspects of Chinese law had been contravened, and what the monies in question relate to. It was also discussed that market making and dealing with Appointed Representatives takes a specific format, which was all heard by the judge.

“Your Honour, the relief was sought in the context of a recently commenced 40 investigation by ASIC in respect of the conduct of the defendants. And just to give your Honour some brief context USG and the two corporate authorised representatives operated derivatives and foreign exchange business from Australia to local and overseas clients. Pursuant to an AFSL that is granted only to USG. USG and the two corporate authorised representatives are permitted to do three relevant 45 things. The first is to provide general financial advice.”

“We say that that restriction has been breached by the provision of personal financial advice having regard to the terms of the Act and the decision of the Full Court in Westpac which your Honour will be familiar with.”

“The second is they are permitted to deal in derivatives and foreign exchange contracts, and thirdly, to make a market for those securities. In short, your Honour, on the basis of the investigation to date, ASIC is concerned that the defendants may have contravened a number of provisions of the Corporations Act and ASIC Act.”

“ASIC’s proposed course is that the matter – the orders remain in force and the matter comes back for directions case management hearing in February of next year for further submissions. I understand that at least Mr McLure’s client seeks the immediate discharge of those orders and so therefore there is going to be a contest in relation to that matter. Obviously, enough, your Honour, we say as the regulator that where the investigation is at an early stage where the conduct that we have identified is serious and where the so-called prejudice or asserted prejudice to the continuation of the orders is either not sustained or can be ameliorated through variations to the existing orders that the appropriate course is that an asset restraint regime and travel restrictions remain in force pending the continuance of ASIC’s investigations until 25 the new year.”

This set the ground, however Mr McLure later in the hearing asserted that there was no grounds for the orders, and after a substantial amount of description and discussion between all parties, the judge explained that having heard full description of the circumstances by Mr Somerville (representing USGFX), that it “doesn’t appear to correspond with the order that was made earlier this morning concerning USG because it provides for leave to give any securities broking firm or futures broking firm with which any of the defendants operates any accounts and notice.”

Thus, the judge explained that they were able to go and get their passports and be free to travel, and although the court has been adjourned until February 17, the restriction orders have already been lifted on the entities concerned.

USGFX has now responded to ASIC’s media release on the matter and has explained that Justice Gleeson of the Federal Court (the judge overseeing the series of hearings) was highly critical of ASIC’s application as against USGFX, which was not substantiated by the evidence provided to the Court. In particular, ASIC stated publicly that Mr John Martin, who is a Director of USGFX, is not allowed to travel abroad. I have been made aware that Mr Martin takes issue with ASIC for stating this when actually it is not true – the order against Mr Martin was dropped.

Sought immediate discharge of the orders they did, and immediate discharge they got.

Are ASIC beginning to become very draconian and make snap decisions against FX brokerages? The kneejerk leverage restrictions on CFDs last year and restraint on overseas business were followed by immediate backtracking noises by ASIC. Let’s see what 2020 brings to the well developed Australian FX industry.

Are ASIC beginning to become very draconian and make snap decisions against FX brokerages? The kneejerk leverage restrictions on CFDs last year and restraint on overseas business were followed by immediate backtracking noises by ASIC. Let’s see what 2020 brings to the well developed Australian FX industry.

I think a fine line exists between being astute and on the ball – something which ASIC certainly is with its very high tech First Derivatives surveillance system that conducts real time monitoring on all activity in Australia’s brokerage sector, and its detailed understanding of our industry (rare for a regulator) – and being seen as a snap-reaction dictator.

The NFA does its job very well by balancing law enforcement powers, high quality technology-led surveillance and reporting, yet does not make snap reactions – it does its research and investigates its members at their site for weeks to understand full procedure and operational structure before doing any publicly viewable court cases. ASIC can certainly emulate the NFA in that respect and maintain its global reputation as one of the best regulators in the world.

This particular matter is a complex case and I have the full official transcripts which I am happy to discuss, or provide, to anyone who wishes to see them. Please let me know by email.

A great response by great people!

Those who saw my expose relating to confidence trickster Hither Mann and her garish and unpleasant ‘Fortune Academy’ this week have responded to me in droves.

It is absolutely heart warming to know that the good guys who have made commitment to professionalism, development, innovation and moving a very sophisticated electronic trading business forward in every area are glad that this nonsense scheme and its perpetrator have been exposed.

Quite interestingly, the vast majority of senior FX industry executives, ranging from brokerage owners to technology vendors and prime of prime liquidity providers that approached me this week have been targeted by Ms Mann to try to make “let’s split the client losses” deals.

One brokerage executive actually cut directly to the chase when approached by Ms Mann last year, literally writing “Foxtrot Oscar” in his reply.

Another explained “A man has two heads with which to make a decision. The big head and the small head”, and just shortly after that, when I explained to one particular FX industry executive that there are actually people out there who believe that this vacuous no-mark advises companies on proceeding to IPO and trains hedge funds, his extremely amusing reply was “Maybe she was influential in the silicone market.”

Guffaw guffaw. Very drole. For the record, absolutely not my taste at all. Thank goodness.

Later in the day, a systems engineer in the platform sector told me “I find the article quite offensive. I bought my first pair of spectacles from Vision Express, and you call them downmarket!” Brilliant stuff.

Potentially the most amusing of the lot, however, came from a Head of IT at a European brokerage’s London office, who said “Nice feature on Prince Harry’s next girlfriend.”

Aside from the typically British humor, there were at least 25 emails and messages from brokers across America, Australia, Cyprus and Britain, all stating that it was high time that this individual had been exposed for what she really is and that they had been approached with all kinds of banal and absurd partnership offers all aimed at scamming both broker and client.

I am very proud to work in an astute industry which does not believe the nonsense, and does not succumb to fraudulent partnerships with imbeciles like Ms Mann, and I am glad to have been able to do my bit last week to protect us all, our esteemed industry and our clients.

Together we are strong!

Wishing you all a super week ahead.

 

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