Australian Securities and Investments Commission v AGM Markets Pty Ltd

Counsel for the Third Defendant: Mr MGR Gronow QC, Ms L Collaris and Mr A Christopherson

Counsel for the Fifth Defendant: Mr JL Evans QC and Mr P Miller

Solicitor for the Fifth Defendant: O'Loughlin Westhoff

Counsel for the Sixth Defendant: The Sixth Defendant did not appear

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant

AND: AGM MARKETS PTY LTD (ACN 158 706 766) (IN LIQUIDATION) First Defendant

OT MARKETS PTY LTD (ACN 621 714 181) (IN LIQUIDATION) Third Defendant

OZIFIN TECH PTY LTD (ACN 618 038 396) (IN LIQUIDATION) (and another named in the Schedule) Fifth Defendant

JUDGE: BEACH J DATE OF ORDER: 26 FEBRUARY 2020

1. Within 21 days of the date of these orders, each party file and serve proposed minutes of orders and short submissions (limited to 3 pages each) to give effect to these reasons.
2. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BEACH J: 1 The present proceeding concerns the activities of the first defendant (AGM), the third defendant (OT) and the fifth defendant (Ozifin) and the promotion of derivative instruments. From the latter part of 2017 until the middle of 2018, each of the three defendants operated separate businesses in Australia that offered over-the-counter (OTC) derivative products being contracts for difference (CFDs) including margin foreign exchange contracts (FX contracts) to retail investors in Australia. They provided retail investors an online platform on which to invest in those products and also provided financial product advice to them by telephone and email (the financial services). That advice was provided by account managers (AMs) who were engaged on behalf of the defendants, but who were based overseas. The AMs engaged on behalf of AGM were based in Israel. The AMs engaged on behalf of OT were based in Cyprus and later the Philippines. And the AMs engaged on behalf of Ozifin were based in Cyprus. 2 ASIC alleges that by the interactions between the AMs and those retail investors, each of the defendants contravened various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). And it has sought against each defendant, inter-alia: (a) declarations of contravention; (b) orders that the defendants: (i) pay pecuniary penalties to the Commonwealth; and (ii) make payments to those retail investors being their clients who suffered losses arising from the contraventions by way of non-party redress; and (c) orders that the defendants be wound up on the just and equitable ground. 3 The trial before me proceeded on the issue of liability only. Moreover, and as I will explain later, it is now not necessary to make any orders concerning the imposition of any external administration. 4 The specific allegations that ASIC maintains against the three defendants can be separated into two broad categories of contraventions. 5 The first set of contraventions are said to arise from the interactions between AMs engaged by or on behalf of each of the three defendants and 17 investors on whose affidavit evidence ASIC has relied (witness investors) and 24 additional investors (additional investors); in relation to the latter, ASIC has relied on the transcripts of conversations between AMs and the additional investors. The witness investors are: (a) four investors who were clients of AGM's "Alphatrade" business; (b) six investors who were clients of OT's "OT Capital" business; and (c) seven investors who were clients of Ozifin's "TradeFinancial" business. 6 ASIC's case concerning these contraventions is that each defendant with respect to their relevant investors: (a) provided personal advice within the meaning of s 766B(3) of the Corporations Act to each of those investors when they were not licensed or otherwise entitled to do so; (b) made representations to those investors about the operation of and risks associated with the CFDs and FX contracts that were false, misleading or deceptive; and (c) engaged in conduct in relation to each witness investor as well as additional investors that was, in all the circumstances, unconscionable in contravention of s 12CB of the ASIC Act. 7 ASIC also says that the AMs who provided the personal advice to each of the investors failed to take the steps that a reasonable person in the situation of those AMs would have taken to ensure that they acted in the best interests of the investors and did so when it would not have been reasonable to conclude that the advice was appropriate to each such investor. 8 In addition, ASIC says that the conduct by OT and Ozifin that constituted such contraventions was conduct undertaken on behalf of AGM. Further, ASIC says that AGM was knowingly involved in the contraventions by OT and Ozifin that arose from the said conduct. 9 Further, it is said that each of the defendants contravened other provisions of the Corporations Act that applied to their provision of the financial services. In particular, it is said that if the advice statements identified in ASIC's further amended points of claim (FAPOC) each constituted financial product advice, but did not constitute personal financial advice and therefore constituted general advice, then at no stage did any of the defendants provide a general advice warning as required by s 949A(2). 10 Further, it is said that the defendants each engaged in a system of conduct or pattern of behaviour that was in all the circumstances unconscionable. 11 The second set of contraventions concern what I would describe as compliance contraventions. ASIC says that AGM as the holder of an Australian Financial Services Licence (AFSL) failed to take the steps necessary to ensure that the financial services provided by OT and Ozifin as its authorised representatives and the AMs engaged by or on behalf of the defendants were provided in accordance with the requirements of the financial services laws. ASIC says that AGM's compliance systems and their implementation were insufficient to meet its obligations to properly supervise the conduct of its representatives. It is said that the scale of the misconduct revealed by the AMs' interactions with the investors establishes the insufficiency of AGM's compliance systems. 12 Now as I have already said, ASIC has relied on 17 affidavits relating to the conduct of the defendants towards the 17 witness investors including transcripts of telephone calls and emails between the witness investors and the AMs. ASIC has also relied on further documentary evidence of communications between those investors and the AMs, including extracts from the defendants' customer relationship management databases. In addition, ASIC has also relied on the transcripts of conversations between AMs engaged by or on behalf of the defendants and 24 additional investors. Of those additional investors, 11 were clients of AGM, eight were clients of OT, four were clients of Ozifin and one was a client of both OT and Ozifin. 13 Further, ASIC has relied on the evidence of two former employees of IBD Marketing Inc (IBD). IBD was engaged by OT to provide introductory and customer services, and what have been described as "retention" services. In particular, Mr Bryan Cecilio was employed by IBD during the relevant period, first in a role described by OT as an "opening agent", and later as an AM in a department described by IBD as "retention". Mr Cecilio provided evidence of the operation of AM services by IBD on behalf of OT and by extension AGM. He said that the purposes pursued by the AMs engaged by IBD were to maximise the deposits that clients made to their OT trading accounts, and to have the clients of OT open multiple CFD and/or FX contract positions. Mr Cecilio's evidence was that those purposes were communicated to the AMs engaged by IBD in training conducted by IBD, and by the team leaders and senior AMs to whom the AMs engaged by IBD on behalf of OT were subordinate. The other employee witness was Mr Carlos Nabata, who was employed by IBD in customer service. 14 In addition, ASIC has also relied on two expert reports of Mr John Blundell, an expert in the derivatives in question. Mr Blundell provided evidence regarding the operation of the CFDs and FX contracts that were issued to the clients of the defendants. He also gave evidence that the AMs who provided what ASIC says was personal advice to a sample of the witness investors did not take all steps that they ought to have taken to ensure that they acted in the best interests of those clients; further, they provided advice that it was not reasonable to conclude was appropriate to those clients. Further, he gave evidence of the steps that AGM ought to have taken but did not take to ensure that its representatives complied with the requirements of the Corporations Act and the ASIC Act. 15 In summary, I have largely accepted ASIC's case. But in order to explain why I have done so, it is necessary to descend into the detail of the defendants' activities to give them their proper characterisation. Further, in assessing their consequences I have only needed to resort to the applicable statutory language construed in context. No resort to meta-themes has been necessary. Any commercial judge tempted to engage in overly nuanced intellectualisation in this area should heed what Francis Bacon warned about philosophers: "their discourses are as the stars, which give little light because they are so high." But "delusive exactness", to use Oliver Wendell Holmes' robust phrase, is also to be avoided.

Factual Background 16 Let me begin with the defendants and the structure of their operations.

(a) Structural and operational aspects 17 From 2 October 2012 until 31 December 2018, AGM was the holder of an AFSL. The AFSL permitted AGM to: (a) provide general financial product advice in derivatives and foreign exchange products, but not personal advice; (b) deal in derivatives and foreign exchange products; and (c) make a market in derivatives and foreign exchange products to wholesale and retail clients. 18 On 5 November 2018, ASIC made a decision to cancel the AFSL pursuant to s 915C(1) of the Corporations Act, although the cancellation only took effect on 31 December 2018. The stay of the cancellation was intended to allow the continued operation of AGM's dispute resolution process and any compensation arrangements, and to allow clients with existing positions to close them. 19 Until 16 April 2018, each of OT and Ozifin was a corporate authorised representative of AGM. OT was a party to a corporate authorised representative agreement (CAR agreement) with AGM dated 18 September 2017. AGM cancelled OT's authorisation on 16 April 2018. Ozifin was a party to a CAR agreement with AGM dated 13 June 2017. AGM cancelled Ozifin's authorisation on 16 April 2018. 20 The defendants provided financial services to retail investors in Australia: (a) in the case of AGM, under the business name "Alpha Trade"; (b) in the case of OT, under the business name "OT Capital"; and (c) in the case of Ozifin, under the business name "TradeFinancial". 21 As I have indicated, each of the defendants operated businesses dealing in financial products, being FX contracts and CFDs. They provided advice to retail clients in Australia in relation to those products. 22 A CFD is an agreement to exchange, at the closing of the contract, the difference between the opening and closing price of the underlying asset, multiplied by the number of units of that asset detailed in the contract. A CFD essentially allows a person to bet on whether the value of the underlying asset will increase or decrease over time. An FX contract is a form of CFD that allows a person to take a position on the change in value over time of one currency relative to another. 23 The precise terms of the contract that represents a CFD or FX contract are determined by the disclosure documents provided by the issuer of the product. Nevertheless, under both CFDs and FX contracts, investors are exposed to movements in the value of the underlying asset, without having to purchase the asset itself. CFDs and FX contracts are highly leveraged. They require the investor initially to pay only a fraction of the price of the value of the underlying asset or currency to open the position. The investor is exposed, however, to the total of the movement in the price of the underlying asset or currency. Whilst those products can thereby be used to magnify profits relative to the initial investment, they have a commensurate potential to magnify losses. 24 As I have indicated, AGM carried on the business of dealing in FX contracts and CFDs pursuant to its AFSL. OT and Ozifin carried on the business of dealing in FX contracts and CFDs pursuant to the CAR agreements. The defendants dealt in FX contracts and CFDs because they issued those products to their clients, and because they arranged for a person including each of the investors to acquire those products. 25 There is an issue in this proceeding as to which of the defendants issued the FX contracts and CFDs to the clients of OT and Ozifin, and in particular whether OT and Ozifin issued those products to their clients on OT's and Ozifin's own behalf or on behalf of AGM. To some extent, the question of which entity issued the CFDs offered to clients of OT and Ozifin is resolved by considering the terms of the relevant product disclosure statements (PDSs) and their terms and conditions, as well as the terms of the CAR agreements between AGM and OT, and AGM and Ozifin. On the evidence I am prepared to accept the following. 26 From at least 22 December 2016 until ASIC cancelled its AFSL, AGM, under its Alpha Trade business name, issued CFDs and FX contracts to retail clients in Australia pursuant to a PDS and account terms and conditions dated 22 December 2016. 27 From sometime in October 2017 until 16 April 2018, when AGM cancelled the CAR agreement with it, OT operated a business of issuing CFDs and FX contracts to retail clients in Australia under its OT Capital business name and pursuant to: (a) PDSs dated October 2017 (the first OT PDS) and December 2017 (the second OT PDS); and (b) account terms dated 9 October 2017 (the first OT terms) and 22 December 2017 (the second OT terms). 28 Now according to the first OT PDS and first OT terms, OT issued the FX contracts and CFDs to the clients of OT. But according to the second OT PDS and second OT terms, AGM issued those products to the clients of OT. I am prepared to accept the reality of that division. 29 From sometime in October 2017 until 16 April 2018, when AGM cancelled the CAR agreement with it, Ozifin operated a business of issuing CFDs and FX contracts to retail clients in Australia under its TradeFinancial business name and pursuant to: (a) PDSs dated October 2017 (the first Ozifin PDS) and November 2017 (the second Ozifin PDS); and (b) two sets of undated account terms (the first Ozifin terms and the second Ozifin terms). 30 Now whilst there is some internal inconsistency in the documents and so some uncertainty, according to the first Ozifin PDS and first Ozifin terms, Ozifin purported to issue the FX contracts and CFDs to the clients of Ozifin. But according to the second Ozifin PDS and second Ozifin terms, AGM issued those products. Again I am prepared to accept the reality of that division. 31 Now it is questionable whether I treat the arrangements for issuing as if they were formally reflected in the documents or whether I treat all CFDs and FX contracts as having been issued by AGM whether directly or on its behalf by Ozifin and OT. I note that on one view and given the AFSL authorisation, it would seem that only AGM had the right to issue. But I will proceed on the basis that the documents reflected the true position such that each of AGM, OT and Ozifin can from time to time be taken to have issued CFDs and FX contracts. 32 Let me deal with another matter. The terms of the CAR agreements determine the proportion of the revenue generated by positions opened by the clients of OT and Ozifin to which AGM was entitled, and that to which OT or Ozifin were entitled. By the OT CAR agreement, AGM was entitled to between 5% and 7% of the monthly "Client P&L" generated by OT. By the Ozifin CAR agreement, AGM was entitled to 7% of the monthly "CAR Client P&L" generated by Ozifin. 33 Now neither of the CAR agreements defined the term "Client P&L". But in my view, the term "Client P&L" should be understood to mean the total of client funds deposited and lost via trading, net of any profits realised by clients from their trading. 34 Further, whilst the CAR agreements do not say so explicitly, OT and Ozifin were each entitled by the terms of their respective CAR agreements to so much of the Client P&L to which AGM was not entitled. 35 In the result: (a) OT was entitled to between 93% and 95% of the monthly Client P&L from positions opened by its clients; and (b) Ozifin was entitled to 93% of the monthly Client P&L from positions opened by its clients. 36 In summary, until December 2017 and November 2017 respectively, OT and Ozifin, and after those dates, AGM, issued the CFDs and FX contracts to, and was therefore the counterparty to the contracts with, the clients of OT and Ozifin respectively. 37 Further, at all relevant times: (a) AGM was entitled to between 5% and 7% of the revenue generated by reason of clients of OT and Ozifin experiencing crystallised losses; and (b) OT and Ozifin were entitled to the balance of the revenue so generated. 38 Further, AGM was the counterparty to CFDs and FX contracts issued to clients of its 'Alphatrade' business. Therefore, and subject to the steps undertaken by AGM to hedge positions opened by its clients, AGM generated revenue when its clients suffered losses on positions that they had opened. 39 Further, I should make another point. On the evidence, I am not clear as to whether the defendants gave the PDSs and other disclosure documents published by the defendants to their clients as required by s 1015C in the case of the PDSs, and as required by s 941A in the case of the financial services guide. But they were nevertheless available on the relevant defendants' websites. Further, I am prepared to accept that as a matter of contract, they governed the issue of CFDs and FX contracts to clients. 40 Let me now further elaborate on some specific matters. 41 First, let me say something about trading platforms. 42 Each of AGM, OT and Ozifin provided a web-based trading platform that clients used to open and close margin FX contracts and CFD positions. AGM, OT and Ozifin used various means to attract clients, including web sites and advertising on the internet and social media. 43 After making an initial deposit with the relevant company, clients were contacted by an AM engaged on behalf of the relevant defendant. 44 Each of Ozifin, OT and AGM offered their clients "bonuses" in the form of an increase to the balance of the client's account. The increase in the clients' account balance effected by the bonuses improved the client's margin position, and could therefore be used to avoid having to close existing positions that had moved against a client or could be used to open additional and/or larger positions. AMs engaged by Ozifin and/or AGM represented to clients that the AM could arrange for a bonus to be paid to the client's account. But the terms upon which Ozifin and AGM offered those bonuses meant that clients could not withdraw the bonus funds until they had opened a certain number of positions or a certain period of time had elapsed. 45 AMs engaged by OT and Ozifin were based in overseas call centres. As I have said, in the case of OT the AMs were based in Cyprus and the Philippines. In the case of Ozifin they were based in Cyprus. 46 People working in those overseas call centres contacted retail clients in Australia. In addition to assisting clients to download trading software and to operate that software, call centre staff provided financial product advice to retail clients in Australia in relation to FX contracts and CFDs, including giving personal advice. Further, they encouraged or persuaded retail clients to deposit further funds into the trading accounts that they had established with the relevant company. Further, in some instances, they encouraged the clients to provide remote access to the client's computer, and asked the client to open their online banking system so that the AM could assess the funds available to retail clients. 47 As I say, each of the defendants provided to their clients an online trading platform that those clients used to open, monitor and close CFDs and FX contracts, and by which the clients could monitor the balance, equity, margin and free margin in their accounts. AGM clients used the MetaTrader 4 platform, which could be used to open and close CFD or FX contract positions. OT clients also used the MetaTrader 4 platform, which included for each product on the platform a candle chart. Ozifin's trading platform was on the TradeFinancial website. The TradeFinancial website included a feature whereby Trading Central signals would appear in a message that scrolled across the top of the website. 48 Second, AGM and OT used software to view and access clients' computers. Indeed, they instructed clients to download that software during early discussions with them. The software, typically a program called TeamViewer, allowed the defendants' representatives to view the client's computer screen remotely, and move a cursor around on each client's screen. For AGM, it was also used to control clients' computers. 49 The defendants used this software not only to view what clients were doing on the trading platforms, but also to: (a) view the clients' personal financial information on their online banking accounts and use that information to persuade clients to deposit more funds with the defendant; (b) direct the client to effect transfers of funds from the client's online banking system to the client's trading account; and (c) direct clients as to what CFD and FX contracts to open, and how to open those positions. 50 Third, AGM engaged Falcon IC&T Limited (Falcon) to provide financial services to customers of AGM. The AMs who spoke with retail clients of AGM in Australia were engaged by or on behalf of Falcon. 51 Now AGM has sought to avoid responsibility for any conduct that amounts to a contravention undertaken by an AM engaged by Falcon. It says that its agreement with Falcon prohibited Falcon from giving personal advice or otherwise acting contrary to law. So, according to AGM, if AMs engaged by Falcon did give personal advice or otherwise acted contrary to law when dealing with AGM's customers, AGM cannot be made liable for that misconduct. But in my view any mere prohibition in the agreement between AGM and Falcon against conduct that may contravene the law does not of itself relieve AGM of responsibility for conduct undertaken on AGM's behalf by Falcon. 52 Fourth, on 1 November 2017, OT entered into an agreement with IBD by which IBD agreed to provide "marketing" services to OT. But regardless of the specific services described in that agreement, AMs engaged by IBD provided financial services to clients of OT. Indeed, in my view OT appointed IBD to provide, inter-alia, account management and customer relations services to customers of OT. Moreover, the evidence of the interactions between AMs engaged by IBD in the Philippines and the customers of OT reveals that those AMs provided financial product advice to clients in Australia, including personal advice. Indeed, it would seem from the evidence before me that the conduct of the AMs engaged by IBD, and who contacted clients of OT in Australia, was calculated to increase the quantum of deposits that clients of OT made to their OT trading accounts. 53 Fifth, let me say something briefly at this point concerning AGM's compliance systems. 54 AGM, OT and Ozifin purported to provide financial services to their clients in Australia pursuant to AGM's AFSL. As the holder of the AFSL, AGM was required to meet the general obligations set out in s 912A of the Corporations Act. Those obligations included ensuring that the financial services covered by that licence were provided efficiently, honestly and fairly (s 912A(1)(a)), and an obligation on the part of AGM to take reasonable steps to ensure that its representatives complied with the financial services laws (s 912A(1)(ca)). Indeed, it was a condition of the AFSL that AGM establish and maintain compliance measures that ensured, as far as was reasonably practicable, that AGM complied with the provisions of the financial services laws. Now in what purported to be compliance with that obligation, AGM had in place a written compliance plan, and various associated documents. Further, apart from providing various policy documents to OT and Ozifin, AGM took some steps to discharge its compliance obligations. Various employees of AGM were tasked with listening to recordings of between 5 and 10 calls each week between AMs engaged by or on behalf of each defendant, and the clients of those defendants. Further, from January 2018, AGM prepared daily compliance reports, and sent some correspondence to Ozifin regarding a limited number of deficiencies that the compliance officers identified in the calls between the AMs and clients. Further, some of the deficiencies identified by the compliance officers engaged by AGM related to the description provided to clients of the risks associated with investment in the relevant products. 55 I would say now, although I will return to this later, that AGM's compliance systems and their implementation were insufficient to satisfy its statutory obligations under s 912A. 56 Let me now say something further about derivatives and how they operated in the present context.

(b) Operation of derivatives 57 When a client opened any position in a CFD or FX contract, all of the funds in that client's account were exposed to adverse price movements in the referenced underlying asset. The loss was not limited to the initial margin payment that the client made to open the position. In addition, the risk was also not limited solely to the amount the client had deposited. A client could lose more than they deposited. 58 A client's trading account could enter a negative balance when one or more of the client's open positions moved quickly against them. If the price of the underlying reference asset was rising or falling rapidly, the relevant defendant may not have been able to close the positions quickly enough. This was because in rapidly moving markets, prices moved quickly and could often 'gap' up or down, which was where prices could jump from one level to the next, for example from $10 down to $9, and miss the price levels in between. The price at which the position was closed may have used up all of the margin posted against the position and then some or all of the available funds that were also deposited in the account. This could then place the account into a negative balance. The client would normally then be obliged to cover any negative balance on the account by making further deposits. 59 The CFD and FX contracts provided by the defendants were leveraged products. Only a small proportion of the value of the underlying asset needed to be paid to gain exposure to that asset. For example, a leverage of 1:100 means that for every $1 used to open a position, the client will have a $100 exposure to that asset. If the client wanted to have $1000 exposure to the asset, then they would pay (or post as margin) $10 to open the position. 60 In the present case, the client was required to hold a minimum amount of margin available as a deposit within the trading account to maintain the position that they had opened. The margin was posted against the open position to ensure any fluctuations in price, particularly negative fluctuations, could be met by the funds posted as margin. How much needed to be maintained depended upon the underlying asset and the terms of the entity providing the product. 61 The following description sets out a short sequence of events that could occur when a client opened a losing CFD position: (a) Assume a client opened a trading account. (b) The client then placed an opening CFD trade. (c) The position moved against the client, which started to reduce the amount of available margin in the account. (d) The position continued to move against the client. Assume the available funds were now below the 100% required margin level to maintain the position. The client could then either close the position and accept the loss, or put additional funds into the account to increase the amount of available margin in the account to keep the position open. (e) Assume the client deposited additional funds, but the position moved quickly against the client again. The margin level may then have reached the trigger point for a margin call to be made (e.g. 80% of the required margin level). (f) The entity could then make a margin call and move to close the position, liquidating the loss for the client. (g) Indeed, the position could have moved so quickly against the client that by the time the margin call was made, all of the available funds in the account could have been used and the account could then have a negative balance. 62 The process of making a margin call is designed to limit the potential losses of clients to those funds deposited in the account. However, in fast moving markets the losses may have accumulated so quickly that the account moves in to a negative balance. As I say, the price movement against the client positions first erodes the margin posted, then moves on to use up any other funds in the account and finally could move into a negative position if the position is not closed in time. 63 Now by depositing extra funds, the client may be able to maintain the open positions for longer if the prices move against them. The client will have a larger amount of available margin to cover any losses on the positions. But the provision of extra funds does not change the risk being taken by the client to hold that position. If the client 'tops up' their account due to a low margin level, the client is also placing those additional funds at risk against the open position(s). There is no reduction in the level of risk taken by the client. If anything the risk has become greater as a larger amount of funds have been put at stake. 64 Let me turn to the position of the issuer. 65 An issuer of CFD and FX contracts may earn revenue by one of four means, namely, spreads, commissions, fees and by not completely hedging the clients' open positions but managing the issuer's risk on a 'B book' strategy. 66 First, an issuer can earn revenue using the spreads that it offers for its products. For example, if a price is provided by a liquidity provider to buy/sell BHP shares at 20.00/20.03, the issuer could adjust this price to 19.99/20.04 for its clients. The issuer will therefore make money from the extra cents provided when widening the spread of the price to the clients. 67 Second, an issuer can earn revenue from commissions or a one-off charge per transaction. For example, some issuers may charge $5 per transaction commission on each individual equity CFD position taken. 68 Third, an issuer can also earn revenue from the various fees and charges it can impose on clients for general account maintenance. For AGM, such fees and charges included roll-over fees (the charge for carrying positions overnight), finance charges and withdrawal fees. 69 Fourth, an issuer can also earn revenue from its hedging strategy. As was explained in the evidence, there are two types of strategies, namely, an A Book strategy and a B Book strategy. The A book strategy hedges exactly all of its client open positions. This may be done by hedging each and every position, or by aggregating all client positions in an asset, netting down and then hedging the net position. A B Book strategy involves placing some or all client positions into a separate ledger and then either hedging all or part of those clients' positions. Now it may be the case that the B Book is naturally balanced, and little hedging is required to manage the risk to the issuer. The issuer may intentionally not hedge the positions or only hedge positions when certain risk tolerances have been met. A naturally balanced B Book is where all of the long (buy) positions aggregated together, match all of the short (sold) positions aggregated together; for this scenario the buy positions roughly match the sell positions of the clients. 70 There are three possible combinations when using these strategies; a sole A Book strategy, a sole B Book strategy or a combined A and B Book strategy. 71 A sole A Book strategy will automatically hedge all of its clients' open positions and represent, to a certain degree, a risk-free strategy for the issuer regarding client exposure to market fluctuations. 72 A sole B Book strategy does not automatically hedge its clients' open positions. It places all positions into the B Book and then decisions are made by the issuer on how to best manage those positions, by either hedging or not depending upon its risk appetite. If it does not hedge the open positions, then the issuer will have direct exposure to market price fluctuations. When this is the case, if the clients' positions earn money then the issuer will lose funds, but if the client loses then the issuer gains funds. 73 A combination A and B Book strategy uses both methods to varying degrees. An issuer may automatically hedge the positions of clients that it deems to be high risk and as such place those positions into its A Book. But for other clients it could place positions into its B Book and actively manage the risk of that exposure to market fluctuations. Further, it may be that certain stipulated risk levels are put in place to prevent the issuer from being too exposed to the market, e.g. only 10% of the B Book is allowed to be unhedged, with the rest being hedged. 74 On the evidence before me it would seem that AGM utilised a combined A and B Book strategy. As I have said, this would allow AGM to fully hedge certain client positions in its A Book, and partially hedge other client positions in its B Book. Those client positions that remained unhedged would cause a loss to AGM should the client make a profit on the position; alternatively, should a client have lost on an unhedged position, then AGM would have generated revenue from it. 75 It follows from what I have said that if AGM did not hedge any of its open client positions, then it would be 100% exposed to fluctuations in market prices but in the opposite direction to its clients. If prices moved in favour of the clients, this would be at a cost to AGM, and vice versa. Clearly, this would be a high-risk strategy for any CFD and FX contract issuer to undertake to be completely unhedged including with no natural hedge. 76 Now the terms upon which AGM, OT and Ozifin dealt in CFDs and FX contracts provided that each was entitled to hedge client transactions by opening a similar transaction in the name of the relevant defendant with a hedge counterparty. Moreover, in the case of OT and Ozifin, funds deposited by clients could be used for that purpose. 77 Now the terms and conditions on which AGM, OT and Ozifin provided financial services did not provide for clients to pay any form of commission. That being the case, AGM, OT and Ozifin were able to generate revenue in two ways. 78 First, if the relevant entity did not hedge positions opened by clients, they could generate revenue by the position moving against the client. This was because in the present case the relevant defendant was the counterparty to the positions opened by their clients. 79 Second, if the relevant entity did hedge positions opened by clients, they could generate revenue on the spread between the position opened by the client and the hedge position opened by the relevant defendant. 80 But despite all of this, clients of AGM, OT and Ozifin were often told that it was only if the client made money that AGM, OT and Ozifin also made money or that the income of AGM, OT and Ozifin depended on the volume of trades placed by the clients.

(c) Events in the course of these proceedings 81 Let me now say something about the present proceedings. 82 On 9 February 2018, ASIC filed an originating process seeking ex parte orders freezing certain bank accounts of AGM, OT and Ozifin, and restraining travel by directors of AGM and OT. 83 On 12 February 2018 at an ex parte hearing, I made orders: (a) freezing funds standing to the credit of two Commonwealth Bank of Australia accounts held by AGM being an OT client money account held by AGM and an Ozifin client money account held by AGM; and (b) imposing travel restrictions on the then second defendant Mr Yossef Ashkenazi, at that time a director and the CEO of AGM, and the then fourth defendant Mr Guy Stein, at that time a director of OT. 84 On 20 February 2018 in respect of AGM and OT and on 23 February 2018 in respect of Ozifin, I made orders varying the terms of the freezing orders with respect to the use of funds from the said accounts. 85 On 7 March 2018, ASIC filed an interlocutory process seeking the appointment of a receiver and manager to each of AGM, OT and Ozifin. This interlocutory process was later amended to include an application for the appointment of a provisional liquidator. I subsequently declined to make such orders (see Australian Securities and Investments Commission v AGM Markets Pty Ltd (2018) 129 ACSR 335; [2018] FCA 1119). 86 On 3 April 2018, Mr Paul Tsangaris became a director of AGM and Mr Ashkenazi ceased as a director of AGM. By that time Falcon had ceased to provide call centre services to the Alphatrade business operated by AGM. At around the same time, Mr Tsangaris became the CEO of AGM. Whilst Mr Ashkenazi did not at that time formally resign as CEO, he did not have any functional role as CEO after Mr Tsangaris's appointment. 87 Later, ASIC filed and served an amended originating process which sought orders that each of AGM, OT and Ozifin be wound up on the "just and equitable" ground. 88 It is not necessary beyond this point to detail the further procedural steps that were taken up to trial. 89 As at the date of trial at which, I might add, AGM did not appear: (a) the current sole director of AGM was Gary Tseytlin; and (b) Yogi Wealth Pty Ltd was the sole shareholder of AGM. 90 As at the date of trial: (a) the current sole director of OT was Guy Stein; and (b) X.O Milestones Holdings Ltd (X.O) based in London, United Kingdom was the sole shareholder. 91 On 27 September 2019, pursuant to s 436A of the Corporations Act, Mr Mathew Gollant of Courtney Jones & Associates was appointed as voluntary administrator to OT. The voluntary administrator was represented before me at trial. 92 As at the date of trial: (a) the current sole director of Ozifin was Brendan Gunn; and (b) Corfenix Limited based in Hong Kong was the sole shareholder of Ozifin. 93 On 29 September 2019, the sole shareholder of Ozifin resolved to appoint Richard Albarran, Brent Kijurina and Richard Lawrence of Hall Chadwick as liquidators of Ozifin. These liquidators were represented before me at trial. 94 At trial, ASIC sought orders seeking to have the one set of liquidators appointed to all three defendants. ASIC was concerned that there were a number of "behind the scenes" connections between AGM, OT and Ozifin. ASIC was concerned to ensure that there was a thorough investigation into the affairs of the defendants and their respective officers. ASIC anticipated that investigations would need to be conducted to determine: (a) whether there had been any breaches of directors' duties; (b) whether there were any voidable transactions that could be recovered; and (c) whether the funds paid by current or former clients of some or all of the defendants were held on constructive trust for those clients. 95 ASIC sought orders to the effect that John Ross Lindholm and George Georges of KPMG, both official and registered liquidators, be appointed to each of AGM, OT and Ozifin. 96 I did not accede to this application for the reasons I gave orally at the hearing; it is unnecessary to detail these reasons at this point. Rather, I made the following orders which had the effect of imposing liquidation on each of AGM, OT and Ozifin, but with separate sets of liquidators: 1. Pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth), AGM Markets Pty Ltd be wound up. 2. Pursuant to s 472(1) of the Corporations Act, John Ross Lindholm and George Georges, official liquidators, be appointed as joint and several liquidators of AGM Markets Pty Ltd. 3. Pursuant to s 447A of the Corporations Act and s90-15 of the Insolvency Practice Schedule (Corporations), the administration of OT Markets Pty Ltd (administrator appointed) end forthwith. 4. Pursuant to s 461(1)(k) of the Corporations Act, OT Markets Pty Ltd be wound up. 5. Pursuant to s 472(1) of the Corporations Act, Matthew Gollant, an official liquidator, be appointed liquidator of OT Markets Pty Ltd. 6. Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), the voluntary liquidation of Ozifin Tech Pty Ltd (in liquidation) is terminated. 7. Pursuant to s 461(1)(k) of the Corporations Act, Ozifin Tech Pty Ltd be wound up. 8. Pursuant to s 472(1) of the Corporations Act, Richard Albarran, Brent Kijurina and Richard Lawrence, each an official liquidator, be appointed as joint and several liquidators of Ozifin Tech Pty Ltd. 9. ASIC be granted leave to proceed in proceeding VID126/2018 in accordance with s 471B of the Corporations Act. 97 I should say that I have taken steps designed to ensure that there is co-operation between the different sets of liquidators in terms of information flows and investigations, costs being efficiently incurred, and trust questions and any conflicts questions between the different sets of interests being first made the subject of applications for advice or directions from this Court, with notice to ASIC. I should also note that on 17 February 2020 I discharged various freezing orders. 98 Let me now turn to ASIC's case and deal with the first set of contraventions.

INVESTOR CONTRAVENTIONS 99 The conduct that ASIC says gives rise to the investor contraventions arises from interactions between AMs of each of the defendants and each of the investors including what the AMs said to the investors. 100 There is apparently no dispute between the parties that the AMs said to the investors the things that have been summarised by ASIC, with some exceptions. Instead, determination of whether those things amount to the contraventions alleged by ASIC depends on the characterisation of what was said by the AMs to those clients. 101 There are, relevantly, four categories of contraventions. 102 First, it is said that the defendants, by the AMs, gave or directed personal advice to the investors within the meaning of s 766B(3) of the Corporations Act. The statements that constituted such advice can be divided into statements made to each of the investors to the effect that those clients should: (a) take CFD or FX contract positions, whether by making statements to the effect that the clients should open, close or maintain: (i) specific positions identified by the AMs (position statements); or (ii) positions in accordance with indicators that were sourced from, in the case of: A. AGM and OT, a third party website known as Investing.com; and B. Ozifin, a third party organisation known as Trading Central, (signal provider statements); (b) deposit further funds to their trading account (deposit statement); or (c) adopt a particular trading strategy (trading strategy statement). 103 I will refer to the position statements, signal provider statements, deposit statements and trading strategy statements collectively as advice statements. 104 ASIC says that the investors made investments in CFDs and FX contracts on the basis of the advice provided to them by the AMs and that such advice was personal advice. It says that the AMs knew sufficient details of the investors' resources, needs and objectives to engender a reasonable expectation that those matters would be taken into account. But none of the defendants were licensed to give personal advice. Further, ASIC says that even if the advice was merely general advice, the AMs failed to give the statutorily mandated warning each time the advice was given. The warning was not given by the AMs at all during any telephone call. Further, the fine print disclosure in some documents and emails sent to the clients was insufficient, so ASIC says, to meet the statutory requirement to give the warning each time advice was given. 105 Second, ASIC says that the AMs who made the advice statements: (a) were providers of personal advice to the investors constituted by each of those statements within the meaning of s 961(2); (b) failed to take the steps necessary to ensure that the advice that they provided to the investors was in each of the investor's best interest, in contravention of s 961B; and (c) provided advice to the investors that it was not reasonable to conclude was appropriate to those clients, in contravention of s 961G. 106 Moreover, it is said that the AMs who made the advice statements did so as representatives of AGM within the meaning of s 910A. Accordingly, it is said that AGM contravened s 961K. 107 Third, ASIC says that the AMs made statements to various investors that constituted representations concerning: (a) in the case of AGM and Ozifin, the relative risk of investing in the products offered by the defendants compared with an equivalent investment in equities (equities risk representation); (b) the risks associated with depositing additional funds to the clients' trading accounts (money risk representation); (c) in the case of Ozifin, the veracity of positions recommended to a client as being based on indicators (analysis representation); (d) the circumstances in which the defendants would earn revenue from positions opened by the client (revenue representation); (e) the prospect of earning particular profits from trading (profit representation); (f) the operation of the accounts opened by the clients (client account representation); (g) the formulation by the AMs of investment plans for investors (plan representation); and (h) the prospect that positions that had moved against a client would recover (loss recovery representation). 108 ASIC says that each of these representations (investment representations) was a representation as to future matters, and there was no reasonable basis for such investment representations. 109 It is said that the investment representations were false, misleading or deceptive, because the financial products and financial services offered by the defendants operated in a manner contrary to those representations. 110 Further, ASIC says that the defendants made representations to their clients regarding: (a) in the case of AGM and OT, where the AMs engaged by the defendants were located (location representation); and (b) in the case of OT and Ozifin, the regulation of those entities (regulation representation), which ASIC says were misleading or deceptive. 111 Further, ASIC says that by making the advice statements, the defendants represented to their clients that: (a) it was in the clients' best interests to invest in the products recommended by the AMs (best interests representation); (b) the advice provided to the investors was appropriate for those investors (appropriate advice representation); and (c) the defendants were entitled to or approved to provide personal advice to those clients (personal advice representation). 112 It is said in relation to the best interests representations, appropriate advice representations and personal advice representations that those representations were implied and were misleading because the AMs did not do all things required to act in the best interests of those clients, the advice provided by the AMs was not appropriate to those clients, and the defendants, by making the advice statements, provided personal advice when they were not entitled to do so. 113 Fourth, ASIC says that the defendants engaged in unconscionable conduct towards the witness investors and four of the additional investors by reason of the vulnerability of each of those clients, the defendants engaging in misleading or deceptive conduct or making false or misleading representations, and the defendants engaging in other forms of unfair conduct towards those defendants. It also puts a system of conduct case that I will detail later. ASIC says that the derivative financial products the AMs persuaded the witness investors to acquire, and make greater and greater payments towards, were highly complex and risky. It says that the witness investors were plainly not suited to such investments. That was so both in terms of the witness investors' lack of investment experience, being either none, or very limited, and in no case in relation to CFDs or FX contracts, and financial resources which were very limited, which the AMs knew. Moreover, the level of risk to which the witness investors were exposed was not explained at all by the AMs. Instead, the AMs persuaded the witness investors to invest more and more money, on the basis of representations that were either demonstrably misleading or untrue.

(a) Personal advice - the evidence 114 Now ASIC's case depends on the proper characterisation of the various statements that the AMs made to the investors. But in context, there are several characteristics of the interactions between the AMs and the investors that bore common characteristics, and which are relevant to the allegation that the AMs gave personal advice to the clients. 115 From the evidence before me, the following common features can be distilled. 116 Each of the witness investors was introduced to the defendants by clicking on a web based advertisement, which in the case of clients of OT was often an advertisement concerning Bitcoin, or responding to a text message or email, or otherwise coming to the relevant defendant's website after conducting a search for investment opportunities. 117 The advertisements, particularly those which led the witness investors to OT, would typically ask the investors to enter certain personal information. After they had entered the information, they were contacted by a representative of the defendant, by telephone or email, and then steps were taken to set up their trading account with the relevant defendant. 118 After the trading account had been set up, the witness investors were then contacted by an AM engaged on behalf of the relevant defendant, who typically: (a) in the case of AMs engaged by or on behalf of AGM and OT, asked the client to download TeamViewer, or equivalent software, that allowed the AM to connect to and remotely view the witness investor's computer screen; (b) made enquiries of the investor's financial situation including by asking the client to open their online banking whilst the AM was connected to the client's computer by TeamViewer or an equivalent program; and (c) advised the client to deposit funds to their trading account or, if the client had deposited funds at the time that they had registered, advised the client to deposit further funds. 119 Following that process, the AM would contact the witness investors frequently by telephone and email. 120 The evidence of Mr Cecilio, an AM engaged by IBD and who was allocated to clients of OT, was to the effect that: (a) the goal of AMs engaged by OT was to increase the deposits that clients of OT made to their OT trading accounts, and to encourage the clients to open multiple positions and thereby increase the prospects of clients losing money; (b) that goal was advanced by IBD in part by giving AMs cash incentives if they were able to secure deposits from clients; (c) the purpose of asking clients of OT to open their online banking whilst connected to TeamViewer was so that the AM could determine the amount of money that a client had, so that the AMs "could encourage them to deposit that money into their [OT] trading account". 121 ASIC says that by making each statement summarised or otherwise identified in annexures to its FAPOC, the AMs provided financial product advice that was personal advice within the meaning of s 766B(3) to the investor to whom that statement was made. 122 Now ASIC alleges that the many hundreds of statements on which it relies each constituted the separate provision of financial product advice. But the similarities between the statements in each category justify them conveniently being considered together. 123 Now clearly CFDs and FX contracts are derivatives within the meaning of s 761D and therefore financial products (s 764A(1)(c)). Further, there is little doubt that the relevant investors of AGM, OT and Ozifin were each retail clients (s 761G). Accordingly, the real issues that I need to consider are the following. 124 First, did the advice statements constitute a recommendation or statement of opinion to the investors to whom it was made within the meaning of s 766B(1)? 125 Second, were the advice statements: (a) intended to influence the investor in deciding whether to: (i) in the case of the position statements or signal provider statements, take a particular CFD or FX contract position?; (ii) in the case of the deposit statements, deposit further funds to the clients' trading account?; or (iii) in the case of the trading strategy statements, adopt a particular trading strategy?; or (b) could reasonably be regarded as being intended to have such an influence? 126 Third, did the personal matters about each investor that they revealed to the relevant AM constitute one or more of that investor's objectives, financial situation or needs within the meaning of s 766B(3)? 127 Fourth, were some or all of those advice statements provided in circumstances where: (a) it could be inferred that the AM who made the particular advice statement considered one or more of the investor's objectives, financial situation or needs?; or (b) a reasonable person might expect the AM to have considered one or more of the investor's objectives, financial situation or needs? 128 In summary, in my view an affirmative answer should be given to each of these questions. 129 As I have said, ASIC has helpfully prepared a detailed summary of the statements made by the AMs that ASIC says constituted the provision of personal advice, including by reference to those parts of the transcripts of the conversations between the AMs and the investors in which those statements appear. Save for some matters that I will address later, that summary is accurate, subject to some transcription errors that I have corrected. Let me discuss in some detail what the evidence reveals.

Position statements and signal provider statements 130 The conduct of the AMs that constituted the position statements and signal provider statements was commonly characterised by the AM providing advice to open a particular position. Typically the AM would either identify a currency pair or affirm the client's selection of a currency pair. In the case of the signal provider statements, such conduct occurred by reference to information from a third party information provider. In the case of AGM and OT, that information provider was commonly the free website "Investing.com". In the case of Ozifin, the third party information provider was "Trading Central". The AM described to the client the volume of the position that they should open, or commented on the volume that that client had suggested. 131 In instances in which the AMs gave advice to leave open or close a position, that conduct was typically characterised by the AMs mentioning a particular open position after either identifying it themselves or being directed to it by the client, and saying what the client should do in relation to that position, being either to leave open or close. 132 In my view the advice statements considered in all the circumstances of the relationship between the various AMs and the investors, amounted to an implicit, and often explicit, recommendation that the investors adopt a particular course. That conclusion, and the conclusion that the recommendations were intended to influence the investors to adopt that course, is clear from statements made by the AMs to the investors. The statements of the sort set out in the evidence show that the AMs guided or directed the investors in their trading with the relevant defendant, suggested to the client that following the guidance would increase the prospects that the investors would generate a profit, and in the case of the signal provider statements recommended that the investors use the third party signal provider to further those aims. 133 The evidence shows that there were at least 677 position statements made, comprising 133 statements to 10 clients of AGM, 132 statements to 14 clients of OT and 412 statements to 11 clients of Ozifin. Before proceeding further to detail some of the evidence, I should note that I have sought to anonymise particular investors/clients by using only the relevant entity's acronym and a number; for example, AGM5 is investor no. 5 who dealt directly with AGM and its AMs; the numbers assigned merely reflect ASIC's ascription, with the actual persons identified in the evidence. 134 Examples of the position statements are as follows: (a) to investor AGM5: "Now, don't be stressed from the minus, it's a normal fluctuation, but if I was you, I'd add more money to be able to hold those fluctuations, okay?" (b) to investor OT10: Account Manager: "We can actually start opening now. Click 'Okay'. Perfect. Now click here. Perfect. Click 'Okay'. Okay. Perfect. So, here US Dollar is going up. Right click. New order. Perfect. So, here the US Dollar is going up, it means that the Great British Pound is going down now. Okay. So, what will be the position; sell or buy?" Investor OT10: "Sell." Account Manager: "Perfect. Click it. Click 'Okay'. Click 'Okay'. Perfect. Here. Right click. New Order. Perfect. So, same as GBP, US Dollar is going up. Perfect. Click 'Okay'. Now here, US Dollar versus Japanese Yen. The US Dollar is our major currency, it's going up. Right click. New order. Perfect. Perfect." (c) to investor OF4: Account Manager: "Okay. Okay. We've got Euro/USD, from Trading Central, the sell position…." Investor OF4: "Yeah. I just leave everything at 50,000 - am I trading in units, or - - -" Account Manager: "Well, most of my clients will do it from 500,000." … Investor OF4: "So, I've got the 500,000, and did you say it was sell?" Account Manager: "Yes. Yours - USD from Trading Central at the sell position." Investor OF4: "Okay. Done." Account Manager: "Okay. USD/JPY from Trading Central at the buy position." … Account Manager: "Okay. USD/JPY, sell position from Trading Central." Investor OF4: "Yes. Yes." Account Manager: "And, I've got British Pound - - -" Investor OF4: "Yes." Account Manager: "- - - British Bound [sic] vs JPY - - -" Investor OF4: "Yes." Account Manager: "- - - that's also a sell position from Trading Central." Investor OF4: "Done." Account Manager: "I'm going to refresh. Okay. So, you have three positions open?" Investor OF4: "Yep." 135 Further, the evidence shows that there were at least 314 signal provider statements made, comprising 40 statements to 10 clients of AGM, 44 statements to 9 clients of OT and 230 statements to 11 clients of Ozifin. 136 Examples of the signal provider statements are as follows: (a) to investor AGM5 in relation to a NZD/CHF position: "The trend is a down trend. It's 100 percent a down trend. … It is a strong, this is a investing.com recommendation, a strong sell." (b) to investor OT7 (in relation to an AUD/USD position): Account Manager: "Go to investing.com. I'll help you to open trades. … Go to the technical summary … What exactly do you see is it buy or sell." Investor OT7: "It says 'strong buy'. Strong Buy." Account Manager: "Okay. Now, go back to the MetaTrader and look for AUD/USD. … You can open up to 100 volumes." Investor OT7: "100?" Account Manager: "Exactly." Investor OT7: "Wow. A lot on the run." Account Manager: "Exactly. … We can do it gradually. I want you to do it on the small volume but it doesn't work, you can see that all the trades you opened is not working. ... Okay. Now, don't be afraid, you can open up the 100 volumes." Investor OT7: "Okay." Account Manager: "As I have told you, I have analysed it properly for you before I tell you information. All right. Now, go ahead if you want to trade for AUD USD. Are you buyer, or you sell?" Investor OT7: "It says to buy." Account Manager: "Okay. Buy by the market. Have you already clicked, 'Buy by the market'?" Investor OT7: "Yeah. Yeah. Processing at the moment. Okay. Now it's gone through." (c) to investor OF4: "I'm passing you these trades from trading central USD/JPY SELL GBP/JPY BUY GBP/USD BUY".

Deposit Statements 137 Further, the evidence discloses that the AMs made statements to the investors in telephone calls that amounted to a recommendation or statement of opinion that those clients should deposit more money to their trading accounts. In almost every instance in which the AMs made a deposit statement, the AMs described to the investors the reasons why the client should follow the course suggested by the AMs. Those reasons generally included: (a) to avoid the need for investors to close existing positions; (b) to remove or reduce the risk that the investors would lose money; or (c) to increase the investors' free margin to allow them to open additional positions. 138 It is apparent on the face of these deposit statements that they amounted to a recommendation or statement of opinion and were intended to influence the investors to deposit further money to their trading account. 139 Moreover, the operation of the investors' trading accounts, and the use to which the money in those accounts could be put, meant that the statements were made in relation to the financial products or financial services offered by the defendants. The expression "in relation to" in s 766B(1)(a) is to be construed broadly. It is enough that there is some apparent connection or relationship between the recommendation that the investor deposit further funds, and the financial products in which the AM otherwise recommended that he invest in. The deposit of funds to an investor's trading account was a necessary step to the investor opening any CFD or FX contract position or, in some cases, leaving open existing positions. Further, because any funds that a client did invest were exposed to adverse movements in the client's open positions, by depositing further funds the client was effectively investing further funds in those positions. That was particularly the case if the funds were deposited at a time when the client had an actual margin exposure. 140 The evidence shows that there were at least 276 deposit statements made, comprising 83 statements to 14 clients of AGM, 95 statements to 15 clients of OT and 98 statements to 12 clients of Ozifin. 141 Examples of the deposit statements are as follows: (a) to investor AGM1: "Now, I know you hate it and I hate it too, but I think it's going to be the best for you to add more money into the account." (b) to investor OT12: Account Manager: "So you need to maintain 100 per cent level for you to wait for the market to correct itself, okay?" Investor OT12: "All right." Account Manager: "By doing that, okay, you need to have - oh - you need to deposit more - a little bit more, okay?" (c) to investor OF4 (after telling investor OF4 that Amazon was launching in Australia): Account Manager: "I was thinking for you, I had a proposal if we do something for Friday. Well, actually today, invest in Amazon. This is what I'm getting from Trading Central also, I'm readying myself too, a lot of articles here. And, everything is positive about Amazon. So, what you can do is invest on the Friday, leave it there and then maybe next week withdraw the funds…" Investor OF4: "… Yeah. Yeah." Account Manager: "Okay. But, what's available? What can you do? And, I don't want to give you a - I don't want to give you a bonus runner because there's currently conditions on that … but, with the stock Amazon what are you thinking? How much more can you invest on that?" Investor OF4: "You want more funds?" Account Manager: "Do you have any - can you do anything or - - -" Investor OF4: "No. Well, no."

Trading Strategy Statements 142 The trading strategy statements were an explicit or implicit recommendation that the investors should adopt a particular trading strategy. Of the various strategies identified in the evidence, the strategies of most significance recommended by the AMs were that the investors should: (a) leave open positions that had moved adversely to a client, and particularly those in relation to which the client had suffered an unrealised loss, with the intention of waiting (in reality, hoping) for them to turn positive; (b) close positions that had achieved a small profit; (c) open multiple positions simultaneously, which referenced various currency pairs; (d) adopt some variation of the "Martingale strategy", which involved: (i) identifying a position that had moved against the investor; (ii) opening an equivalent position, with twice the volume of the original position; and (iii) when both the positions moved to the benefit of the client, closing both at the point where the loss on the first position was set off or exceeded by the profit on the second position. 143 Now it is evident that the trading strategy statements amounted to recommendations. They were plainly intended to influence the investors to make a decision in relation to the products offered by the defendants. 144 The evidence establishes that at least 224 trading strategy statements were made, comprising 84 statements to 10 clients of AGM, 87 statements to 12 clients of OT and 53 statements to 11 clients of Ozifin. 145 Examples of the trading strategy statements are as follows: (a) to investor AGM5, the AM made a recommendation or provided statements of opinion to the effect that she should adopt a strategy of opening multiple positions: "But you know what you can do, because you are working um, just before you're going to sleep or when you're coming back from work just set up like five, six different trades, do take profit and leave … the computer, leave it." "I would have opened… five different trade at for example 0.50 and then I would take … set up sum, take profit on maybe $200 which means going to take a long … time to get there, a very long time." "But if for example I have five trades look, I would have done it even with 10. You have a space of making 10 trades of 0.50. … And then for example you have five closing on a plus and five closing on a minus it's still going to be on more gain than a loss." "[Y]ou can do a stop-loss and take profit calculated and this is going to be at least a third higher than the, the profit is going to be at least a third higher than the minus." "[L]et's say that one is going to be on a profit of let's say even 150 and then other one going to be on a minus of 75 and you're going to do on each one of them plus 150 and every trade going to be, going to close on a minus of 75 and every trade going to close on a plus of 150 you would find yourself um, like, even if half going to be good and half going to be wrong you're still going to be on more profit than loss." "[I]n the end the worst chances that can be is 50/50. Why? Because you have a buy and a sell." "[G]aining seven trades out of 10 it would be, like it's going to be amazing. So you have, going to have a lot of profit. And then it's setting up every time so you can do maybe um, 200 profit and maybe 125 loss." "[I]f you're setting up take profit and stop-loss just take the profit is going to be much higher than, not much but like at least a third higher than the stop-loss." (b) to investor OT6: Account Manager: "And then when there's a big event we can easily predict what will happen to the market because what, what, what will happen to the market. If you know what will happen, you can easily make profit okay?" Investor OT6: "Right." Account Manager: "Of course when we know what will happen we're going to trade with the maximum volume and, and support that." (c) to investor OF4: Account Manager: "To release the bonus as well, it's - how do I say it? Because - let me see here your account. I need to refresh it. Because you want to do more trading volume and open up bigger positions to accumulate the turnover - okay. You have 26 - 25,000 available margin with the 38,000 - - -" Investor OF4: "Yeah. Well, I can close - well, tomorrow - I'll have a look 'cause I want to get through tonight with Amazon 'cause it's gone up over the weekend. Tomorrow what if I close some of those Amazon positions so that I've got more margin available to do the Forex trading?" Account Manager: "That's what I was going to say. Why you don't close everything. We can open up big positions. It's totally up to you but if you - that's what I was trying to say. And then- - -" Investor OF4: "Okay." Account Manager: "- - - put 10,000 - - -" Investor OF4: "Yep." Account Manager: "Make the deposit of ten, open up Amazon - strictly Amazon - and then target in the next week, two weeks, see it go up potentially and then withdraw from your cash balance and use the other 130 to accumulate points and hopefully in the next month, two months you can also - that's also withdraw-able if you release it."

(b) Personal advice - principles and application 146 Section 766B(1) to (4) provided at the relevant time as follows: 766B Meaning of financial product advice (1) For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could reasonably be regarded as being intended to have such an influence. (1A) However, subject to subsection (1B), the provision or giving of an exempt document or statement does not constitute the provision of financial product advice. (1B) Subsection (1A) does not apply for the purpose of determining whether a recommendation or statement of opinion made by an outside expert, or a report of such a recommendation or statement of opinion, that is included in an exempt document or statement is financial product advice provided by the outside expert. (2) There are 2 types of financial product advice: personal advice and general advice. (3) For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where: (a) the provider of the advice has considered one or more of the person's objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or (b) a reasonable person might expect the provider to have considered one or more of those matters. (4) For the purposes of this Chapter, general advice is financial product advice that is not personal advice. 147 Section 766B(1) defines financial product advice as a recommendation or a statement of opinion or a report of either of those things that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in such a product or class of products; or (b) could reasonably be regarded as being intended to have such an influence. 148 Section 766B(2) states that there are two types of financial product advice: personal advice and general advice. 149 Section 766B(3) defines personal advice as financial product advice that is given or directed to a person in circumstances where: (a) the provider of the advice has considered one or more of the person's objectives, financial situation and needs; or (b) a reasonable person might expect the provider to have considered one or more of those matters. 150 General financial product advice is defined negatively (s 766B(4)). It is financial advice that is not personal financial advice. 151 Section 766B forms part of a legislative scheme that sets out a range of requirements for the holder of an AFSL. It has as its broad purpose the protection of consumers of financial services. 152 More generally, Chapter 7 draws a distinction between the statutory regulation of those who provide general advice on the one hand, and personal advice on the other. 153 Division 2 of Part 7.7 establishes minimum disclosure obligations on providers of financial product advice, whether general advice or personal advice, when financial services are being provided to "retail clients" as defined in s 761G. In the present case there is no doubt that the investors were retail clients. 154 Division 3 of Part 7.7 provides for additional obligations on those who provide personal advice, including: (a) to provide a statement of advice to the client (s 946A); (b) to act in the best interests of the client (s 961B(1)); (c) that the advice provided must be appropriate to the client (s 961G); and (d) that the provider of personal advice must address conflicts of interest by giving priority to the client's interests when giving advice (s 961J). 155 Further, a provider of general advice only who provides general advice to retail clients must warn the client, at the same time as providing the advice and by the same means as the advice is provided, that the advice has been prepared without taking account of the client's objectives, financial situation or needs, and because that is the case that the client should consider the appropriateness of the advice having regard to those same considerations (s 949A). Further, an authorised representative of an AFSL holder who provides oral general advice can meet its obligations under s 949A by providing the modified warning stipulated in ASIC Corporations (General Advice Warning) Instrument 2015/540, namely, an oral warning that the advice is general advice and the advice may not be appropriate for the client. 156 Putting aside the personal advice question, I would say now that if the defendants provided only general advice to clients, then the defendants contravened s 949A. If only general advice was given, there were hundreds of s 949A contraventions. 157 At this point, let me elaborate further on the proper construction of the personal advice definition. 158 There are relevantly two sub-sections of s 766B to be interpreted in the context of this case: (a) first, s 766B(1), which determines the circumstances in which a person will be taken to be providing "advice"; and (b) second, s 766B(3), which determines the circumstances in which such advice will be personal advice. 159 Three questions emerge in the present case. First, did each advice statement made by the AMs amount to a recommendation or statement of opinion, or a report of either of those things? Second, was that recommendation, statement or report intended to influence the investors to invest in, dispose of, or retain an investment in, a particular financial product, or class of financial products (in this case, CFDs and FX contracts), or could the recommendation, statement or report reasonably be regarded as being intended to have such an influence? Third, in providing the advice, did the advisor actually take account of one or more of the person's objectives, financial situation or needs or might a reasonable person have expected the advisor to have taken account of one or more of those matters? 160 Now in order to amount to advice, the statement made must amount to a recommendation or statement of opinion, or a report of either of those things. And the recommendation or statement of opinion must either have been intended to influence the client to make a decision in relation to a financial product or reasonably be regarded as being intended to have such an influence. 161 That dichotomy therefore encompasses both circumstances in which the provider subjectively intended to have such an influence, or in which, objectively, the statements the provider made "could reasonably be regarded as being intended to have such an influence." The existence of those alternatives supports the notion of a broad reading of the provisions, consistent with their protective purpose. The statutory context in which it appears, and the protective purpose of Chapter 7 as a whole, also supports a broad interpretation of the terms "recommendation" and "statement of opinion" in s 766B. 162 Accordingly, those phrases are capable of accommodating not just recommendations or statements of opinion that are explicit or direct, but those that are implicit, such as where information or other material is presented to a client in a form implying that the presenter favours or commends a particular course of action without saying so in terms, or information or other material is presented in a form that implies that the presenter's view is that the contemplated course of action is likely to be beneficial to the client. 163 Now by the terms of s 766B(1), financial product advice may take the form of a recommendation or a statement of opinion, or a report of either of those things. The reference to a report appears as an alternative to the first two forms that the advice might take. It does not limit those forms, and in particular does not suggest the need for any particular formality in the provision of the subject advice. On the contrary, the words "a report of either of those things" expressly capture the circumstances of this case. The "signals" provided by websites such as Investing.com were, plainly, statements of opinion based on the dubious notion that past trends in the price of a financial product could reliably predict future movements. The AMs reported to their clients those statements of opinion. In any event, the AMs frequently made their own recommendations that the client should follow the "signals". 164 Let me now say something about the Full Federal Court decision of Australian Securities and Investments Commission v Westpac Securities Administration Ltd (2019) 373 ALR 455. 165 In the statutory context, as Jagot J said (at [216]), a "recommendation" or "statement of opinion", which are concepts of broad amplitude, necessarily involve something that is capable of influencing a person about a product. And this can be discerned from the whole or any part of the communication (at [217]). Moreover, "[a] statement of opinion is simply a statement of a view" (at [240]). Further, such a statement can be express or implied, and can include "matter that is not written but conveys a message". Similarly, a recommendation can be express or implied. Moreover, the concepts of "recommendation" or "statement of opinion" are not mutually exclusive. The latter may be the basis of the former, and the former may imply the latter (at [18] per Allsop CJ). But the latter need not be accompanied by or imply the former. As O'Bryan J said (at [336]), "opinion" means "the expression of a belief, view, estimation or judgment"; and such an expression does not need to be accompanied by a recommendation in the sense of commending a course of action. Further, there is no super-added "advice" component to "recommendation" or "statement of opinion". Satisfaction of either limb of s 766B(1) is taken to be "financial product advice" (at [333] and [334] per O'Bryan J). 166 Now the first limb of s 766B(3) defines "personal advice" in terms of financial product advice that is given or directed to a person in circumstances where the provider of the advice has considered one or more of the person's objectives, financial situations and needs. 167 Let me address several of these concepts. 168 First, as to the phrase "in circumstances where", I prefer what Jagot J said (at [242]) in terms of intrinsic causal connection to the following effect: If read in isolation the phrase "in circumstances where", as the primary judge found, does not naturally connote a causal connection between the person's objectives, financial situation and needs and the financial product advice that is given or directed to the person. When the statutory text is considered as a whole, however, the need for some such causal connection becomes apparent. Read in context it is apparent, in my view, that personal advice is financial product advice which is connected to the consideration of one or more of the person's objectives, financial situation and needs. The connecting words "in circumstances where" are capable of conveying the causal connection required. If it were otherwise, and the financial product advice could be entirely disconnected from the consideration of the person's objectives, financial situation and needs, then the relevant object of the provision, ensuring that personal advice does in fact consider one or more of those matters, would be defeated. To the same end, the express statutory object of Ch 7 of promoting "confident and informed decision making by consumers of financial products and services" would not be facilitated. 169 I accept that O'Bryan J placed a different emphasis on the relevant phrase (at [361] to [364]) but on this aspect in my view context is everything. Moreover, I do not accept that the construct in the way Jagot J has used it imposes any external notion of causality. To the contrary, her notion is necessarily implicit in the context in which the phrase is being used. 170 Second, as to the word "considered" and its cognate present tense, in context its usual or ordinary meaning of pay attention to, have regard to, view, think about with attention or scrutinise applies (at [25] and [26] per Allsop CJ and at [373] per O'Bryan J). 171 But one must be careful not to inject any further let alone more stringent degree of consideration. As Jagot J said (at [247]), "[i]t is not necessary to go further to analyse the extent, degree or quality of the consideration; any taking into account of the identified matter will suffice". And as O'Bryan J said (at [375]), to superimpose the notion of an active process of evaluating runs the danger of requiring a higher level of consideration than the text read in context mandates. I agree. 172 Third, let me say something about the phrase "one or more of the person's objectives, financial situation and needs". Plainly "person's" is to be applied distributively across the rest of the phrase. That is not in doubt. What follows in the phrase only derives from the context of the possessive "person's" in each case. As to the words "one or more", that is referring to one or more of: (a) the person's objectives, understood as an end towards which efforts are directed; (b) the person's financial situation, understood as a state of affairs or combination of circumstances; and (c) the person's needs, understood as a case in which some necessity or want exists. 173 So construed, it should be plain from the use of "one or more" that one does not have to have all of (a) to (c) together. The use of "and" does not mandate the use of all (at [250] per Jagot J, and at [369] per O'Bryan J). If only one of (a) to (c) has been considered, that would be sufficient to meet the definition. Further, there is no statutory warrant to superimpose the requirement of "as a whole" to any of (a) to (c) or to all of (a) to (c) (at [371] per O'Bryan J). 174 Let me now address the second limb of s 766B(3) being that personal advice is taken to be financial product advice that is given or directed to a person in circumstances where "a reasonable person might expect the provider to have considered one or more of those matters." 175 First, the phraseology "in circumstances where", "considered" and "one or more of those matters" under the second limb can be similarly construed as I have discussed for the first limb. 176 Second, as to the concept of "a reasonable person might expect", let me make a few observations. 177 The language is might expect, which is a lower standard than would have expected. So, as Jagot J points out, the "standard is one of reasonable possibility not reasonable probability" (at [267]). 178 But whose perspective or expectation is being referred to? As has been explained by the Full Court, it is "a reasonable person in the position of the person to whom the financial product advice is given or directed" (at [260] and [264] per Jagot J and at [377] and [378] per O'Bryan J). 179 That being the case, I agree with what O'Bryan J said at [380]: It follows that the expectations of the reasonable person in para (b) (being a reasonable person standing in the shoes of the recipient of the advice) will be informed by the interactions between the provider and the recipient. However, the expectations will not be limited to those matters. The expectations of a reasonable person standing in the shoes of the recipient of the advice will also be informed by other facts that are likely to be known by such a person, but which did not form part of the express interactions between the provider and the recipient. 180 But it follows from this perspective that matters that could not have been known to a reasonable person in the position of the person to whom the financial product advice was given or directed would not be taken into account. 181 Finally, in the context of financial products being promoted to retail investors, the standard of the reasonable person should be that of the ordinary person who is not necessarily university educated and does not have any particular experience or expertise in the financial sphere generally or complex derivatives in particular. 182 Now OT and Ozifin have argued concerning the first limb in s 766B(3)(a) that there is no evidence that the relevant AM in fact considered the investor's objectives, financial situation and needs. They say that the availability to the AM of information about the investor's objectives, financial situation or needs does not prove that the AM considered these matters. The AM did not say that they took into account any of the investors' objectives, financial situation and needs. In general, the AMs were passing on trading signals to the investors, and explained this to the investor. Each investor also signed a document regarding the trading signals that they received. And in this respect, trading signals were generic, untailored and provided to all those who had access to them. But I reject such arguments. They take a too narrow view of the evidence. 183 Further, it is said that the AMs did not intellectually engage in reflecting upon the clients' positions. So much is apparent from the common advice repeated throughout the investor witnesses' evidence that the investor witnesses could or should take trading signals from generic websites such as Investing.com. Those generic website trading signals were not tailored or responsive to investors' individual circumstances. But again, this is taking a too narrow view of the evidence and the ambit of the first limb. 184 Further, in relation to the second limb of s 766B(3)(b), OT and Ozifin say that a reasonable person would know that the AM was not acting as a financial adviser in the traditional sense, but was merely passing on trading signals to the investor. A reasonable person would know that the trading signals were derived from third party websites, and the relevant AM had told the investor this. Indeed a reasonable person may also consider that the AM was merely communicating the information from the signal provider, without any 'recommendation' or 'statement of opinion'. They say that although the investors provided some information about themselves to the AMs, the AMs never said that they were taking this information into account, or that they were taking the investors' personal circumstances into account. Further, Ozifin says that there is no evidence that Ozifin had any ability to view or interact with the client's computer screen remotely. Moreover, each of them say that a reasonable person would expect the investor to have read their PDSs, where they ticked a box that confirmed they had read it. It is said that the relevant PDS stated that neither AGM nor Ozifin/OT was authorised to provide, and would not provide to the client, any personal financial advice. Further, it is said that a reasonable person might also know that the AMs were making similar recommendations to everyone, so that the recommendations were not tailored to the individual investor's specific situation. 185 But again, this is all an artificially narrow view of the evidence and what occurred. 186 In my view it was reasonable to expect the AMs engaged by the defendants to take account of one or more of a client's objectives, financial situation or needs in providing financial advice given: (a) that the AMs sought, or were in fact in possession of, information regarding the client's objectives, financial position, or needs; (b) the circumstances in which advice was provided, and in particular that advice was provided to retail clients in one-on-one telephone calls; (c) the nature of the financial product in relation to which the advice was provided; and (d) the substance of the financial advice, and in particular that the advice was to do specific things, such as to open a specific FX contract or CFD position, leave that position open, close it, or to deposit more funds in a trading account. 187 Further, OT and Ozifin say that to the extent that there were instances where personal advice was given to the investors, these should be limited to statements 'in relation to the particular financial products' (see s 766B(1)), that is, the FX contracts or CFDs in which the investors invested, and not statements that were not related to the particular financial products. They say that statements made in respect of depositing funds into an account (i.e. the deposit statements) or adopting a trading strategy other than in relation to a particular financial product (i.e. the trading strategy statements) do not fall within the scope of s 766B(1) and therefore do not engage s 766B(3). I disagree. No such narrow view is warranted. 188 Generally speaking I reject the submissions advanced by OT and Ozifin. 189 In summary, in the case of each investor, both the subjective and objective limbs of s 766B(3) have been established such that the recommendations and statements of opinion provided by the AMs constituted personal advice. 190 First, by reason of enquiries made by the AMs of the investors, the AMs sought and were provided information that revealed important aspects of the investors' objective, financial situation and needs. 191 Second, the AMs were aware at all times of the balance, equity and free margin of the investors' trading accounts. 192 Third, the AMs sought to assure or reassure the investors that the AMs would guide or assist the investors in their trading, and in some instances said to the clients that the AMs had determined or would determine a "plan" or "portfolio" for the client. 193 Fourth, and relatedly, AMs maintained ongoing relationships with the investors, which were maintained over multiple phone calls and emails. They were far from one-off sales calls. 194 Fifth, in none of the phone calls did the AMs provide a general advice warning. 195 Sixth, the AMs presented each recommendation in terms and in a manner that conveyed the impression that the recommendation was an uncontroversial course of action to take. 196 In summary I am satisfied that each of the advice statements constituted financial product advice which was personal advice.

(c) Best interests and appropriate advice obligations 197 Section 961B(1) requires that a provider of personal advice must act in the best interests of the client in relation to that advice. Section 961G(1) requires that a provider of advice must only provide advice to the client if it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the duty under s 961B to act in the best interests of the client. 198 Sections 961(1), 961B(1) and (2), 961C and 961D provide as follows: 961 Application of this Division (1) This Division applies in relation to the provision of personal advice (the advice) to a person (the client) as a retail client. 961B Provider must act in the best interests of the client (1) The provider must act in the best interests of the client in relation to the advice. (2) The provider satisfies the duty in subsection (1), if the provider proves that the provider has done each of the following: (a) identified the objectives, financial situation and needs of the client that were disclosed to the provider by the client through instructions; (b) identified: (i) the subject matter of the advice that has been sought by the client (whether explicitly or implicitly); and (ii) the objectives, financial situation and needs of the client that would reasonably be considered as relevant to advice sought on that subject matter (the client's relevant circumstances); (c) where it was reasonably apparent that information relating to the client's relevant circumstances was incomplete or inaccurate, made reasonable inquiries to obtain complete and accurate information; (d) assessed whether the provider has the expertise required to provide the client advice on the subject matter sought and, if not, declined to provide the advice; (e) if, in considering the subject matter of the advice sought, it would be reasonable to consider recommending a financial product: (i) conducted a reasonable investigation into the financial products that might achieve those of the objectives and meet those of the needs of the client that would reasonably be considered as relevant to advice on that subject matter; and (ii) assessed the information gathered in the investigation; (f) based all judgements in advising the client on the client's relevant circumstances; (g) taken any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client's relevant circumstances. … 961C When is something reasonably apparent? Something is reasonably apparent if it would be apparent to a person with a reasonable level of expertise in the subject matter of the advice that has been sought by the client, were that person exercising care and objectively assessing the information given to the provider by the client. 961D What is a reasonable investigation? (1) A reasonable investigation into the financial products that might achieve those of the objectives and meet those of the needs of the client that would reasonably be considered relevant to advice on the subject matter sought by the client does not require an investigation into every financial product available. (2) However, if the client requests the provider to consider a specified financial product, a reasonable investigation into the financial products that might achieve those of the objectives and meet those of the needs of the client that would reasonably be considered relevant to advice on the subject matter sought by the client includes an investigation into that financial product. 199 Section 961G provides: 961G Resulting advice must be appropriate to the client The provider must only provide the advice to the client if it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the duty under section 961B to act in the best interests of the client. 200 Now in my view the provider of personal advice is the individual who is to provide the advice, even if that individual is a representative of a financial services licensee and is to provide the advice on behalf of that licensee. 201 In my view in summary, the evidence shows that by reason of the conduct constituting each of the investor contraventions, the providers of the financial product advice that formed the basis of that conduct contravened ss 961B(1) and 961G. 202 Further, AGM contravened s 961K(2) in respect of such conduct engaged in by the people who were employees, agents or otherwise engaged by Falcon or IBD Marketing. 203 Because each of the advice statements constituted personal advice within the meaning of s 766B(3): (a) the providers of that advice, namely, the AMs were required to take all steps necessary to ensure that they acted in the best interests of the recipient of that advice; and (b) the AMs could only provide the advice constituted by the advice statements if it was reasonable to conclude that the resulting advice was appropriate to the recipient. 204 The AMs who made the advice statements to each of the clients were the providers of the advice to those people for the purposes of s 961(2). The alleged contraventions of the best interests obligations and appropriate advice obligations by the various AMs, as representatives of AGM, provide the foundation that AGM itself contravened s 961K by reason of the AMs' contraventions, and that AGM contravened s 961L by failing to take reasonable steps to ensure compliance by the AMs with s 961B and s 961G. 205 As the AMs made the advice statements in their capacity as representatives of AGM and by making the advice statements, the AMs contravened the best interests obligation or appropriate advice obligations. It follows that AGM contravened s961K. I will discuss s 961L later. 206 Now OT and Ozifin submit that Division 2 of Part 7.7A of the Corporations Act only applies in relation to the conscious or intentional provision of personal advice to a person as a retail client. OT and Ozifin contend that when the content of the obligations in those provisions is considered, it is apparent that they apply only to the conscious or intentional provision of personal advice, and not to a person who provides personal advice unwittingly. It is said that this is because the giving of personal advice by a person who was only licensed to give general advice is dealt with separately in other provisions of the Corporations Act. The provision of financial services such as personal advice which is not covered by an AFSL is a contravention of s 911A(1). In addition, a failure to comply with the conditions of an AFSL is a contravention of s 912A(1)(b), which gives ASIC power to suspend or cancel the AFSL. 207 They say that the Explanatory Memorandum to the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012 makes it clear that Part 7.7A was intended to regulate the "financial advice industry". Part 7.7A was inserted in 2012 to replace the former Division 3 of Part 7.7 of the Corporations Act which was, in turn, introduced to regulate licensees (and authorised representatives) that were licensed to provide personal advice. So much is clear from the Explanatory Memorandum to the Financial Services Reform Bill 2001, which noted that where the providing entity's licence or authorisation does not cover the provision of advice, it would be obliged to decline to give the advice. 208 Further, they say that another indication that the relevant statutory obligations were not intended to catch situations where persons who provided general advice may have unwittingly strayed into personal advice also, is the reference in several of the provisions in Division 2 of Part 7.7A to advice "sought by the client": ss 961B(2)(b)(i), 961B(3), 961C, 961D(1), 961D(2), 961E, 961J(2)(b) and 961J(3). It is said that Division 2 of Part 7.7A of the Act is only engaged where personal advice is sought by the client. 209 In the present case, they say that a significant number of the statements said to have been made by AMs to clients were unsolicited, and therefore fell outside the scope of those provisions. 210 Accordingly, they say that the provisions in Division 2 of Part 7.7A do not apply to OT or Ozifin, the authorised representatives of AGM which had been licensed to provide only general advice. 211 In my view, these arguments are misconceived and in essence seek to re-write the clear terms of the statutory provisions. As I have said, personal advice was in fact given. That being the case, Division 2 of Part 7.7A was triggered (s 961(1)). 212 Further, OT and Ozifin say that if there have been contraventions of ss 961B or 961G, then they ought not be liable for two reasons. 213 First, the obligations in Division 2 of Part 7.7A are placed on a "provider", who is the "individual" (s 961(2)). In this case, so the argument goes, the "provider" would be the relevant AM. Therefore, neither Ozifin nor OT was a "provider". Now s 961Q(1) provides that an authorised representative contravenes that section if the authorised representative contravenes s 961B or s 961G. But in the present case the authorised representatives are corporations and not individuals; accordingly, so the argument goes, they cannot have breached s 961B or s 961G. And s 961Q(1) does not provide that an authorised representative contravenes that section if a representative of the authorised representative contravenes ss 961B or 961G. Now this is a narrow reading of the statutory provisions. Unfortunately, as a matter purely of textual construction it would seem to have some merit to it. But I do not consider that this could possibly have been intended. 214 Now the difficulty is in the language of s 961(2). The provider is taken to be the individual who provided the advice. And normally, as a matter of statutory interpretation, the reference to individual is a reference to a natural person; one is not in context dealing with the single/group type distinction. Moreover, other parts of s 961 distinguish between "individual" and "person". So assume that for the moment. Then the AM of OT or Ozifin (as the case may be) was the relevant individual and therefore the provider. And it is that AM who then had obligations under s 961B and s 961G, which I have found were breached. But where then does liability attach to OT or Ozifin (as the case may be) as the principal of such an AM? Strictly, s 961Q(1) does not assist. 215 Section 961Q(1) provides: An authorised representative of a financial services licensee contravenes this section if the authorised representative contravenes section 961B, 961G, 961H or 961J. 216 Of course, OT and Ozifin are authorised representatives. But if the AM is the individual and therefore the provider and has breached s 961B or s 961G, that is the AM's breach, not OT's or Ozifin's contravention. Section 961Q(1) has no work to do. Section 961Q(1) would only have work to do where an authorised representative was a natural person and also the individual/provider. Moreover, there is nothing express in s 961Q(1) which would attribute the AM's breach to the authorised representative. 217 But all of this seems absurd. What then is the solution? One solution is to read "individual" in s 961(2) as not confined to a natural person. But there are difficulties with this approach. Another approach is to use a provision such as s 769B as a legislative poly-filler; s 769B(7) is not relevant on this argument because I am not seeking to attribute liability to the AFSL holder (AGM) but rather the authorised representative (OT or Ozifin). So, utilising s 769B, the AM's conduct and state of mind may be attributed to OT or Ozifin (as the case may be). And by that route, the AM's conduct becomes OT's or Ozifin's contravention. And by that route, harmony is produced with s 961Q(1). This solution does the least damage to the statutory language. I will adopt it. Accordingly OT's and Ozifin's first argument is rejected. 218 Second, OT and Ozifin say that insofar as AMs failed to act in the best interests of clients (s 961B(1)) and/or provided advice when it was not reasonable to conclude that the advice was in the best interests of the recipients of that advice (s 961G): (a) AGM provided Ozifin and OT with information or instructions about the requirements to be complied with in relation to the giving of personal advice, including but not limited to the provision of the Client Sales Guidelines (the Guidelines), a document prepared by and provided by AGM; (b) any failure by the AMs of Ozifin or OT to comply with ss 961B(1) and/or 961G occurred because they were acting in reliance on AGM's information or instructions; and (c) their reliance on AGM's information or instructions was reasonable in circumstances where AGM had provided the Guidelines to assist them in conducting their businesses in accordance with the law and AGM had represented to them that AGM understood the law and would provide relevant supervision and training. 219 As such, OT and Ozifin say that in accordance with s 961Q(2), they are not liable for any contravention of s 961B(1) and/or s 961G. But I reject these assertions, at the least because I am not satisfied on the evidence that limbs (b) and (c) of the s 961Q(2) defence have been made good. 220 Let me now discuss the evidence in more detail.

Best Interests Obligation 221 Now the best interests obligation is concerned with the process or procedure involved in providing advice. It is an obligation concerned with process questions, rather than justifying the quality of the advice by retrospective testing against financial outcomes, as the relevant extrinsic material expressed it. Mr Blundell provided a list of eight general steps that he considered an advisor providing personal advice in relation to CFDs and FX contracts ought to have taken in order to discharge the best interest obligation. I accept that evidence. 222 First, the AMs should have undertaken a thorough examination of the client's current financial situation. This should have included details of all income, savings, assets and debts. This is so that the AM could build a picture of the client's current financial capabilities when trading in CFD and FX contracts. For example, the needs and objectives of a client with $20,000 in disposable funds are very different to those holding $1 million in funds. A client with $1 million in funds would be able to take more risk and absorb greater losses, whilst those with a lot less funds would need to be more risk averse and any significant losses would restrict their trading capabilities, due to the margin requirements for trading, to a greater degree than those with more funds. 223 Second, the AM should also have gained a clear understanding of the client's objectives. Did the client seek a slow steady income stream, were they looking for short term gains or did they want to hedge existing positions held? It was important that the AM clearly understood the client's objectives so that the advice provided could be tailored to each individual client's needs. The intention was for the AM to build a picture of the client's trading capabilities, including whether the products offered by the provider and the risk of those products were appropriate for the client or if the client had needs beyond the products provided by the entity. 224 Third, the AMs should have ascertained the type of products the client wished to invest in. Whilst the AMs were providing CFDs and FX contracts, there were many different types according to the underlying asset of the contract. For example, did the client wish to trade in cryptocurrency CFDs, USD FX contracts or CFDs over equities? The AM should have understood whether the client only wanted to trade these types of products and advised the client according to the client's wishes. An AM could recommend other types of product but had to have a reason for doing so based upon conversations with the client and an understanding of the client's objectives. The client had to also be informed of the reasons why the AM believed an alternative product would suit the client's needs. The AM had to be clear that the products being offered to the client were appropriate to that client and their needs and objectives. 225 Fourth, the AM ought to have informed the client whether the advice that they were providing was based on incomplete information regarding the client's financial situation and objectives. The AM should have advised the client of why the information was incomplete and informed the client of the risks involved in acting on the incomplete advice. This would have allowed the client to make their own informed decision on whether to follow the advice provided. 226 Fifth, the AMs were also required to provide a Statement of Advice (SOA) when, or shortly after, they provided advice to the client. The SOA should have clearly set out all of the details noted above, such as the client's financial situation, objectives and the reasons for the advisor recommending the product that they were. This would have allowed the client to clearly see the reasons why they had been directed to a certain product by the AM. 227 Sixth, the AMs should have educated the clients on the products they were being advised to use. The client should have understood how the product worked, how it could make money for them and equally how they could lose money. It was important for CFDs and FX contracts that the client understood that they could lose more than the funds they had deposited in their account should markets move against them quickly. The AMs should have educated the clients to trade in a responsible manner and not put at risk more funds than they could reasonably lose. The client ought to have been aware of the concepts involved with CFDs and FX contracts trading, particularly leverage, margin and the process of margin calls. The client should have understood when to take profits but also when to liquidate losses to limit risk. 228 Seventh, the AMs should have ensured that the clients understood all the risks involved with the products they were trading and should also have ensured that the clients were aware of the risk management features available to them, such as stop loss orders, prior to the clients placing a trade. 229 Eighth, the AMs should also have advised the client that the CFDs and FX contracts that they were being recommended were leveraged and as such highly risky products. The clients should have been made aware that, depending on the leverage offered, every dollar they put at risk when placing a trade represented several times that amount, which meant that whilst any profits were multiplied by that amount, so too were losses. This meant that a client could lose more than they deposited should losses accumulate quickly. It should have been clearly stated to the client that losses could exceed the amount of funds they had deposited. 230 Now specifically in relation to a sample of the investors, Mr Blundell concluded that the providers of the advice to those clients did not take the general steps identified by him as being necessary to discharge the best interests obligation. 231 He also identified further bases for that conclusion specific to each investor. In the case of those sample investors, Mr Blundell concluded from the details of each investor's financial situation that they provided to the AMs that the investors: (a) wished only to put a limited percentage or a set amount of their overall funds at risk; and/or (b) had a low risk appetite. 232 On those bases, Mr Blundell concluded that, to discharge the best interests obligations, the AMs ought to have taken certain specific steps that they did not take. Because of the high degree of commonality in the circumstances of the sample investors and the balance of the investors, I am prepared to conclude that the AMs contravened the best interests obligation in relation to the balance of the investors.

Appropriate Advice Obligation 233 Mr Blundell concluded that the AMs each provided advice to the sample investors that was not appropriate to them. As with his conclusions concerning the best interests obligation, there is a commonality of reasoning behind Mr Blundell's conclusion with regard to the contravention of the appropriate advice obligation. 234 With regard to each of the sample investors, Mr Blundell expressed the opinion, which I accept, that the following trading strategies were not appropriate for clients who he identified as having investment objectives that did not align with such strategies embodied in the following advice. 235 The first inappropriate strategy was advice to invest in FX contracts or CFDs at all, because those products were high risk, short term investments that did not meet the clients' stated investment objectives. 236 The second inappropriate strategy was advice to leave open negative positions, which was not a strategy appropriate to an investor with limited available funds and therefore a limited ability to maintain the margin necessary to keep those positions open for the days, weeks or even months before the negative positions in leveraged CFDs and FX contracts might return to positive. 237 The third inappropriate strategy was advice to open multiple positions, which was counter intuitive to the strategy of maintaining losing positions. In particular, if a client wished to keep losing positions open a client needed to maintain the minimum level of free margin in their account, adding funds as required. But opening new positions used up some of the available free margin to maintain the new positions. 238 The fourth inappropriate strategy was advice to adopt what I described earlier as a Martingale strategy, which Mr Blundell described as effectively "doubling down" on a losing position, with the expectation that once the position moved in the client's favour, any losses on the first position would more quickly be offset by profits on the second position. As with the strategy of leaving negative positions open, the Martingale strategy required an investor to hold a large amount of funds that they could use to maintain open positions. It was also only suitable for those with a high-risk appetite. 239 The fifth inappropriate strategy was advice to deposit more funds, which Mr Blundell considered inappropriate particularly when used in combination with the advised strategies of running with losses and taking profits, which he considered would lead to the client losing funds in a short period of time. 240 The sixth inappropriate strategy was advice to use trading signals, which were the source of the signal provider statements. Mr Blundell considered that the use of those signals was inappropriate because the signals: (a) were generic, and had not been tailored to the client's needs; (b) related to products, namely, FX contracts and CFDs that Mr Blundell concluded were not appropriate to those clients; and (c) were overly simplistic as they merely recommended a buy or sell position depending on the direction of the signal. 241 The seventh inappropriate strategy was advice to increase the volume of trading that the investor conducted with the incentive to gain further bonuses from the entity and reach a higher level of status on the trading platform. But that strategy was not appropriate for any investor who had stated that they wanted to put only a small amount of funds at risk and invest over the long term. 242 In my view each of those strategies was not appropriate advice for the relevant clients. Again, because of the high degree of commonality between the conduct of the AMs towards the sample investors, and that towards the balance of the investors, in my view it is reasonable to extrapolate Mr Blundell's conclusion to all investors. The personal financial advice the AMs provided to the balance of the investors was not appropriate to those investors. 243 In my view, in summary, ASIC has made out the contraventions of ss 961B and 961G as alleged.

(d) Failure to give general advice warning 244 ASIC says that in the event that I am satisfied that the advice statements each constitute the provision of financial product advice but do not constitute the giving of personal financial advice, then by the operation of s 766B(4), that advice was general advice. And if that advice was general advice, then s 949A comes into play and s 949A(2) was accordingly contravened by each of AGM, OT and Ozifin. 245 Section 949A provides: 949A General advice provided to retail client - obligation to warn client that advice does not take account of client's objectives, financial situation or needs (1) This section applies in relation to the provision of general advice if: (a) the advice is provided: (i) by a financial services licensee (the providing entity); or (ii) by an authorised representative (the providing entity) of a financial services licensee, or of 2 or more financial services licensees; and (b) the advice is provided to a person (the client) as a retail client; and (c) the advice is not provided in circumstances specified in regulations made for the purposes of this paragraph. (2) The providing entity must, in accordance with subsection (3), warn the client that: (a) the advice has been prepared without taking account of the client's objectives, financial situation or needs; and (b) because of that, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the client's objectives, financial situation and needs; and (c) if the advice relates to the acquisition, or possible acquisition, of a particular financial product - the client should: (i) if the product is not a CGS depository interest - obtain a Product Disclosure Statement (see Division 2 of Part 7.9) relating to the product and consider the Statement before making any decision about whether to acquire the product; or (ii) if the product is a CGS depository interest - obtain each information statement (see Division 5C of Part 7.9) for the class of CGS depository interests that includes the product and consider the statement before making any decision about whether to acquire the product. (3) The warning must be given to the client at the same time as the advice is provided and by the same means as the advice is provided. (4) In any proceedings against an authorised representative of a financial services licensee for an offence based on subsection (1), it is a defence if: (a) the licensee had provided the authorised representative with information or instructions about the requirements to be complied with in relation to the giving of personal advice; and (b) the representative's failure to comply with subsection (1) occurred because the representative was acting in reliance on that information or those instructions; and (c) the representative's reliance on that information or those instructions was reasonable. (5) A financial services licensee must take reasonable steps to ensure that an authorised representative of the licensee complies with subsection (2). 246 The evidence shows that the defendants did not provide the general advice warning to the investors required by s 949A(2). That is so even with the "modification" set out in ASIC's Regulatory Guide 244 and ASIC Corporations (General Advice Warning) Instrument 2015/540, which required only that the defendants say to their clients, at the time of providing the advice and by the same means as the advice is provided, that the advice is general advice and may not be appropriate to its clients. 247 ASIC says, which I accept, that if the AMs did give general advice to the investors, AGM, Ozifin and OT contravened s 949A(2) in failing to warn the investors that the advice had been prepared without taking account of the investors' objectives, financial situation or needs, and that the client should consider the appropriateness of the advice before acting on it. 248 Now Ozifin and OT say that to the extent it is held that the AMs did not provide a general advice warning to clients in accordance with s 949A(2), they rely on the defence in s 949A(4). They say that AGM provided them with information or instructions about the requirements to be complied with in relation to the giving of personal advice, including but not limited to the provision of the Guidelines. Further, they say that any failure by their AMs to comply with s 949A(1) occurred because they were acting in reliance on AGM's information or instructions. Further, they say that their reliance on AGM's information or instructions was reasonable in circumstances where AGM had provided the Guidelines to assist them in conducting their businesses in accordance with the law and AGM had represented to them that AGM understood the law and would provide relevant supervision and training. 249 Now s 949A(4) begins with the words 'In any proceedings against an authorised representative of a financial services licensee for an offence based on subsection (1)…'. But in my view this defence applies even though this is not a criminal proceeding. The Explanatory Memorandum to the Financial Services Reform Bill 2001 (Cth) relevantly stated: 12.60 Where general advice is provided to a retail client, no SoA is required. However, at the time of giving the general advice and by the same means as the general advice is given, the providing entity must warn the client that the advice has been prepared without taking account of the client's objectives, situation and needs and the client should therefore consider the appropriateness of the advice to their situation before acting on the advice (proposed section 949A). 12.61 Warnings must accompany all general advice regardless of the medium used to provide that advice. For contraventions of this provision, the general approach described below has been taken, so that authorised representatives have a defence available to them with a corresponding duty on licensees to ensure that authorised representatives comply. 250 Further, the Revised Explanatory Memorandum ([12.62] and [12.63]) contained similar paragraphs. 251 In my view the words "for an offence" were inserted into the legislation in error, further compounding the erroneous reference to 'subsection (1)' (instead of subsection (2)). The defence can apply to civil penalty proceedings concerning a contravention of sub-section (2). 252 But assuming that the defence under s 949A(4) can apply to OT and Ozifin in relation to the present proceedings, I am not satisfied on the evidence that elements (b) and (c) of the s 949A(4) defence have been made good.

(e) Miscellaneous matters relating to the provision of advice 253 Let me address briefly some other matters. 254 First, AGM admits that it did not provide statements of advice to the clients to whom advice statements were made, but denies that by failing to do so it contravened s 946A(1). Presumably that denial rests on the basis that the advice statements did not constitute personal advice. But in my view the advice statements made by AGM constituted personal advice, and by failing to provide statements of advice each time it made an advice statement, it contravened s 946A(1). 255 Second, OT appointed IBD to provided financial services on its behalf without the written approval of AGM. OT thereby contravened s 916B. Now OT asserts that it did not authorise IBD to provide financial services on its behalf and Mr Ashkenazi was aware of the appointment of IBD and consented to that appointment, including by providing training to IBD employees. But in my view OT did appoint IBD to provide financial services on its behalf, and OT therefore contravened s 916B. 256 Third, AMs engaged by Ozifin stated to its clients that they were "financial advisers". Now Ozifin says that the AMs so described themselves at the request of Mr Ashkenazi. In support of that allegation, Ozifin points only to the hearsay statements of its officer Omer Hen in an email to Michelle Zhao of AGM well after the fact. That, of course, is no defence. In my view Ozifin contravened s 923C(1).

(f) False, Misleading or Deceptive Conduct 257 ASIC's case is that the AMs made three categories of representations to clients of the defendants that were false, misleading or deceptive. 258 First, it is said that the AMs made a number of express representations regarding the operation of the financial services offered by the defendants, each of which was a representation as to a future matter, for which there were no reasonable grounds (investment representations). 259 Second, it is said that the AMs engaged by the defendants made a number of additional express representations. It is said that in the case of AMs engaged by AGM and OT, it was represented that they were located in Melbourne. Further, it is said that in the case of AMs engaged by or on behalf of OT and Ozifin, representations were made regarding the licensing of those entities. 260 Third, it is said that by making the advice statements, the defendants made implied representations that: (a) it was in the clients' best interests to invest in derivatives generally or the particular derivatives recommended by the AMs (best interests representations); (b) the financial product advice that formed the subject of each advice statement was appropriate to the client (appropriate advice representations); and (c) the defendants were entitled or otherwise approved to provide personal advice (personal advice representations). 261 I have set out in other cases the relevant principles concerning misleading or deceptive conduct and misrepresentation and I do not need to repeat them; see, for example, Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147 at [2256] to [2327] and the cases there cited.

Express Investment Representations 262 Let me begin with the equities risk representations 263 In my view the evidence discloses that AMs engaged by AGM and Ozifin made representations to clients AGM1, AGM2 and AGM12 and client OF12 respectively to the effect that by reducing their investment in equities and increasing their investment in the derivative products offered by AGM and Ozifin, those clients would reduce their exposure to risk. 264 Those representations were false, misleading or deceptive. All other things being equal, investments in CFDs or FX contracts carry a greater risk to capital than an equivalent investment in equities. The terms upon which the products offered by AGM and Ozifin operated were determined by the disclosure documents published by the defendants. The PDSs available on the websites of both AGM and Ozifin each stated that investment in CFDs and FX contracts carried with it the risk of losses that exceeded the initial margin payments made by the clients. By contrast, it is in the nature of equities that an investor's liability is limited to the amount that the investor pays to purchase the equity save for the rare case of partly paid shares. 265 There were at least six equities risk representations made in total, comprising 5 representations to 3 clients of AGM and 1 representation to a client of Ozifin. 266 Examples of the equities risk representations are as follows: (a) to investor AGM1 (in relation to what the AM described as increased volatility in the equities market): "It's bad news but it also can be good news okay? People making huge amount of money in this type of volatility in the market Why? Because people are cashing out their stocks Okay? They're cashing out their stocks and they are buying dollars instead, because dollar is the most stable currency. So the dollar is really climbing up, and you can see… it on this trade of the USD versus the Swiss francs. Right?" (b) to investor OF12: Investor OF12: "I can't see why I can't change it from currency to something like that for a couple of weeks." AM: "… I will tell you why. If you will change to stocks the risk over there right now it's too high. Because if - like I told you just now, Amazon made $60 gain on after it lost $200 it made a $60 in one day, people went like crazy to buy Amazon and then the next day it lost $58. What's the point in that, you're risking money for [inaudible]." 267 As to the analysis representations, an AM engaged by Ozifin made representations to Investor OF3 that various FX contract positions that he recommended the investor should open on 12 January 2018 were consistent with information that the AM had received from Trading Central. In fact, they were not. Trading Central was actually forecasting movements in the opposite direction. Investor OF3 ended up losing $292,626.52 on those trades, representing all of the money that he had invested of approximately $225,000 and a portion of the "bonus money" that had been attributed to his account. 268 Those representations were false, misleading or deceptive because Trading Central published no analysis that was consistent with the 12 January positions. Ms Vanessa Macris, an officer of ASIC, conducted a search of Trading Central for technical analysis for the 12 January positions. The searches that Ms Macris conducted reveal that the technical analysis published by Trading Central was not consistent with the analysis representations. 269 As to the money risk representations, AMs engaged by or on behalf of each of the defendants made representations to the investors regarding the risk to which funds deposited by clients to their trading accounts would be exposed. There are the following three categories of money risk representations: (a) first, that by increasing the amount of money in a client's trading account, the client would reduce the level of risk to which they were exposed; (b) second, that the risk associated with depositing additional funds to a client's trading account would carry an equivalent risk to holding money in a client's bank account; and (c) third, that only those funds in a client's trading account that the client used to make an initial margin payment to open a CFD or FX contract position would be exposed to adverse movements in the price of that product. 270 Those representations were false, misleading or deceptive. By putting further funds into the trading account, the clients did not reduce their risk of loss. On the contrary, there was a greater risk of a larger loss than that to which the client was already exposed. And it was not true to say that, by investing only a certain percentage of the balance of a client's trading account, only that percentage was at risk of being lost. The opposite was true. Much more could be lost through a margin trade than the initial amount invested. The entire balance of the account, and more, was at risk of loss. 271 When a client opened a position in a CFD or FX contract, all of the funds in that client's account were exposed to adverse price movements in the referenced assets. That followed from the characteristics of the products offered by the defendants, and the terms on which those products were offered. 272 In addition, if the position moved quickly against the client, the relevant defendant may not have been able to margin close the position quickly enough before the client's account entered a negative balance. 273 When a client opened a position, they were required to make an initial margin payment. The terms upon which the defendants offered the CFDs and FX contracts meant that, were a position to move against a client, the funds in the client's account apart from those used to make the initial margin payment might be exposed to the adverse movement, and the client might be required to make a further margin payment. Additionally, the defendants were each entitled to close out positions that had moved against the client. 274 By depositing further funds to their trading accounts, the clients to whom the money risk representations were made would be able to maintain open positions because their available margin would increase. But by depositing further funds the clients would not reduce the risk being taken by the client to hold the position. Rather, by depositing further funds to their account, the clients would simply be placing those additional funds at risk against the open position. 275 The evidence shows that there were at least 86 money risk representations made in total, comprising 16 representations to 8 clients of AGM, 31 representations to 11 clients of OT and 39 representations to 10 clients of Ozifin. 276 Examples of the money risk representations are as follows: (a) to investor AGM3: AM: "it's very important for me to tell you - Alpha Trade is a licensed company, okay? It's exactly like your bank. Over here when you put the money, when you invest money, the money is sitting in a trust account in Commonwealth Bank, okay?" Investor AGM3: "I have a Commonwealth Bank Account." AM: "Perfect, perfect. So this is the bank that work with us, okay? This is the bank that work with us. And the money is sitting in the trust account in Commonwealth." (b) to investor OT7: "If you want to withdraw the money, you will be able to get it right away. Now, as I have told you, every day that you open a trade, it doesn't mean that you are going to use everything. Correct? ... That's the reason why you are exposing like, for example, 50 percent or 70 percent of your money in the market, is that 30 percent is just sitting in your account so that just in case you need the money you can withdraw." (c) to investor OF4: "Your money is not at risk until you start trading. So, let's say we put $1 trade, that's what's at risk." 277 As to the revenue representations, AMs engaged by or on behalf of the defendants made representations to various clients to the effect that the defendants would generate revenue, or the AMs would earn income, when the client made money. Those statements were false, misleading or deceptive, both with regard to the circumstances in which the defendants generated revenue, and those in which AMs earned income. 278 First, in the case of revenue earned by the defendants, each of AGM, OT and Ozifin made money when the investors lost. That is because: (a) with the possible exception of a short period at the end of 2017, AGM was the issuer of the CFD and FX contract positions opened by clients of AGM, OT or Ozifin; (b) OT and Ozifin were entitled to most of the net revenue (Client P&L) generated by AGM, as the counterparty to the position, from positions opened by clients of OT and Ozifin. AGM was entitled to the balance, and therefore generated revenue from positions opened by clients of OT and Ozifin which resulted in clients suffering a loss; (c) by reason of the matters in (b), the profits to which OT and Ozifin were entitled were not affected by whether or not AGM, as the counterparty to the positions, hedged those positions; (d) AGM separated its clients between the A Book and B Book. At least some of the positions opened by the five clients who were allocated to the A Book were hedged with an external counterparty. Positions opened by clients allocated to the B Book were not hedged; (e) none of the investors were allocated to the A Book except for at least some trades for investor AGM10, and so none of the positions opened by those clients was externally hedged. 279 Now AGM has said that trades that were recorded in its B Book, which were not individually hedged, might nevertheless be internally hedged against opposite positions held by other clients. But there is no evidence that this in fact took place. The level of profit earned by AGM, and the level of losses suffered by AGM's clients suggests there was minimal, if any, internal hedging. 280 Second, in the case of the income earned by the AMs, the evidence of Mr Cecilio was that AMs engaged by IBD on behalf of OT were paid a base salary, plus cash incentives based on the quantum of deposits that clients of OT made to their trading accounts. Further, whilst there is no evidence of the basis on which AMs engaged by Falcon were compensated, the Falcon Agreement stated that during the period prior to ASIC cancelling the AGM AFSL, Falcon was paid a flat monthly fee of US$6,000, and US$7,000 per employee. 281 In those circumstances the general propositions that whenever a client made money the relevant defendant would make money or that the client's success would be the defendant's success or the AMs' success, were false. 282 The evidence shows that there were at least 35 revenue representations made in total, comprising 3 representations to 2 clients of AGM, 16 representations to 9 clients of OT and 16 representations to 6 clients of Ozifin. 283 Examples of the revenue representations are as follows: (a) to investor AGM5: "With all of my heart you're helping me as well. You need to understand whenever you're making money I'm making money as well." (b) to investor OT7: "I just want you to know that if you are making dollars, I will be making my own dollars too." (c) to investor OF1: AM: "I understand that, Mr [Investor], it's normal. But at the end of the day, as I said, it's - basically your success reflects my success and basically if you benefit, the company benefits, I benefit, so we all working - I wouldn't say a circle, but as I said previously, a triangle." Investor OF1: "… my life is in your hands now, or will be." AM: "And my life is in your hands, Mr [Investor], because we depend upon each other right now." 284 As to the profit representations, the defendants made various representations to their clients regarding the profits that clients were likely to or might reasonably expect to generate from their trading. Those statements were false, misleading or deceptive. Each was a representation as to a future matter, and there was no reasonable basis for the representation. 285 Circumstances involving investor OT7 are instructive of the misleading nature of these representations. In an early call with "Max Morris", his AM at OT, Morris said that his "plan" for investor OT7 was to deposit between $40,000 and $50,000, and from that deposit earn: (a) "potentially … at least 15,000 a month, 15 to 20,000 a month"; (b) "at least like 10,000 to 15,000 a day"; and (c) "potentially make every week … at least 15,000." 286 As a result of his trading, investor OT7 deposited and lost approximately $97,000. 287 In addition, in relation to the clients of OT to whom profit representations were made, I am able to infer from the evidence of Mr Cecilio that the purpose advanced by AMs engaged by IBD was to maximise deposits made by clients of OT, and have those clients open multiple positions, in order to maximise client losses. 288 The evidence shows that there were at least 46 profit representations made in total, comprising 3 representations to 2 clients of AGM, 21 representations to 7 clients of OT and 22 representations to 8 clients of Ozifin. 289 Examples of the profit representations are as follows: (a) to investor AGM1: "I just want to give you a chance to recover before Thursday because on Thursday the potential of the event we have can make you a profit of $26,000 the minus that you've got over there. And I'm not exaggerating. Okay? Let me show you. Can I show you the potential that I'm talking about? The event that I want you to trade on? I already explain to you about the earnings season, right?" (b) to investor OT7: "So my point is, [Investor], if you are going to start with 50,000, you will have an income, potentially from that you will generate is at least like - for a single day you can make at least like 10,000 to 15,000 a day, because of the good movement of the market. And that's the beauty about trading. 'Cause the profits that you will be making is the sky's the limit. There is no certain limit that you can make... The bigger the capital, the better the assets, because it will help you to maximise all your assets." (c) to investor OF5's aunt: "Personally, I deal with no more than thirty (30) clients in my portfolio of average investment of 25 000 AUD. My aim is to help each client benefit from their accounts on a weekly basis with a possible success ratio of 25%-65%. Smaller accounts have a smaller potential of around 10% but each client is able to set their own parameters regardless of their ability and availability." 290 There were no reasonable grounds for making those profit predictions, even if expressed as possibilities. 291 As to the client account representations, the defendants made representations to their clients that money that the clients deposited to their trading accounts: (a) would be held in the client accounts, and that the relevant defendant would not be able to access those accounts; (b) further, would be able to be withdrawn by the clients in the same manner as money held in their bank accounts. 292 Those statements were false, misleading or deceptive. Each of the statements is contrary to the terms and conditions upon which the defendants offered financial services, which they published on their websites. 293 First, such terms stated that the defendants were entitled to withdraw from the client accounts any amount necessary to meet any liability owed to it by the client. Those liabilities would have included any amounts that the clients of those defendants lost to the defendants by reason of their trading. 294 Second, the terms stated that clients would or might be required to submit identification documents and close all positions that the client had open before a withdrawal could be made. 295 It is apparent that those matters were things that the clients would not have had to do to make a withdrawal from a bank account. 296 As with the money risk representations, it is the terms upon which the defendants offered the products that meant that representations that the AMs made about their operation were false, misleading or deceptive. Whilst the information that belies the representations was published by the defendants in documents available on their websites, the availability of that information self-evidently does not overcome the otherwise misleading nature of the statements made by the AMs. 297 None of the investors was an experienced investor, and none was acting with the assistance of professional advice. In addition, there is no evidence that the AMs or any other representative of the defendants directed the investors to such terms published by the defendants. 298 In those circumstances, the fact that the information was published in documents on the websites maintained by the defendants is of little significance to whether or not the client account representations were false, misleading or deceptive. 299 The evidence shows that there were at least 25 client account representations made in total, comprising 5 representations to 2 clients of AGM, 12 representations to 8 clients of OT and 8 representations to 6 clients of Ozifin. 300 Examples of the client account representations are as follows: (a) to investor AGM10: "after this, if you need some money, you just can withdraw." (b) to investor OT6: "So I want you to remember ah - I want you to understand this, [Investor]. This OT Capital is just like your bank account, okay? This is your second bank account." (c) to investor OF5's aunt: "All funds are kept in a segregated account with Commonwealth Bank in Australia where you have access to the funds in your trading account at all times." 301 As to the plan representations, AMs engaged by OT and Ozifin made representations to clients that they would develop a "plan" for the clients designed to improve the client's financial position, and provide financial product advice that was consistent with that plan. 302 Those statements were false, misleading or deceptive. As with the other investment representations, they were representations as to future matters for which there was no proper basis. On the contrary, the purpose of the AMs engaged by or on behalf of OT and Ozifin was to increase the value of deposits that their clients made to their trading accounts, and to open multiple positions, risking maximising losses. 303 That conclusion is supported in the case of OT by the evidence of Mr Cecilio that the express purpose that AMs engaged by IBD were told to advance was to increase the quantum of deposits made by their clients, and to have those clients open multiple positions. Further, that conclusion is supported in the case of all defendants, by the provision of advice to their clients to adopt trading strategies that were not appropriate to those clients. 304 The evidence shows that there were at least 32 plan representations made in total, comprising: (a) 19 representations to 6 clients of OT; and (b) 13 representations to 5 clients of Ozifin. 305 Examples of the plan representations are as follows: (a) to investor OT12, when asking about where investor OT12 was standing financially, the AM said: "so I can make strategies, plans on your account. Personalise it… so I can make plans and advise what to give you the best asset on the market that can help you potentially gain profit in the financial market… so I can give you some advices … so I can have a strategy or permeate strategies for you. Personalise it… this is for you for me to make a personalised strategies on your account. Make it - help for you to potentially gain more profit." (b) to investor OF10: "we do need to have a conversation of law so you understand what I do as a financial adviser. What I can do for you. I need you to tell me what - what your goals are, what your financial situation is and then together we're going to make a financial plan ah based on that. A financial plan so we can help you maximise whatever investment you make and keep the risk at a minimum, all right?" 306 At the least, the defendants offered no evidence to establish any reasonable grounds for the making of these future representations. But expressing the matter more strongly, the only "personalised" advice that the AMs intended to give or in fact gave to clients was directed towards extracting as much money from the clients as possible. 307 As to the loss recovery representations, there was no reasonable basis for the representations made by AMs engaged on behalf of OT that positions that had moved against a client represented only "temporary" losses. Whilst some negative positions that clients of OT had open moved back to a positive position, I am satisfied that this occurred simply by chance. The evidence of Mr Cecilio is that he and other AMs engaged by IBD undertook no meaningful analysis in determining which positions to recommend to their clients, and had no particular insight to the operations of the currency markets. The loss recovery representations were a manifestation of the purpose being pursued by the AMs engaged by IBD, namely to have clients deposit additional funds, and for the AMs to put in place strategies to increase the prospect of the clients losing those funds. 308 The evidence shows that there were at least 18 loss recovery representations made in total, comprising 18 representations to 8 clients of OT. 309 An example of the loss recovery representation made to investor OT6 is as follows: "Don't be afraid. Just don't close those negative positions. They will turn into positives no matter what, okay?" The deception inherent in that misrepresentation is well apparent.

Additional Express Representations 310 In addition to the investment representations, which were each representations as to future matters, the defendants made two further categories of express representations: 311 First, in the case of each defendant, it was represented that AMs engaged by or on behalf of the defendants were located in Australia. 312 Second, in the case of OT, it was represented that it was licensed by ASIC. Further, in the case of Ozifin, it was represented that it was one of only four or one of the largest entities that was entitled to provide financial advice in relation to derivatives in Australia, and that an Australian authority recorded calls made by AMs with clients in Australia. 313 Each of those representations was false. The AMs engaged by the defendants were based overseas. Further, OT was not licensed by ASIC. Further, Ozifin admits that it was not one of only four, or one of the largest, entities that was entitled to provide financial advice in relation to derivatives in Australia. Further, ASIC, which is the only Australian regulator that it could possibly be suggested might have recorded such calls, did not record calls between AMs engaged by Ozifin and its clients. 314 The evidence shows that there were at least 10 location representations made in total, comprising 1 representation to a client of AGM and 9 representations to 7 clients of OT. 315 Examples of the location representations are as follows: (a) Investor AGM10 was told by her AM, during her first call with him, that he was based in Melbourne (and it was not until much later that she discovered he was based in Israel); (b) In relation to investor OT12: Investor OT12: "So, you're ringing me from Melbourne, are you?" AM: "Yes, Sir." 316 The evidence shows that there were at least 15 regulation representations made in total, comprising 4 representations to 3 clients of OT and 11 representations to 6 clients of Ozifin. 317 Examples of the regulation representations are as follows: (a) to investor OT1: "If you click on "About Us" then click on "Regulation". Okay. You will see in here that you're really dealing with a regulated company, right, or with a license company under ASIC and you will see in there our licence number, okay, our regulations and about ASIC, okay…" (b) to investor OF4: "We are one of four companies fully licensed under ASIC, if you've heard about ASIC."

Implied Representations 318 Further, in my view, on each occasion that an AM made an advice statement, in context they impliedly represented to the client that: (a) the AM, by providing the financial product advice in that statement, had done all things that it was reasonable for them to have done to ensure that they were acting in the best interests of the client; (b) they considered that the financial product advice constituted by each advice statement was reasonably appropriate to the client; and (c) the defendants were entitled or approved to provide personal advice to those clients. 319 The representations in (a) and (b) are to be inferred from two matters. First, the AMs asked their clients for and were provided with information regarding the clients' objectives, financial situation or needs, and in addition to the plan representations, made statements to clients to the effect that the AMs would guide or assist the investors in reaching their goals, which carry the implication that the AMs would provide advice to the investors that would or was likely to advance their financial interests. Second, they are to be inferred from the circumstances in which the AMs made each of the advice statements, and on the basis of the matters set out earlier that the reasonable person might have expected the AMs to have considered one or more of the client's objectives, financial situation or needs. 320 Now the falsity of the representations in (a) and (b) depends, of course, on the foundation that personal advice was given. But that foundation is established in the evidence as I have previously explained. 321 The representation in (c) arises from the reasonable assumption that a company providing financial services in Australia would comply with the laws regulating the conduct of that business and the specific statements made to various investors regarding the regulation of the defendants. Its falsity is established from the uncontested fact that none of the defendants were so licensed or authorised to provide personal advice. 322 Further, the making of each of the advice statements that I have previously identified and the equities risk representations constituted the making of the best interests representations. 323 Further, the making of each of the advice statements also constituted the making of the appropriate advice representations. 324 Further, the making of each of the advice statements and the equities risk representations and/or those statements and representations to the extent they were best interests representations and 9 further statements set out in the FAPOC, constituted the making of the personal advice representations.

Shark Tank Representations 325 The shark tank representations were made on the internet. ASIC alleged the following: 27. In or about February 2018, OT published, or caused to publish, on the internet, in such a way as to make it available to be viewed by members of the public in Australia an advertisement that: (a) was an advertisement for a product titled "Bitcoin Trader" (Bitcoin Ad); (b) was styled as a news article with the heading "The Biggest Deal in Shark Tank History, That Can make you rich in just 7 days (seriously)"; (c) purports to recount an episode of the Channel 10 television program Shark Tank in which two people attempted to sell a business idea for a "bitcoin trading platform" to the venture capitalists that host the program (who are described for the purposes of the program as "the Sharks"); (d) attributes to: (i) the Sharks various positive comments about Bitcoin Trader, including their experiences using Bitcoin Trader: (ii) Steve Baxter, one of the Sharks, the statement that he was prepared to invest $2.5 million for 20% of the "company" Bitcoin Trader; and (iii) the authors of the purported article their experience of using Bitcoin Trader, including that "the platform charges a commission of 2% on profits a user generates and you need to make a deposit of $250 to get started. That money will be your initial investment, which the trading software uses to trade"; (e) included what purported to be testimonials for Bitcoin Trader from: (i) cast members of Shark Tank; and (ii) people who were purported to have used Bitcoin Trader; (f) stated that Bitcoin Trader: (i) was an automated Bitcoin trading platform; (ii) traded Bitcoin by the application of an automated trading algorithm; (g) included instructions for how to invest in Bitcoin Trader, which included: (i) a "screenshot" of a webpage which is branded with an OT logo; and (ii) instructions as to how deposit funds to an OT Trading Account; (h) stated that by opening an OT Trading Account: (i) Bitcoin Trader would buy or sell interests in Bitcoin for the client; and (ii) would not be purchasing CFDs or FX Contracts that referenced Bitcoin. (together, separately or in any combination, Shark Tank Representations). 28. Bitcoin Trader: (a) had never featured on the Australian series Shark Tank; (b) had never been the subject of the testimonials by the participants in Shark Tank; (c) had never been the subject of testimonials from those people represented in the Bitcoin Ad as current or former users of Bitcoin Trader; (d) was not a product that OT offered clients in Australia; and/or (e) did not include any explanation that an OT Trading Account allowed clients to open positions in CFDs and FX Contracts. 326 It also alleged that: [B]y making the Shark Tank Representations, OT, further or in the alternative AGM, made false or misleading representations: (i) that purported to be a testimonial by a person relating to the financial services that it provided, in contravention of section 12DB(1 )(c) of the ASIC Act; and (ii) concerning: (A) a testimonial; further or in the alternative (B) a representation that purports to be a testimonial, relating to the financial services that it provided, in contravention of section 12DB(1)(d) of the ASIC Act. 327 The evidence established the following. In February 2018, an OT investor clicked a banner advertisement for Bitcoin trading that was on a news website to which he received a link each day. When he clicked on that banner ad, the investor was directed to an advertisement for a product called 'Bitcoin Trader'. The Bitcoin Trader ad was styled as a news article with the headline "The Biggest Deal in Shark Tank History, That Can Make YOU Rich In Just 7 Days! (Seriously)". It purported to recount an episode of the Channel 10 television program Shark Tank in which two people attempted to sell a business idea for a "bitcoin trading platform" to the venture capitalists that host the show, who are described for the purposes of the show as "the Sharks". It attributed to the Sharks various positive comments about Bitcoin Trader, including their experiences using Bitcoin Trader, and stated that Steve Baxter, one of the Sharks, invested $2.5 million for 20% of the "company" Bitcoin Trader. It set out various comments attributed to the authors of the purported article about their experience of using Bitcoin Trader, including that "the platform charges a commission of 2% on profits a user generates and you need to make a deposit of $250 to get started. That money will be your initial investment, which the trading software uses to trade". It recounted the experience of the authors of the purported article using Bitcoin Trader, including their use of the "withdraw funds" function. It included what apparently purport to be testimonials from other people who had used Bitcoin Trader, and describe earning significant profits from that use. And it gave instructions for how to invest in Bitcoin Trader, which included what appears to be a "screenshot" of a webpage which is branded with an OT logo in the banner. 328 Now the OT investor was interested in trading in Bitcoin. He clicked on a link under the section 'Try Bitcoin Trader for Yourself' at the end of the Bitcoin Trader ad and subsequently paid $500 from his credit card to OT. Once the account was opened, the investor realised it was not what he expected and it did not appear as though Bitcoin could be traded. He submitted a withdrawal request for his deposit, after which he was contacted by a person who identified themselves as an AM at OT. The investor was told his withdrawal would take 7 to 10 business days. He later received his withdrawn funds. 329 Endemol Shine Australia, the production company of Shark Tank, confirmed that: (a) the Australian series of Shark Tank has never had an episode relating to Bitcoin Trader, nor has any Bitcoin platform been one of the businesses pitched to the panel of Sharks; (b) the Sharks never made the comments attributed to them in the article, and none of them have ever heard of OT; (c) Mr Baxter told Endemol Shine that he has never invested in Bitcoin Trader and has never heard of OT; and (d) the executive producer did not recognise the two men in the still picture under the headline of the article, who apparently purport to be the promoters of Bitcoin Trader, and that the background in that picture does not match the colour or set design of Shark Tank. 330 Further, this part of the case is also established by the admissions by AGM and OT in their defences and responses to notices to admit that the Bitcoin ad was in the form alleged and that OT published or caused to be published the Bitcoin ad on the internet. Further, it is also established by the deeming effect of s 12DB(1A) of the ASIC Act. 331 Now Ozifin accepts that I have sufficient evidence upon which to make findings of misleading or deceptive conduct in respect to investors OF1 to OF12. But there are aspects that it does not concede. 332 In respect to the allegations of misleading or deceptive conduct that are not conceded, Ozifin says as follows: (a) Investor OF1: In respect to the alleged revenue representations made to OF1, some of the content of the statements do not support the pleaded representation. In respect to the alleged profit representation made to OF1, the content of the statement does not support the pleaded representation. In respect to the alleged plan representation made to OF1, the content of the statement does not support the pleaded representation. (b) Investor OF4: In respect to the alleged money risk representation made to OF4, the content of the statement does not support the pleaded representation. (c) Investor OF5: In respect to the alleged regulation representation made to OF5, the content of the statement does not support the pleaded representation. (d) Investor OF7: In respect to the alleged money risk representation made to OF7, the content of the statement does not support the pleaded representation. (e) Investor OF8: In respect to the alleged revenue representation made to OF8, the content of the statement does not support the pleaded representation. In respect to the alleged plan representation made to OF8, the content of the statement does not support the pleaded representation. In respect to the alleged regulation representation made to OF8, the content of the statement does not support the pleaded representation. (f) Investor OF9: In respect to the alleged money risk representation made to OF9, the content of the statement does not support the pleaded representation. In respect to the alleged revenue representations made to OF9, the content of the statement does not support the pleaded representation. In respect to the alleged profit representation made to OF9, the content of the statement does not support the pleaded representation. In respect to the alleged plan representation made to OF9, the content of the statement does not support the pleaded representation. In respect to the alleged regulation representation made to OF9, the content of the statement does not support aspects of the pleading. (g) Investor OF10: In respect to the alleged revenue representation made to OF10, the content of the statement does not support the pleaded representation. In respect to the alleged plan representation made to OF10, the content of the statement does not support the pleaded representation. (h) Investor OF12: In respect to the alleged equities risk representation made to OF12, the content of the statement does not support the pleaded representation. In respect to the alleged money risk representation made to OF12, the content of the statement does not support the pleaded representation. In respect to aspects of the alleged revenue representation made to OF12, the content of the statement does not support the pleaded representation. And in respect to the alleged plan representations made to OF12, the content of the statement does not support the pleaded representation. 333 Further, Ozifin submits that neither the equities risk representation (if made to investor OF12) nor the money risk representations should be considered to have been representations as to future matters. The contents of the relevant statements described as the money risk representations represented statements as to the terms on which monies in trading accounts of investors OF1 to OF12 were held. 334 Further, as to the best interests representations and appropriate advice representations which ASIC says are to be implied by the making of the advice statements by Ozifin's agents to investors OF1 to OF12, Ozifin says that ASIC did not call any evidence regarding the general operation of Ozifin's call centres in Cyprus and Israel, and appears to rely on inferences to be drawn from the transcripts relating to dealings between the AMs of Ozifin and investors OF1 to OF12, and similarities of business practices between AGM, OT and Ozifin. 335 Further, Ozifin says that the giving of advice by one person to another does not ordinarily involve more than the expression of an opinion by the advice giver that the advice represents their true opinion. The advice statements were just that, the giving of advice by Ozifin's AMs to investors OF1 to OF12 regarding what steps the specific investor should take with regard to the taking of positions, and the depositing of money. The advice statements at their highest involved the expression of an opinion on the part of Ozifin's AMs to the specific investor that the advice giver considers that it is in the interests of the recipient to act on the advice. The advice statements do not involve a representation that it is in the best interests of the recipient to take the advice. This would be to elevate a statement of opinion to a guarantee of an outcome if the advice is followed. 336 Further, Ozifin goes on to say that nor does the recommendation that a position be taken constitute a representation that the taking of any position, or even the recommended position is in the individual investor's best interests. It is said that this is a bootstraps argument. In essence, it seeks to say that because Ozifin knew something about an individual investor's financial circumstances, the giving of advice regarding the taking of a position or making a deposit thereby conveyed an additional representation that investing was in the individual investor's best interests or appropriate to their circumstances, which was not otherwise present in the giving of advice. At most, any such representation could still only be a statement of an opinion on the part of the advice giver. 337 Further, Ozifin says that in any event, if the statements relied on conveyed the implied representations pleaded, they conveyed, in the case of the best interests representations, a representation that it was in the individual client's best interest to invest in derivatives including the derivatives recommended by the relevant AM. In the case of the appropriate advice representations, they conveyed a representation that the financial product advice was appropriate to the client. These are not representations as to future matters. Rather, they are representations of a present state of affairs. It follows that in order for ASIC to show the representations were misleading, ASIC must prove that the investment was not in the individual client's best interests. In the case of some investors, Ozifin says that this may be conceded. But it is not proved only by showing that the investor lost money on trades undertaken by that investor. 338 Further, Ozifin says that the statements relied on to support the personal advice representations do not convey generally the representation as pleaded, as a matter of implication. Further, insofar as the personal advice representations are said to be inferred from the giving of personal advice as pleaded, it says that the advice statements did not constitute personal advice. 339 Largely speaking I would reject Ozifin's contentions and OT's position to the extent that it also adopted any of these arguments. 340 Ozifin's submissions raised three matters: (a) first, various of the investment representations were not established; (b) second, the equities risk representations and money risk representations were not representations as to future matters; and (c) third, by making the advice statements, the AMs did not make the best interests representations, appropriate advice representations or personal advice representations. 341 Now ASIC has conveniently provided me with a table that sets out each of the investment representations that Ozifin says are not supported and ASIC's response. In my view ASIC's case is well made out on the evidence. Further, there are three matters that arise in relation to those representations. 342 First, Ozifin says that none of the statements relied on by ASIC as constituting the plan representations support the representations pleaded in relation to Ozifin. Now Ozifin has apparently adopted this position because the FAPOC does not include a representation that Ozifin would create an investment plan for the client. But on 20 September 2019, ASIC wrote to the then solicitors for Ozifin and informed them that the relevant words: "create an investment plan for clients of Ozifin" had been inadvertently omitted from the relevant plea and then corrected its pleading. Moreover, Ozifin did not raise any issue with this correction when it was identified. The amended paragraph gives rise to two separate representations, namely, that the AM would create an investment plan, and separately that the trading signals provided to the client would be consistent with that plan. The inclusion of the omitted words cures Ozifin's criticism. 343 Second, as noted in the table, in several cases it may be debatable whether particular statements constituted the precise representation alleged. But the statements plainly gave rise to other, closely-related, misrepresentations. 344 Third, as to representations as to future matters, Ozifin says that the equities risk and money risk representations were not representations as to future matters. But Ozifin's characterisation of those representations should not be accepted. Now Ozifin asserts that the statements alleged to be money risk representations represented statements as to the terms on which monies in trading accounts of investors OF1 to OF12 were held. But I do not completely accept this. Each of the statements alleged to be equities risk and money risk representations relate to what would happen if an investor invested their money in CFDs and/or an Ozifin trading account, rather than equities or a bank account. The equities risk representations were about relative risk if one invested money in CFDs or FX contracts, which, given the nature of those markets, was a statement about the future behaviour of those markets. That conclusion is not altered even if the statement can also be said to relate to a present fact, such as the extant terms on which Ozifin offered CFDs or FX contracts. 345 Further, as to the implied representations, Ozifin says that by making each of the advice statements, Ozifin did not also make the implied representations. With regard to the best interests representations and appropriate advice representations, Ozifin says the implied representations do not arise. It says that this is because the advice statements can rise no higher than a statement that the opinion embodied in each statement represented the AM's true opinion. But there are several responses. 346 First, that submission relates only to the advice statements. But ASIC's case is that the best interests representations were also implied by the equities risk representations, which I have accepted. 347 Second, the fact that the various statements may have conveyed a representation about the AM's opinion does not mean that the statements did not also convey the best interests representations and appropriate advice representations. 348 Third, in seeking to confine the representations in that way, Ozifin ignores the regulatory context within which each of the advice statements was made. The advice statements constituted the provision of personal advice to each of the clients to whom those statements were made. Because that is the case, before making the statement that constitutes that advice, the provider of the advice was required to: (a) have taken all those steps that would reasonably be regarded as necessary to determine whether the advice was in the client's best interests; and (b) assuming that the provider had taken the steps in (a), only provide the advice to the client if it were reasonable to conclude the advice was appropriate to the client. 349 The reasonable recipient of financial product advice is entitled to assume that the provider of that advice has complied with the applicable legislative and other regulatory requirements. In the case of each of the advice statements those regulatory requirements included the best interests obligations and appropriate advice obligation. 350 I am satisfied that the AMs who made the advice statements to investors OF1 to OF12, who were the providers of the advice within the meaning of s 961B(2) of the Corporations Act, failed to comply with the best interests obligations and appropriate advice obligations. This proposition is supported by the expert opinion of Mr Blundell, who expressed the opinion that the AMs engaged by Ozifin who provided financial product advice to investor OF4 contravened each of those obligations. The conclusions reached by Mr Blundell in relation to investor OF4 can equally be applied to the balance of the Ozifin investors to whom Ozifin made advice statements. 351 Further, ASIC does not say that the characterisation of the advice statements as personal advice arises from the simple receipt by Ozifin's AMs of some information regarding the investors' financial circumstances. Whilst that is a relevant consideration, account must be taken of all of the circumstances in which the advice statements were made, including the statements set out in each of the summaries for each of the Ozifin investors provided to me. Those statements and summaries show that AMs engaged by Ozifin: (a) said to the investors that they would guide or direct the investors in their trading, including by making the plan representations; (b) suggested that, by following that guidance, investors would increase the prospects of generating a profit; and (c) in the case of the signal provider statements, recommended that the investors use signals provided by Trading Central to advance those aims. 352 Further, the regulatory context within which the advice statements were made meant that the advice statements conveyed the additional representation that the providers had, in effect, complied with their obligations in s 961B and s 961G of the Corporations Act. 353 Now the best interests representations and appropriate advice representations are not representations as to future matters. But I am satisfied that the AMs failed to discharge the best interests obligation and appropriate advice obligation. Now Ozifin apparently concedes that point in relation to all investors save for investors OF3, OF4, OF6, OF10 and OF11. With regard to investor OF4, Mr Blundell addressed the question of whether the AMs engaged by Ozifin discharged the best interests obligation and appropriate advice obligation when providing advice to her. And the basis for Mr Blundell's opinion in relation to investor OF4 is equally applicable to the balance of the investors in relation to whom Ozifin does not concede the inappropriateness of the advice statements. Further, in respect of investor OF3, Ozifin has admitted the contraventions in relation to the analysis representation, which involved a failure to discharge the best interests obligation and appropriate advice obligation. 354 Further, with regard to the personal advice representations, ASIC does not rely only on the making of the regulation representations as the basis of the implied representation, as appears to be suggested by Ozifin. The implication that Ozifin was lawfully entitled to provide personal advice arises from all the circumstances in which Ozifin made the advice statements. In particular, the reasonable person in the circumstances of the Ozifin investors was entitled to assume that in making the advice statements, Ozifin had complied with the laws regulating the provision of that advice. That assumption, and the representation that induced it, were both false. 355 For the above reasons, I largely reject Ozifin's criticisms of ASIC's case on these aspects.

Summary 356 In summary, the making of each of the representations referred to above constituted conduct that was misleading, deceptive or likely to mislead or deceive in contravention of s 1041H of the Corporations Act and/or s 12DA(1) of the ASIC Act and/or the making of false or misleading representations in contravention of s 12DB(1) of the ASIC Act. Further, many of the representations, being the investment representations (other than the analysis representation), were representations as to future matters, and deemed to be misleading pursuant to s 12BB of the ASIC Act. They, and the balance of the representations, were also false, misleading or deceptive or likely to mislead or deceive.

(g) Unconscionable conduct 357 It is convenient to first deal with some legal principles, then address the individual cases of unconscionable conduct, and finally then deal with ASIC's case on systemic conduct.

Some legal principles 358 At this point it is convenient to set out some workable propositions that I have distilled from the case law concerning statutory unconscionability. I have endeavoured to keep citations to a minimum as my goal is to separate out some structural elements from the meta-themes. Let me start with the statutory text. 359 Section 12CB of the ASIC Act provides: (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person (other than a listed public company);or (b) the acquisition or possible acquisition of financial services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. … (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. … 360 Section 12CC(1) provides: (1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 12CB in connection with the supply or possible supply of financial services to a person (the service recipient), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the service recipient; and (b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and (e) the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the service recipient was consistent with the supplier's conduct in similar transactions between the supplier and other like service recipients; and (g) if the supplier is a corporation - the requirements of any applicable industry code (see subsection (3)); and (h) the requirements of any other industry code (see subsection (3)), if the service recipient acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the service recipient: (i) any intended conduct of the supplier that might affect the interests of the service recipient; and (ii) any risks to the service recipient arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient); and (j) if there is a contract between the supplier and the service recipient for the supply of the financial services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the service recipient; and (ii) the terms and conditions of the contract; and (iii) the conduct of the supplier and the service recipient in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the service recipient engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the service recipient for the supply of the financial services; and (l) the extent to which the supplier and the service recipient acted in good faith. 361 It is appropriate to make some observations concerning ss 12CB and 12CC. 362 First, one is referring to a statutory standard rather than invoking the alchemy of equity. The context of s 12CB makes this clear; s 12CA deals with unconscionable conduct within equity's embrace. Further, both the lens "in all the circumstances" (s 12CB(1)) and the non-exhaustive list of matters to which the Court may have regard (s 12CC(1) in this case) indicate that neither the boundaries nor content of the equitable doctrine are defining or limiting features. Nevertheless, equitable doctrine provides some background against which the statutory concept may be appreciated, albeit that the statutory concept is less restrictive (Australian Securities and Investments Commission v Kobelt (2019) 368 ALR 1 at [279] and [295] per Edelman J). 363 Second, the evaluation of the conduct in all the circumstances requires "close consideration of the facts" (Thorne v Kennedy (2017) 263 CLR 85 at [41], citing Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [14]). Now such an observation was made when applying the equitable doctrine, and is particularly apposite in that context when considering the parties' relationship, one party's relative special disadvantage vis-à-vis another, whether situational or constitutional, and the conduct said to constitute the unconscientious taking advantage thereof. Necessarily such matters are fact specific. But equally, if not more so, such close consideration of the facts is necessary in the context of s 12CB (Kobelt at [150] and [151] per Nettle and Gordon JJ). And s 12CC elaborates on the factual matters and circumstances that are to be considered. 364 Further, assessing whether conduct in all the circumstances is to be characterised as unconscionable involves an evaluative judgment. Moreover, to say that unconscionability is to be assessed in all the circumstances is to deny the legitimacy of an atomistic approach which takes each of the factors in s 12CC(1) and considers them only separately. 365 Third, one cannot simply align the statutory concept of unconscionable with something not done in good conscience in the sense in which equity has so treated the matter. It is clear from s 12CB and the factors that may be taken into account under s 12CC(1) that one is dealing with a broader notion. But reference to intellectual ideas of customary morality and societal values without further delineation and ready identification may be at too high a level of abstraction to be an objective touchstone. Further, such general themes may distract attention from the values that need to be considered, namely the values explicitly or implicitly enshrined in the text, context and purpose of the ASIC Act, the Corporations Act and any other relevant statutory framework applicable to the activities in issue. But in identifying and applying those values, and indeed in considering the relevant matters under s 12CC(1) applicable to the particular case, societal or community values may also be implicitly satisfied. For example, in considering conduct affecting a particular sub-group, for example an indigenous community, the application of each relevant matter under s 12CC(1) may take into account and may need to be tailored to the characteristics of that sub-group and the alleged contravener's interaction therewith, consistent implicitly with community standards. But if unconscionable conduct is found, it will not be because of some characterisation of it as being against community values without more. Rather, it will be so characterised as being against the statutory construct informed by the values that I have identified and which I will partly expand upon in a moment, as applied to the characteristics and conduct of the participants involved in the commerce in question. 366 Fourth, let me say something on the question of "conscience". In the context of equity, Kakavas explained the matter by reference to the appellant's submissions in that case in the following terms (at [15] and [16]): In advancing a claim based on the principle expounded by Mason J in Amadio, the appellant relies upon the standards of personal conduct compendiously described as the conscience of equity. According to Pomeroy's Treatise on Equity Jurisprudence: "the 'conscience' which is an element of the equitable jurisdiction came to be regarded, and has so continued to the present day, as a metaphorical term, designating the common standard of civil right and expediency combined, based upon general principles and limited by established doctrines, to which the court appeals, and by which it tests the conduct and rights of suitors, - a juridical and not a personal conscience." The conscience spoken of here is a construct of values and standards against which the conduct of "suitors" - not only defendants - is to be judged. (My emphasis, citations omitted.) 367 As I said in Australian Competition and Consumer Commission v Medibank Private Ltd (2018) 267 FCR 544 at [239], in the present context dealing with the element of "conscience" in statutory unconscionability, the "construct of values and standards" is extended beyond the boundaries and content of what equity would normally embrace. The metaphorical term of "conscience" in the present context has an enhanced dimension. Moreover, it is not just a juridical conscience to use Pomeroy's description. It is a statutorily created or recognised conscience with its construct of values and standards informed by the explicit and implicit values enshrined in the text, context and purpose of the ASIC Act and the Corporations Act. It is a "statutory norm of conscience" (Kobelt at [47] per Kiefel CJ and Bell J). And if that be the case, the qualifying epithet "good" in the phrase "good conscience" is otiose. The relevant conduct is either against the statutory construct of conscience or it is not; the qualifier of "good" in opposition to "bad" may have made sense when dealing with a moralistic version of conscience that had that implicit duality, but it is misconceived to suggest that the statutory construct so requires. Now any description of values even within the statutory construct of conscience will have attendant imprecision in terms of their boundaries and content. But it would be an exaggeration to say that they are so indeterminate as to be little more than a pretext to facilitate condemning conduct that is disapproved of simply on moral grounds. 368 As Gageler J explained in Kobelt at [87]: The correct perspective is that s 12CB operates to prescribe a normative standard of conduct which the section itself marks out and makes applicable in connection with the supply or possible supply of financial services. The function of the court exercising jurisdiction in a matter arising under the section is to recognise and administer that normative standard of conduct. The court needs to administer that standing in the totality of the circumstances taking account of each of the considerations identified in s 12CC if and to the extent that those considerations are applicable in the circumstances. 369 As Nettle and Gordon JJ said in Kobelt at [153]: [At] least in the Australian statutory context, what is involved is an evaluation of business behaviour (conduct in trade or commerce) in light of the values and norms recognised by the statute. 370 Fifth, in terms of any requirement to demonstrate "moral obloquy" or "a high level of moral obloquy", the use of such labels is a gloss on the statutory text. As has been explained in numerous authorities in this area, the statutory language should not simply be restated by substituting words or a phrase that Parliament did not choose. At most, the statutory concept of unconscionable may accommodate a flavour of moral obloquy in the sense that it means more than "unjust", "unfair" or "unreasonable" (Kobelt at [118] per Keane J), but it is to divert the relevant normative inquiry to specifically seek to identify its existence or to clothe the relevant conduct with such a conclusory label. 371 Sixth, as may be distilled from Allsop CJ's discussion in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [259] to [306]: (a) fairness and equality are values and conceptions underpinning s 12CC(1)(a), (b), (d) to (f) and (i) to (k); more particularly, s 12CC(1)(a), (j)(i) and (k) recognise asymmetry of power; (b) a lack of understanding or ignorance of a party is the conception underpinning s 12CC(1)(c); (c) the risk and worth of the bargain are the conceptions underpinning s 12CC(1)(e) and (i); a broader and related although not explicit concept is the question of asymmetry of information; and (d) good faith and fair dealing are values and conceptions underpinning s 12CC(1)(l). 372 Seventh and more generally, although honesty and fairness in dealing with consumers is relevant including acting without deception, it is wrong to say that unfair conduct in and of itself amounts to unconscionable conduct. After all, s 12CB regulates commerce where acting to one's "own advantage is an omnipresent feature of legitimate commerce" (Kobelt at [117] per Keane J). But establishing unfair conduct may be a step along the way to showing unconscionable conduct if it ultimately amounts to an illegitimate exploitation of a person's vulnerability and therefore amounts to an unjustifiable pursuit of self interest. It is also wrong to say that because hardship may be caused to a consumer by conduct, such an actual or likely consequence in and of itself establishes that the conduct was unconscionable. But again, establishing actual or likely hardship may be a step along the way to showing unconscionable conduct, although it is not a necessary condition. 373 Eighth, statutory unconscionability does not require only focusing on the alleged wrong doer's or its officers' or employees' state of mind, whether actual intention or knowledge or what it ought to have known. It is a broader objective evaluation of behaviour including the causes and reasons for such behaviour and its effect or likely effect. But the subjective state of mind of the alleged contravener whether actual or constructive is relevant to the broader sense. Although I am concerned with a normative notion of conscience, the boundaries and content of which are informed by the explicit and implicit values previously identified, state of mind is relevant. 374 Ninth, industry practice is a relevant consideration. To the extent that this is formalised in an industry or other code, express recognition is given thereto in s 12CC(1)(g) and (h). But acting consistently or otherwise with industry practice has broader relevance to the unconscionability question as Keane J explained in Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [290]: The appellants seek to stigmatise as unconscionable or unfair or unjust an activity in the marketplace in which nothing materially distinguishes the situation and conduct of either Mr Paciocco or ANZ from any of the other participants in that activity. It may be said that ANZ and its competitors have dealt "unconscionably" or "unfairly" or "unjustly" with all of their customers in that, in a careless or partisan use of language, all banks may be said to do so as a matter of course. But to argue that conduct by one participant in a market, which is an unremarkable example of conduct engaged in by all participants in that market, is unconscionable, or unjust or unfair, in breach of the statutory norms, without any suggestion that the market itself is unlawfully skewed, is something of a stretch… 375 Of course that was a different context, but it demonstrates that the standards, norms and practices of the relevant sector are relevant to the assessment of statutory unconscionability albeit not confined thereby. But I should also stress that conduct consistent therewith does not necessarily entail that such conduct is not unconscionable. 376 Tenth, the boundaries and content of any applicable statutory regime beyond the ASIC Act and the Corporations Act is also important context within which to assess statutory unconscionability. 377 Eleventh, it is not necessary to show that a person is under a disadvantage or that any particular person has been disadvantaged by conduct (s 12CB(4)(b)). But in any event, a person is not treated as being in a position of substantial disadvantage merely because there is an inequality of bargaining power. And in any event as Keane J said (Paciocco at [293]) on the ultimate question: While a disparity in bargaining power may be necessary to attract the operation of the provision, the mere existence of the disparity is not sufficient to do so. The existence of a disparity in bargaining power, which is an all-pervading feature of a capitalist economy, does not establish that the party which enjoys the superior power acts unconscionably by exercising it. 378 Twelfth, in terms of the technical operation of s 12CC(1), it is necessary to consider each of the non-exhaustive list of matters set out in s 12CC(1) if relevant. The word "may" in s 12CC(1) is conditional rather than permissive. If any matter in the list is potentially relevant to the conduct under consideration, it must be considered. Further, it is inappropriate to focus on one or more of the applicable matters listed in s 12CC(1) to the exclusion or unjustifiable expense of others. 379 Thirteenth and more generally, it is important to note that the conduct which attracts the operation of the statutory provision is assumed to be of sufficient seriousness such as to potentially warrant the imposition of a pecuniary penalty. That perspective is not irrelevant to the construction and application of ss 12CB and 12CC(1). 380 Let me now elaborate in more detail on s 12CB (4)(b) which states: This section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and 381 First, a distinction is made between a "system of conduct" and a "pattern of behaviour". I will return to this in a moment. 382 Second, it is made plain that to establish statutory unconscionability it is not necessary to identify a particular individual as being disadvantaged by the relevant conduct. 383 As Keane J explained (Kobelt at [121] and [122]): Next, it is necessary to observe that sub-s (4)(b) of s 12CB does not mean that it is not an essential characteristic of unconscionable conduct within the meaning of the statute that it involve a calculated taking advantage of a weakness or vulnerability on the part of victims of the conduct in order to obtain for the stronger party a benefit not otherwise obtainable. Under the general law, the absence of such a calculated taking advantage means that the conduct in question cannot be said to be exploitative.122 Sub-section (4)(b), in dispensing with the need for proof of disadvantage to any particular individual, allows a system of conduct or pattern of behaviour to be found to be unconscionable within the meaning of the statute even though the extent of the disadvantage cannot be quantified in the case of any individual. Understood in this way, sub-s (4)(b) is consistent with the requirement implicit in the notion of unconscionability that the impugned conduct effect a disadvantage upon its victims. The declaration in sub-s (4)(b) is a manifestation of Parliament's intention that the purpose of s 12CB is to establish a statutory norm of conduct, rather than simply to provide an avenue of relief for victims of individual transactions. (Citations omitted.) 384 Let me return to what is meant by a "system of conduct" and "pattern of behaviour" without the need to go through the authorities in any detail, most of which have been summarised in Unique International College Pty Ltd v Australian Competition and Consumer Commission (2018) 362 ALR 66 at [104] to [153]; a more recent example concerning binary options trading is Australian Securities and Investments Commission v One Tech Media Ltd [2020] FCA 46, particularly at [78] and [79]. 385 For my part, it is important not to confuse what is embraced, on the one hand, by the concepts of "system of conduct" and "pattern of behaviour", and on the other hand the mode of proof of such concepts. 386 Let me start with the relatively easier concept of "pattern of behaviour" although its proof may be problematic. Given that the context is unconscionable conduct, the reference to behaviour is looking at the external manifestation of behaviour and whether it can be characterised as a pattern. This appears to be what the Full Court meant in Unique at [104] in referring to "the external observation of events". But to be clear, in context the meaning of pattern is most usefully expressed as "a regular and intelligible form or sequence discernible in certain actions or situations" (Oxford English Dictionary, meaning 11(b)). So there has to be both repetition and external discernibility. 387 How is a pattern of behaviour to be proved? Clearly, two or more instances of identical or similar behaviour may be sufficient to infer and discern a pattern. Moreover, the more the number of instances the stronger the induction, ceteris paribus. How many instances will support the induction of a pattern depends upon the context. Numerous like instances with no counter-examples would clearly be sufficient to display a pattern. By numerous, I am referring not just to the absolute number of instances but also that number relative to the total pool of external interactions with investors/members of the public. What if there are counter-examples? A pattern may still exist, notwithstanding the exceptions. But the greater the number of exceptions, the even greater the number of conforming instances that may be required if a conclusion of a pattern is to be supportable. What if there are no counter-examples, but only a small number of like instances referable to the total pool? There may be no clear answer as to whether one should or could discern a pattern. It will depend upon the context including how robust the individual judge may be in being prepared to make the extrapolation. A judge may be prepared to so extrapolate based upon a small number of instances where the following two related conditions are satisfied. First, there is evidence that the instances are not anomalies but are natural and likely consequences of the respondent's conduct or system(s), that is, representative; of course the purity of random sampling may fortify this. Second, there is no evidence that the respondent's conduct or system(s) was designed not to produce but to avoid such instances. But it must be said that, ceteris paribus, the greater the individual differences of the instances, being differences that have real significance to the characterisation of unconscionability, the greater the number of instances that may be required to justify the extrapolation (Unique at [135], [136] and [153]). 388 Further, it would be an error to treat the concept of "pattern" as applying to a respondent's conduct as being binary, that is, as being either a pattern or no pattern. Some parts of its conduct may manifest a pattern, other parts not. A "pattern of behaviour" may be sufficiently found in relation to a part. This may be so where the respondent's conduct is divisible between different regions, between different parts of the respondent's operations, between different personnel where there is decentralised management or between different categories of investors or consumers. But the divisions must be naturally and forensically discernible from how the respondent was structured and operated at the relevant time rather than super-imposed artificially and retrospectively from a regulator's or litigator's perspective. 389 Let me turn to the other concept of "system of conduct". I should say something about "system". In the present context, "system" connotes something designed or intended in its structure; contrastingly, a pattern may be manifested without any design or intentional input. Further, "system" is usually saying something about the internal structure, for example, internal working, of whatever it is that has produced or reflects the conduct. It cannot just mean numerous instances or a pattern of external behaviour. Otherwise the former part of the phrase "system of conduct or pattern of behaviour" would collapse into the latter. 390 But a "system of conduct" could produce a "pattern of behaviour". Relatedly, evidence of a "pattern of behaviour" could enable you to infer a "system of conduct" in some cases. 391 Now "system" also connotes an organised and connected group or set of things that can be thought of as a complex whole. The gist is organisation and connection. But there is an ambiguity in the present context. Does "system of conduct" mean that each element of individual conduct is directly connected in a structured and intended way one to the other? Or does "system of conduct" focus on the system as being the underlying internal structure or method of procedure, organisation or administration of the respondent, which internal structure or method then produces the conduct such that the conduct is indirectly connected one to the other through the underlying system? 392 I am inclined to the view that "system of conduct" encompasses both concepts. But if the latter concept, one does not necessarily need to invoke concepts such as justifiable sampling or representativeness of individual instances as I have discussed concerning patterns. But if the former concept, then the discussion concerning patterns that may be identified from sampling or representativeness of individual instances may have some application to "system of conduct" in the sense that one may require sufficient instances of individual conduct before one can conclude that they are directly connected in a structured and intended way one to the other. 393 Enough of these concepts. Let me turn to some facts.

Specific investors and specific instances 394 ASIC contends that the defendants engaged in conduct that was, in all the circumstances of the 21 investors identified by ASIC, unconscionable. The 21 investors consist of 4 AGM clients, 8 OT clients and 9 Ozifin clients. 395 There is a degree of overlap between ASIC's case regarding the provision of unlicensed personal advice, what ASIC says were false, misleading or deceptive representations made to the investors, and what ASIC says was unconscionable conduct by the defendants towards those clients. But a finding of unconscionability does not depend on a finding of unlicensed personal advice or misleading conduct, although the grounds for concluding that the defendants acted unconscionably are strengthened by such matters. 396 There are six concepts that in my view support ASIC's contention of unconscionable conduct on the part of the defendants towards the 21 investors. 397 First, each of the investors was at a disadvantage in the relevant sense due to their lack of understanding of the operation of the complex products offered by the defendants and the risks associated therewith. None of those investors had any experience in trading derivatives generally, or CFDs or FX contracts in particular. Their inexperience and lack of understanding of the trades they were being encouraged to undertake, and the risks involved in that trading, was evident to the defendants' AMs. 398 Further, the investors had relatively low levels of income and other financial resources. Further, several of those clients deposited practically all of the funds that they had available to their trading accounts. After they had done so, AMs continued to pressure those clients to deposit further funds. Further, a number of investors to whom the defendants administered a client questionnaire were unable to answer the questions in that questionnaire regarding the operation of the products offered by the defendants. Clearly, the products offered by the defendants were not appropriate to many of the investors considering their inexperience. 399 Second, there was an inadequate explanation provided by the AMs of the risk of investing in the products offered by the defendants. An adequate explanation of the operation of the products, and the risks associated with them, was a necessary step for the providers of advice to take in order to discharge the best interests obligation. 400 There was no adequate explanation of the risks involved in investments in CFDs and FX contracts. The products that the AMs were advising the clients to invest in were highly leveraged, risky derivatives. In circumstances where the investors were inexperienced investors, with evident low risk profiles, the risk statements made by the AMs were inadequate. They did not adequately reveal the true risk to the clients' capital. 401 Third, there were false, misleading or deceptive comments made regarding the operation of the products that they advised the investors to invest in. In particular, the money risk representations, which were false or misleading statements regarding the risk to which the clients were exposed by depositing further funds to their trading accounts, also constituted or contributed towards unconscionable conduct. 402 Fourth, the defendants each engaged in unfair conduct towards the investors. Common themes include the following matters. AMs applied pressure to the investors to invest further money to their trading accounts when those clients either expressed a reluctance to do so, or said that they had no further funds to invest. Further, the AMs recommended trading strategies to the investors that were not appropriate to clients with the objectives and risk profile of the investors. They included strategies that were calculated to result in the clients losing all of the funds deposited with the defendants, particularly by quickly closing any profitable trades, but leaving losing trades to run on the suggested basis that the market would "correct itself". 403 Fifth, OT and Ozifin placed unreasonable impediments on various investors seeking to withdraw money from their trading accounts. In the case of OT and Ozifin, the terms required clients of those defendants to close all open positions before they were able to withdraw money from their trading accounts. 404 Further, in the case of Ozifin, those impediments included a policy that required the clients to whom it provided "bonus funds" to undertake an extremely high volume of trading before the client was entitled to withdraw those bonus funds or any associated profits, which were often impossible to isolate from any profits made with the clients' own money. For example, in the case of investor OF4, who was a client of Ozifin, the AM engaged by Ozifin offered her, and she accepted, a number of bonuses in the course of her trading with Ozifin. It was a condition of those bonus funds that she was required to conduct trading of a certain volume in order to withdraw those funds. By 31 January 2018, investor OF4 had engaged in repeated trading in order to withdraw the funds and she had reached the required number of transactions to withdraw the funds. But despite having done so, and having a trading account balance of approximately $110,000, she was told by the AM that she could not withdraw funds until she had closed all her open positions, which included profitable CFD positions. 405 Sixth, the defendants failed to comply with guidelines published by ASIC for providers of CFDs and FX contracts which set out guidelines for improved disclosure and advertising regarding those products. Those guidelines included various benchmarks for disclosure to the clients of the issuers of OTC CFDs and FX contracts. One stipulated benchmark stated that an issuer should maintain and apply a written client qualification policy that: (a) set out the minimum qualification criteria that prospective investors would need to demonstrate they met before the issuer would agree to open an account on their behalf; and (b) outlined the process the issuer had in place to ensure that prospective investors who did not meet the qualification criteria were not able to open an account and trade in CFDs. 406 Further, each of the defendants' own documents refer to the importance, in appropriate circumstances, of assessing clients' knowledge of CFD and FX contract complexities. AGM and OT stated in the relevant PDSs that they maintained a client qualification policy, and that any client that did not meet the predetermined criteria would have the opportunity to gain knowledge from the defendant and retake the assessment. 407 Now in the second Ozifin PDS, Ozifin stated that it did not prevent a potential client from trading "based on its knowledge and experience" on the basis that, because it did not "provide any personal advice, [it was not] responsible to determine the appropriateness of any client". But even if that were true, it was inappropriate for Ozifin to provide investors with general advice, which might influence a client to trade in CFDs or FX contracts, where the client was to the knowledge of the advice provider unsuited to that form of speculative investment. In any event Ozifin did provide personal financial advice to the investors. And consistent with what appears in the second Ozifin PDS, there is no evidence that Ozifin conducted any assessment of the appropriateness of CFDs and FX contracts to the investors who were its clients. 408 Further, neither AGM nor OT made any adequate assessment of the appropriateness of the financial products that they offered to those of the investors who were their clients. The only investor in relation to whom there is any evidence that AGM conducted any sort of assessment is investor AGM5. That assessment was conducted by the AM administering a written "Knowledge Assessment", which investor AGM5 clearly could not answer accurately, despite significant prompting by the AM. 409 Now AMs engaged on behalf of OT administered knowledge assessments to those of the investors who were its clients. The AMs administered those questionnaires: (a) only once the investor had been trading for some time; (b) by providing the investor with the answers to the questionnaire, either directly or with examples that could only lead the investor to the correct answer; and (c) by reason of the matters in (a) and (b), in a manner that undermined the purpose of administering the questionnaire. 410 Mr Cecilio's evidence is that he was told by senior AMs engaged on behalf of OT that he should tell any client to whom he administered an OT knowledge assessment, and who had any investing experience in any asset, that they should mark themselves as "experienced" so as not to have to complete the knowledge assessment before they were able to start trading, and to provide clients with the answers to the questions in the knowledge assessment. 411 Generally, the approach of each defendant to assessing the investors as clients was indiscriminate. And it was not an approach that could possibly have been effective in determining whether any particular person was appropriate to take on as a client. In my view because of the highly leveraged and complex nature of the products offered by the defendants, the failure to adopt and apply the said benchmark is an important factor that supports the conclusion that the conduct of each of the defendants towards the investors was unconscionable. 412 In my view, ASIC has made out its case of statutory unconscionability concerning the specific investors. Let me now turn to the system of conduct case.

System of conduct 413 In my view, on the evidence each of the defendants also engaged in a system of conduct or pattern of behaviour that was in all the circumstances unconscionable. 414 Let me make some general points concerning the features of the system. I will deal with some specific aspects later. 415 First, it can be inferred that the approach adopted by AMs engaged by the three defendants was consistent, both as between the clients of individual defendants and across clients of all defendants. That inference arises from Mr Ashkenazi's responsibility for training AMs engaged by OT and Ozifin. 416 The content of the training given to AMs engaged on behalf of OT included, inter-alia, OT's training with regard to sales guidelines and giving general advice and AGM's client sales guidelines, which are replicated in an equivalent document produced by OT. AGM also provided Ozifin with AGM's sales guidelines, and apparently expected compliance by Ozifin with those guidelines. 417 Now I infer that in the course of the training of AMs, Mr Ashkenazi related his understanding of the difference between general financial product advice and personal financial advice. But Mr Ashkenazi did not have a proper understanding of that distinction. In particular, he apparently considered that financial product advice would not be considered personal advice unless the person providing that advice in fact took account of the person's objectives, financial situation or needs. Further, he considered that the signal provider statements could not be considered personal financial advice, because the putative provider of that advice was simply passing on information from another source, and it was therefore not advice being provided by that person. Further, AGM was concerned in November 2017, not that AMs engaged by Ozifin were making signal provider statements, but that they were not providing the source of that information. Thus, AGM apparently considered that, as long as the source of the "signal" was noted, there was no personal advice. That is incorrect. 418 Further support for the inference that AMs engaged in consistent conduct arises from the following matters. The AGM sales guidelines describe a series of phrases under the heading "Use the words like", that are consistent with phrases used by AMs when talking with the investors. Further, in October 2017 OT sought from AGM, and was provided, approval to use a call script, which Mr Cecilio says he was provided as part of his training with OT in October and November 2017, and that included the following phrase for use by AMs: After you activate your account ________, OT Capital will provide you a Personal Account Manager who will provide you useful tools, such as "Technical and Fundamental Analysis, also how to apply the "Risk Management" to your account. The Senior Account Manager will also guide you in the Financial Market to minimize the Risk and maximize the Potential of Generating Profit. Okay? (emphasis added). 419 The advice statements made by the AMs to the OT investors represent precisely the guidance contemplated by that script. This also supports the conclusion that the advice statements constituted personal financial advice. 420 Let me elaborate further on the training and compliance which was in the main run by AGM for all defendants. In this regard: (a) Mr Ashkenazi trained OT's service providers in: (i) the Philippines on 27 and 28 September 2017; (ii) Israel on 2 and 3 October 2017; and (iii) Cyprus on 4 and 5 October 2017. (b) From in or about November 2017, Mr Ashkenazi was responsible for and provided training to AMs engaged by or for AGM, OT and Ozifin, and compliance staff engaged by AGM. (c) Further, Mr Ashkenazi described his training of the conversion and retention agents engaged by or on behalf of OT and Ozifin. Mr Ashkenazi's training included an "instruction" that representatives were to direct clients to information from third party websites, that would not constitute personal advice. (d) After identifying that AMs engaged by Ozifin were not identifying the source of the third-party information provided to clients, which Mr Ashkenazi and AGM apparently considered was determinative of whether or not the comments constituted personal advice, Mr Ashkenazi arranged "remedial training" for those AMs. I infer that the content of that training was consistent with Mr Ashkenazi's inadequate understanding of the difference between personal and general advice. (e) AGM provided OT with a description of the topics that Mr Ashkenazi would cover in training OT representatives. (f) AGM approved a client sales pitch for use by OT staff. 421 Second, in the case of OT, the purpose advanced by the AMs and senior AMs engaged by IBD was to increase the amounts that clients deposited to their trading accounts, and to have the clients open multiple positions. By doing those things, the clients were exposed to an increased risk of greater losses than if they had not deposited that money. 422 Because OT did not hedge positions opened by its clients, which is unsurprising, given AGM was the counterparty to those positions, OT and AGM earned revenue when a client closed a negative position. In such circumstances it is open to me to infer that the purpose advanced by those engaged by IBD, and therefore on behalf of OT and AGM as its principal, was for clients to lose money, and that it was a purpose advanced in relation to a material number of its clients. 423 Further, the high degree of commonality in the conduct undertaken by the defendants entails that similar inferences are open in relation to the conduct towards the clients of AGM and Ozifin. 424 Third, in the case of the clients of AGM and OT, I infer that the AMs used software that provided remote view access to clients' computers to determine how much money a client could deposit, and therefore to advance the purpose of having the client deposit the maximum funds available to them. Mr Cecilio said that he used remote access software to advance both aspects of OT's purpose, namely, to have clients increase deposits to their trading account, and to open multiple positions. 425 Fourth, various aspects of the system put in place by the defendants were generic. The defendants sought out any retail client who was willing to deposit money. The defendants were apparently indiscriminate in determining to whom they were willing to provide a trading account. 426 Fifth, each of the various themes that emerge from the evidence of the interactions between the AMs and the 21 investors is probative of the unconscionability of the system of conduct and pattern of behaviour engaged in by the defendants. Such a number of investors may be relatively small compared to the total pool, but I am satisfied that they are representative. In this respect, there are no real counter-examples. Moreover, the systems put in place seem to have been designed to identify and interact with investors in the way exemplified by the specific instances. No significant doubt exists in my mind about the appropriateness of the extrapolation. 427 Let me now deal with some more detailed matters concerning the features of the system. 428 There were many similarities in business practices and in key documents for each of the defendants. These similarities give rise to a strong inference that the mode of operations originated from the same source. The similarities included the following matters. 429 First, the AGM and OT sales scripts. Both contain: (a) reference to "rebuttals"; (b) references to being regulated by ASIC, and based in Australia (in particular: "Alpha Trade is an Australian based company, located in Melbourne, Victoria."; "OT Capital is an Australian based company located in Melbourne."); (c) references to making "profit out of" or "profit from"; (d) references to an investor needing to "take advantage"; and (e) statements encouraging AMs to use investors' names throughout the call. 430 Second, the use by AMs of stage names or "screen names" at least by OT and Ozifin, of which AGM had knowledge, including the following matters: (a) Mr Cecilio gave evidence that: "We were also told to choose a screen name to use when talking to clients. We were told to use a screen name so that the clients would not know we were foreigners. Nathalie said if we used our Filipino name, clients would not believe we were licensed brokers". (b) OT staff and client lists refer to "stage names" of various employees. (c) An AGM email refers to the "stage names" of three Ozifin AMs, and refers to legal advice Ozifin had received about "stage names". (d) Ozifin's AMs told clients that their stage names were their real names. (e) Various AGM employees acknowledged in their s19 examinations that stage names were being used. 431 Third, there were similarities as to the use of various phrases consistently by AMs across the defendants. I have set out below examples of phrases used by the defendants. The example phrases are particularly distinctive. It is unlikely that each defendant's AMs happened to start using the phrase without common training. Further, they show how the AMs explicitly sought to and did win the trust of vulnerable investors. In this regard: (a) AMs told investors to "hold my hand", "take my hand", and used other related phrases. (b) AMs referred to themselves as a "friend" of the investor. (c) AMs referred to investors needing to "ride the waves" of the market (or words to that effect), including "holding their breath" as a wave passes. (d) AMs referred to transferring money from an investor's bank account into their trading account as putting "money from the left pocket to right pocket", "one pocket to the other pocket", and other similar phrases. In this regard: (i) AGM: investor AGM4: • The AM said to Investor AGM4: "So if you transfer right now from your right pocket to your left pocket nothing happen. If originally I have 5,000 in my right pocket - it's the bank - and I take from my right pocket and put in my left pocket of my trouser, how much money I have?" Investor AGM4 replied "You have 5,000." The AM responded "Correct. This is what I try to explain you one hour." (ii) OT: investor OT7 (and also investor OT6, investor OT13, investor OT12): • The AM said to Investor OT7, "Anyway you're not paying anything. All right? The money that you will be putting is still your money, this is just more or less you're putting like your money from your left pocket to your right pocket, okay?" (iii) Ozifin: investor OF5's aunt (and also investor OF3, investor OF8, investor OF4, investor OF7 (on at least two calls)): • The AM said to Investor OF5's aunt: "That is very important and the clients are the only ones - strict regulations, very strict regulation, they're the only ones who can access their own funds transferring to into their ah trading account and transferring out of the trading account. Left pocket right pocket ah policy um always and it's very, very strict." (e) Investors were told that the loss they were experiencing was only "temporary". In this regard: (i) OT: investor OT4 (4 calls), investor OT3 (4 calls), investor OT8 (2 calls) (also investor OT10 (2 calls), investor OT12 (3 calls), investor OT9 (2 calls)): • The AM told Investor OT4: "The negative that you're seeing here is just a temporary loss. What does it mean? It means the market can go down and can recover. That's always what happened in the financial market. The market always goes up and down, okay?" • An AM told Investor OT3: "This is only a temporary loss…" • An AM told Investor OT8: "It doesn't mean that this is negative, it's a proper loss. No. It's just a temporary loss, meaning to say you're just waiting the market to correct itself." (ii) Ozifin: investor OF12: • An AM said to Investor OF12: "…the situation in the market it's only temporary but you have enough liquidity in order to survive that which is amazing. So other people would give up way earlier than you but you have a good amount in your account, you have a good potential in your account. It's only temporary what's happening with market and it is possible to be in a positive situation right now in your account." (f) Investors were told that they should make a deposit, but it would only be "temporary". In this regard: (i) AGM: investor AGM1 (3 calls), investor AGM5: • The AM said to Investor AGM1: "If I were you, I will make another transfer tomorrow of another 20 that you can work with. It's up to you. You don't have to. Anyhow, it's temporary as I said last time. Like, whenever you're going to go out of the mess you're going to withdraw it." • The AM told Investor AGM5: "If it was me, I would tell you at least $5,000 to $10,000. And, I know it sounds much. Okay? But, it's only for you to have the equity to attack. And, I'm telling you, it's a temporary money. It's something temporary. The second you want it out, it's out. But, at least we're going to make - like, you're finished your cause of taking those minuses out." (ii) OT: investor OT1, investor OT12 (2 calls), investor OT9 (5 calls): • The AM encouraged Investor OT1 to deposit funds and said "We're only going to - we're all you… we're only going to use it temporary…" He then said "Let's transfer this one in that account for temporary, to put or to place the margin level on about 100 per cent, okay?" • The AM told Investor OT12: "…I want you to understand, [Investor], as only a temporary investment that you're going to put in here because the first thing that you're going to do - I'm going to ask you once the situation is fixed or once the situation is stable is to withdraw those funds back into your account or put it back into your allocated funds." • The AM told Investor OT9: "Like, why - like we keep telling you, you've got to safeguard your account by putting in more funds. And, then once, okay, you see that you're already - the trade, okay, are already going your way then, okay, you can already withdraw your funds. Remember you have the full control of your money. And, it could be just temporary…" The AM reiterated by saying "What you can better do right now is to safeguard your account by putting in more funds. At least temporarily, then once this trades already went your way then, okay, you can withdraw your funds. Anyway, you have full control of your money, like we keep telling you, we are a regulated company." (g) References to "analyst(s)". In this regard: (i) AGM: investor AGM3 (also investor AGM12, investor AGM15): • The AM said to Investor AGM3: "I mean tomorrow, only tomorrow we'll be contacting you and then as from tomorrow you speak with the analyst, with the experienced ARM." The AGM "Guidelines for Client Sales & Marketing" and "Client Sales Guidelines" both suggest using words like "according to the analyst." (ii) OT: investor OT2 (also investor OT3 and investor OT7): • The AM said to Investor OT2: "Actually, I don't know. People say - okay, the analyst says that this Bitcoin will reach half a million dollars. Okay." (iii) Ozifin: investor OF1, investor OF2, investor OF10 (7 calls), investor OF5 (2 calls), investor OF5's aunt (also investor OF4 (5 calls), investor OF8 (3 calls), investor OF12 (3 calls)): • The AM said to Investor OF1 (after Investor OF1 complains about the quality of signals given by Ozifin): "Regarding the - the session with the analyst he has - he has nothing --- to do with, ah, Trading Central, he's one of the in-house analyst basically that does in-housing, he doesn't actually do - but what he's excellent at is teaching people regarding trading strategies…" • The AM said to Investor OF2: "I am going to create a new strategy. I'm going to speak with the analysts of the department. I'm going to give you the latest technology, the latest information by Trading Central. Okay. We are going to focus on quality over quantity." • The AM said to Investor OF10: "Hello, Mr [Investor]. My name is [AM], I'm the market analyst here for TradeFinancial…" • The AM said to Investor OF5's aunt: "…I explain to him ah, as I do every single one of my clients, don't do a single thing unless it is provided ah under your understandment [sic] okay? And of course through the right facility because he have a licenced financial analyst here ah in order to help the client ah with the direction okay, with the right possible direction." (h) AMs referred to working "together" with investors, to their "relationship", and to themselves as "partners" or a "team". (i) AMs regularly referred to investors needing to "cooperate". In this regard: (i) OT: investor OT6 (4 calls), investor OT8 (2 calls), investor OT15 (3 calls) (also investor OT10, investor OT14): • The AM said to Investor OT6: "…I want you to do it with me, okay? Then I'm going to call you once you got home, okay, but promise me you going to cooperate with me properly? You don't touch - - - anything yet, then wait for me, okay?" • The AM said to Investor OT6: "You will be needing liquidity, okay, to sustain all the positions that you have, okay? … All you need to do is to cooperate okay, and that's going to be fine." • The AM said to Investor OT8: "I want you, okay, to cooperate with me so I can help you. Very fast and very easy… You only have to do - is just to listen to me carefully and follow me." • The AM said to Investor OT15: "You're not sure?" Investor OT15 responded: "I don't feel comfortable." The AM said: "Because - yeah. I know. Because right now I'm showing it to you but you don't want to cooperate with me. You don't want to do it." • The AM said to Investor OT15: "I want you to open trades today, okay, because every minute here is money. Okay? We are giving you more time, okay, so just cooperate with us, sir. If you don't want to open trades in the market, we cannot do anything." (ii) Ozifin: investor OF3, investor OF8, investor OF9 (also investor OF11): • The AM said to Investor OF3: "…if we're speaking about 20, 25,000 in profits, [Investor], you understand that we're speaking about a different level of trading and this is the kind cooperation we're having with me and Theo cooperating on this level, okay?" • Investor OF8 told the AM "I have to pay bills today." The AM responded: "I promise you, by next week, once you fix the situation you can withdraw the money that you want to, that you need to, not afraid to pay your bills. Okay, so that everything here will be fixed. I'm asking for your cooperation right now?" • The AM said to Investor OF9: "And that 15,000 it means that you have me locked, so I will explain things every day here again and again and again and again because I know that we going to have a brilliant cooperation, okay, for the future, all right?" (j) AMs regularly made "promises" to investors. In this regard: (i) AGM: investor AGM3: • The AM said to Investor AGM3: "As I promise, you will be guided by one of our experienced account relationship managers." (ii) OT: investor OT7 (also investor OT1 (2 calls), investor OT4 (2 calls), investor OT6 (3 calls), investor OT8, investor OT2, investor OT12 (3 calls)): • The AM told Investor OT7: "I promise you, by next week, once you fix the situation you can withdraw the money that you want to, that you need to, not afraid to pay your bills." (iii) Ozifin: investor OF3 (2 calls), investor OF2, investor OF7 (2 calls) (also investor OF5 (2 calls), investor OF12 (2 calls)): • The AM told Investor OF2: "So right now I am in a position to tell you that I am ready to welcome you to the work from home program, okay? And I'm giving you my promise, and I give - I will promise you my full support. I guarantee you my services and I can guarantee you that you will never work alone here. I will take you and I will explain you everything." • The AM said to Investor OF7: "I am making you no promises. The only promise that I'm making is that I'm going to dedicate a lot of my time and my efforts plus some of my leverage with the company, plus I will sacrifice some of my personal time, time that I make my money, my [inaudible] to try and work with you, [Investor], and try and get the account back on track. … I am promising you that I am going to do my best and you're going to be getting my time and my connections in the company to try and assist this account." • The AM told Investor OF3 after there was a downward movement in his positions: "If there is something I can promise you on a personal level, there is - okay, I mean, if it comes down to that, there is leverage on the account. I will request basically, even if it was, for example, the trading halt and if it was losing calculated of the margin that day, I will try get something back for you, okay." (k) AMs referred to investors obtaining "extra income". In this regard: (i) Mr Cecilio gave evidence that OT AMs were told to say "extra income" instead of "extra information" from the OT script. (ii) Investor calls: • AGM: Investor AGM4 (asked "what actually motivated you to activate your account and to do an online trading? Was it that you want to make an extra income for yourself?") • OT: Investor OT10 (The AM asked Investor OT10, "Oh, retired, I see. I see, so you're looking for uh, an option for you to have an extra income or you just want to try the Bitcoin sir?") (l) The defendants all referred to "segregated" accounts. In this regard: (i) For each of AGM, OT and Ozifin the term "segregated account" was used in the terms documents. Further, there were the following verbal communications to this effect. (ii) OT: • Mr Cecilio gave evidence that he would say things like - "It's still your money and you can withdraw it anytime you want. You don't have anything to worry about because we have a segregated account in the Commonwealth Bank. No one can touch your money and you can withdraw the money any time that you want." • Calls with investors: Investor OT7, Investor OT10, Investor OT8 o The AM said to Investor OT7: "So it - it's a segregated account, trust account, that no one from our company or from the bank can touch the money, but only you. So this is why I would like to open a new savings account from Commonwealth Bank… All right? At any given moment that you need the money, you will be able to withdraw the money. It takes 24 hours." o The AM said to Investor OT8, "This is what we call the segregated account, meaning to say whatever funds that you drop in us, this is transferred directly on the trust account that we have from the Comm Bank. Meaning to say, no one can touch your money, no one can use it, not the OT, not the Comm Bank, but only you as the owner. In that way, if there's a bankruptcy that will happen, your money is safe with you." (iii) Ozifin: • Email: Investor OF5's aunt o "All funds are kept in a segregated account with Commonwealth Bank in Australia where you have access to the funds in your trading account at all times." • Calls with investors: Investor OF1, Investor OF3, Investor OF10, Investor OF12 (two calls), Investor OF9 (two calls), Investor OF7 o The AM said to Investor OF1: "When you make the transfer, because obviously every client has his own separate account, (indistinct) segregated account for your own security so basically I will need to give you your CID so it will come directly to your account." (m) AMs told investors that the market, or a certain price, would "correct itself", "corrects itself" and/or that the "market is doing a correction". In this regard: (i) Mr Cecilio gave evidence that he was trained to say this: "We were told in the second training and by our senior account managers to tell clients to leave negative positions open. Once a client had opened positions and those positions had gone negative, I would say to the client that if they closed those negatives positions, they would lose the money and that they should leave those positions open because "the market will correct itself". We were told to say things like: "the market is volatile", "whatever goes down goes up and whatever goes up comes down" and "the market will correct itself". I learned the phrase "the market will correct itself" during the Second Training, and from senior account managers. The goal of leaving open a negative position was for the client to lose their money." (ii) AGM investor calls: investor AGM2 (2 calls) (also investor AGM10): • The AM told Investor AGM2: "Some of the minuses will return to a profit because the market is doing a correction, and because the investing.com have, potentially, very reliable information… Sometimes the market manipulators, okay, the big banks and the big, commercial companies try to manipulate the market. But there is a limit of how much you can do it. This is why if you let it run, tomorrow the market will be strong and possibility for you to have a correction." (iii) OT investor calls: investor OT6 (6 calls), investor OT7 (3 calls), investor OT12 (38 calls), investor OT4 (2 calls), investor OT9 (3 calls), investor OT8 (8 calls), investor OT3 (7 calls), investor OT10 (6 calls), investor OT1, investor OT13 (2 calls) (iv) Ozifin investor calls: investor OF8 (also investor OF12 (1 email, 1 call)): • The AM told Investor OF8: "Let me know if the plan is to speak and trade tomorrow and the market is now correcting itself and our trades which is great." 432 Fourth, as many of the above statements reveal, AMs were trained in and used tactics to gain investors' trust and engender a false sense of security. 433 Fifth, AMs told or implied to investors that the AMs (and their associated entities) were "experienced" or "experts". But they were plainly not. In this regard: (a) Mr Cecilio gave evidence on this, including the following: • "We were told to convey that we were experts, knowledgeable at accounts, and would help them make money in the financial markets. We were told to tell clients this so they would not think they were dealing with a newbie." • "This training was refresher training about how to get more deposits and use rebuttals. Cullen also told us to say things like "I have been working as an account manager for 6 years now" to make clients think that we were experts." • "We were told that we should find events on investing.com and read them to the client, but pretend that we were not reading so the client would think we were experts." • "When dealing with a new client, the aim of the first call was to give the client the impression that I am an expert and that I will help them to become an independent financial trader. I would tell the client that I would guide them in the financial market by saying things like "I am trained and have been trading for some time", "I have been an account manager for six years", "I help a lot of clients that are first timers and they become independent traders", "I will make a portfolio or plan for you" and "In the future you won't need me because you will be able to make profit on your own." When I said these things I did not actually intend to make a portfolio or a plan for the client, or to teach clients to become independent traders. This was a technique to build a relationship with the client." (b) AlphaTrade webcapture: "After all, our instructors are expert teachers as well as expert traders."; "expert adviser". (c) AGM script: "[Name], like explained to you before, here at Alpha Trade, there will be someone to assist you during your trading journey. Your own personal Senior Account Manager, who is very knowledgeable in the Financial Market… Our Experienced Senior Account Managers have many many years of experience and they will share what they know with you so that you can take advantage of it and in turn make profits for yourself" (d) AGM calls: investor AGM4 (2 calls) (also investor AGM3, investor AGM5): • The AM said to Investor AGM4: "I really hope you will be able to make a very good profit with the help of the experienced manager. Okay… you will have one of our best experienced manager. They will call you." (e) OT client calls: investor OT12 (2 calls), investor OT8, investor OT10 (also investor OT2, investor OT6): • The AM said to Investor OT12: "[H]onestly your 250 Australian dollars or US dollars is [too] risky. My years of experience on - as an account manager 250 is too risky… Okay. Why did I tell you that? Because, the market might kick you out anytime the volatility changes." • The AM to Investor OT8, after she had lost a lot of money: "I have a more - yes, I have more experience than [another OT Capital AM]. I know all of the events, okay? … I know everything. I know all of the events in the market … I will going to make a schedule in here and call you, okay, on Monday because I have an - - - appointment with Warren Buffet, if you know Warren Buffett? … [b]ecause he invest - - - 41 million here and I am the senior account manager which was holding his account. Okay? … And then, we are - we invest in Apple shares and he already earn 31 million." • The AM said to Investor OT10: "Yeah. But I am the one who actually knows everything about the financial market. Now you follow me." (f) OF client calls: investor OF1 (3 calls), investor OF7 (2 calls) (also investor OF2 (2 calls), investor OF12, investor OF10): • The AM said to Investor OF7: "I was in a big audit firm for six years. I'm also a chartered accountant. So, moving out of the audit firm, because - to be honest with you, I wasn't really helping anybody but myself there. I moved to the financial industry the past eight years or so. And, it's been a blessing… the real drive for me, to be honest with you, is helping people. And that's exactly what I do with my clients, regardless of experience, background. That's why I said in the - that's why I was [inaudible] enthusiastic when you said that you don't have experience in this." • The AM said to Investor OF1: "He's [the analyst] going to be calling you and showing you everything he knows which is quite a lot. He - he's a certified - he'll tell you all his certifications… He actually trained most - - - of our newbies, basically in terms of understanding Forex a couple of years ago. So you understand he's - he's up there." 434 It is also clear from the evidence that many of the investors considered the AMs to be experts in CFDs, FX contracts and operational and risk factors associated therewith. 435 Sixth, AMs emphasised that the relevant company was based in Australia, to make it seem more trustworthy. Further, AMs emphasised that the relevant company was regulated, in order to foster trust. 436 Seventh, AMs emphasised to investors that their money was safe, including by saying that "no one can touch" their money and similar phrases. In this regard: (a) Mr Cecilio gave evidence that to get high deposits, he would say things like: "It's still your money and you can withdraw it anytime you want. You don't have anything to worry about because we have a segregated account in the Commonwealth Bank. No one can touch your money and you can withdraw the money any time that you want." (b) OT: the phrase (or similar) was said to each of investor OT8, investor OT3, investor OT9: • An AM said to Investor OT9: "One thing that you feel comfortable here in our company, it's because the money that you will going to deposit, or the money that you will going to transfer on your trading account, it will not go directly with our company. It means we are not the one who will going to handle your money. Okay? It will go directly with a trust account that we have in Commonwealth Bank. It means [Investor] that it's a segregated account by the client, so it means no one can touch your money, no one can get your money, only you, because you are the boss of your account. While you're doing the education, while you're waiting for your senior account manager, the money, it will stay on the trust account. And, say for example you're confident enough to trade, you're confident enough to trade, or you're already doing the trading, but it's that time that you will going to use the money that you're about to transfer on your trading account that will stay on the trust account in Commonwealth Bank. That's how our company works with our valued clients, because we wanted to make sure that each and every - yes. We want to make sure that we're working clean, because we are under the regulation of ASIC." Investor OT9 replied, "I'm very happy with that." 437 Eighth, AMs often asked investors to "trust" them, implied that an investor should trust them, or asked an investor whether or not they trusted them: (a) AGM: investor AGM13 (also investor AGM5, investor AGM11): • An AM said to Investor AGM13: "If you trust me why you not depositing another 10,000, [Investor]?" (b) OT: investor OT11 (2 calls), investor OT6 (on three calls), investor OT12 (17 calls) (also investor OT1, investor OT3 (2 calls), investor OT8 (2 calls)): • AMs said to Investor OT6, on two occasions: "I've got your back". • An AM said to Investor OT11: "[Y]ou need to understand that first of all, if you will not trust me, you will lose money by not making money." • An AM to Investor OT12: "Just trust me on this one, okay." Investor OT12 responded, "Well, I have so far haven't I?" The AM replied, "Yes, I know you trust me, that's why I'm here. I'm trying to help you out." (c) Ozifin: investor OF3 (4 calls), investor OF2 (3 calls) (also investor OF1, investor OF12 (2 calls), investor OF9, investor OF4): • An AM to Investor OF3: "[Y]ou're going to understand that I am a person to trust. Because my trust can correspond, correlate, to money. Okay?" • An AM to Investor OF2: "Thank you - thank you for trusting me. Thank you. But I want you to trust also the company. As I said, we are trading under regulation. So, you already receive the money back into your account…" (d) Additionally, a number of OT AMs asked investors to give them "one percent" of their trust, sometimes, in order that they could "earn" the other "99 percent", usually in instances where investors had expressed uncertainty or a lack of trust in the AM. This was said to investor OT7 and investor OT8 (also investor OT15 (2 calls), investor OT12 (4 calls)): • An AM said to Investor OT7: "Who told you that you are gonna lose that money that you are gonna transfer? No one. That's why you're making money, because we are doing excellent because all I'm asking for you is give me 1 percent of your trust with this big event. I'll show you how impressive it is." • An AM said to Investor OT8: "I mean, our trust is not about asked, you need to work on it for you to get the trust of other people. But, one thing that I will be asking, just only give like 1 percent of your trust, then let me work on the remaining percent, and show you, prove it to you, what you can do on it. Okay?" 438 Further, the fact that many investors showed their bank details to their AMs reveals that the clients trusted them, and also that they were in a position of vulnerability. 439 Ninth, the purpose of the defendants in encouraging deposits and trades is well apparent having regard to the following matters. 440 Mr Cecilio gave evidence that: (a) "[An OT Capital operational manager] told me that our goal in cold leads was to have the people that we called sign up for a trading account and make a deposit. Our target in cold leads was four deposits of a minimum of AUD250. We encouraged clients to deposit more than that." (b) "They said that we would be wasting our time if we were talking to a client when it is not about getting a deposit." (c) "In hot leads, we also had to reach 5 to 12 deposits in one month otherwise we would be sent back to cold leads. The minimum number kept moving up." (d) "Around the room there were at least three television screens. The screens would show the names of the 5 to 10 [AMs] who had got the most deposits during the shift, ranked according to their total deposits. The screen would update during the day when new deposits were made. The bigger the total deposits that were made, the bigger the [AM's] name would appear on the screen. During the shift, [an OT Capital senior AM] would also shout about big deposits on the floor when a name came onto the screen. He would say something like "good job" and "more deposits!"" (e) "In the huddle, our team leader would tell us things like events in the market that we should use to get client deposits, which I discuss below. During the huddle, [an OT Capital senior AM] would yell "kill your customers". I understood this to mean that we should get them to deposit more with the intention that they would lose their money on the trading." (f) "It was clear to me from this training and guidance that the main goal of our conversations with clients was to get them to deposit as much money as possible into their trading accounts and to open as many positions as possible. I was told this during training and it was frequently repeated by the senior account managers and team leaders." (g) "The goal of seeing the client's bank account was to work out how much money they had, so that we could encourage them to deposit that money into their trading account." (h) "I would tell them about an event I had found on the internet and use that event to persuade the client to deposit money into their trading account so they could participate in the event. I did not understand the events or how they affected the financial market. I was only mentioning the events to the clients as a reason why they should deposit money." (i) "The goal of leaving open a negative position was for the client to lose their money." (j) "I was not told directly that one of our purposes was to get the client to lose their money. But I concluded that from my experience as an AM and from the instructions that I have described ... Also, [an OT Capital senior AM] and the other senior [AMs] and team leaders said that a client should be "killed". I was often told by the senior account managers about the clients: "You kill them or someone else will kill them"." 441 Further, it is apparent from the relevant incentives as elaborated on below. 442 Further, it is apparent from the evidence of Mr Blundell, who said that the effect of the "strategies" the clients were given was that they were highly likely to lose their money, as they did. 443 Further, each of the defendants encouraged inexperienced, vulnerable investors with a relatively small amount of funds available to trade in high volumes. In this regard: (a) OT investors, like investor OT7, started trading in very high volumes almost immediately; so too did investor OT8, investor OT1, investor OT6, investor OT10, investor OT15, and investor OT14. (b) The following investors traded in volumes of 5 or more: (xxviii) AGM: investor AGM2 (using personal and superfund accounts), investor AGM8, investor AGM7, investor AGM3, investor AGM10, investor AGM1. (xxix) OT: investor OT7, investor OT8, investor OT1, investor OT6, investor OT10, investor OT15, investor OT14, investor OT11 (AUD account), investor OT9 (USD account), investor OT12, investor OT13, investor OT2. (xxx) Ozifin: investor OF9, investor OF3, investor OF1, investor OF11, investor OF2, investor OF8, investor OF12, investor OF4. 444 Further, the commissions and incentives paid to AMs to encourage deposits placed them in a situation of direct conflict with clients. In this regard: (a) In respect of AGM, Mr Ashkenazi agreed that commissions were paid to Falcon employees. (b) In respect of OT, the commissions were based on the number and amount of deposits their clients made. Mr Cecilio said: (xxxi) "I applied because a friend told me IBD Marketing was hiring and that the salary was quite big compared to other call centres that I had worked in." (xxxii) "While I was an account manager I was given a salary of about 25,000 pesos per month, including overtime. I also received incentive payments on the 20th of each month for the month before. The incentive payments applied once we reached deposits for the month of US$10,000. For every US dollar deposited by our clients over that amount, we would get roughly half that amount in pesos. For example, if our clients deposited US$50,000, we would receive 25,000 pesos as an incentive payment. Incentives were paid in cash." (xxxiii) "As part of the incentives for teams to reach their deposit targets, there were "power hours". During power hours, any account manager who reached total client deposits of US$10,000 within three hours would get 10,000 pesos cash. Each week there would be 5 to 10 power hours." 445 Generally, as a result of this system of conduct and pattern of behaviour, in less than a year, Australian investors lost millions of dollars. As at 1 September 2018, OT clients had lost over AUD 18 million. In the period in and after October 2017, Ozifin clients had lost over AUD 11 million. From October 2017 to 18 September 2018, AGM clients had lost over AUD 1 million. 446 In my view, ASIC has made out its case on this aspect. But Ozifin has challenged ASIC's system of conduct case. It says that none of the features of the system pleaded by ASIC constitute an allegation that the clients of Ozifin suffered any vulnerability or disadvantage, other than the individual examples of vulnerability or disadvantage that are described elsewhere, whether to the knowledge of Ozifin or otherwise. It also makes some other points. 447 First, it says that it is notable that the nature of the investment representations made to each of investors OF1 to OF12 varies. In this regard, it says that it is difficult to see how even in respect of investors OF1 to OF12 and treating them as a class that the evidence of the making of the specific investment representations made to a specific investor evidences a system of conduct or pattern of behaviour on the part of Ozifin given the variety and disparity of the individual representations made. In any event, it says that it is not known whether the investment representations were made to any of the other relevant clients. For that reason, it says that there is no basis to make a finding that the specific investment representations found to be made to individual investors evidence a feature of a system of conduct or pattern of behaviour in respect of a class of individuals which include the other relevant clients. 448 Second, as to the feature that Ozifin engaged with inexperienced, vulnerable investors with a relatively small amount of funds available to trade in high volumes, it says that it is not immediately apparent that the allegation of inexperience, or possession of only a small amount of funds, would amount to a relevant disadvantage of the sort contemplated in the authorities. It says that inexperience and possession of only a small amount of funds would not, of themselves, amount to a relevant disadvantage. 449 Third, in respect of each of the investors in respect of whom ASIC alleges individual unconscionable conduct on the part of Ozifin being investors OF1 to OF5, OF8 to OF10 and OF12, it is conceded that each of them suffered from a relevant vulnerability or disadvantage, although the precise nature and circumstances of each of those investors varied from case to case. But it says that even among investors OF1 to OF5, OF8 to OF10 and OF12 it is difficult to discern a common vulnerability. 450 Fourth, it says that I do not have any direct evidence whatsoever in respect of the other relevant clients. It says that it is not explained how or why any of investors OF1 to OF12 are indirectly representative of, or indicative of, a system of conduct or pattern of behaviour by which Ozifin engaged with vulnerable investors nor the nature of the vulnerability. Further, it says that if ASIC seeks to rely on Ozifin's dealings with any of investors OF1 to OF12 for a tendency purpose, then ASIC should have served a tendency notice in accordance with s 97 of the Evidence Act 1995 (Cth) which ASIC did not do. 451 Fifth, it says that ASIC has had the benefit of the transcripts of all calls between the relevant clients and Ozifin. Accordingly it says that investors OF1 to OF12 may represent the totality of the investors that ASIC was able to identify who displayed a relevant vulnerability, and who communicated that vulnerability to Ozifin. Further, it says that ASIC has only adduced evidence of conduct of Ozifin in relation to 12 investors out of more than 5,300 investors. And ASIC has not sought to explain why it chose those 12 investors to give evidence. It says that I am in no position to infer that the 12 investors chosen are in any way representative of the other investors with Ozifin. 452 Sixth, it says that to the extent that ASIC refers to similarities in business practices and in key documents for each of the defendants, such evidence is tendency evidence and unusual tendency evidence at that, in that it appears that it is being said that Ozifin had a tendency to behave in a particular way by reference to the conduct of AGM and OT who behaved in a particular way. It says that in order to be able to rely on evidence in this way, ASIC was required to give notice under s 97 of the Evidence Act. Further and in any case, it says that the evidence of the use of scripts by AGM and OT does not lead to a finding either that Ozifin employed such scripts, nor as to the content of those scripts, if scripts were used. 453 Seventh, it says that there is no probative evidence to establish that the relevant clients, as a class, suffered from a relevant disadvantage. In particular, there is no evidence of any scripts used by any Ozifin AMs (or other employees) in dealing with the relevant clients. Nor is there any evidence from any AM (or other employee) engaged by Ozifin to deal with the relevant clients. In those circumstances, it says that the features alleged by ASIC are insufficient to support a finding that Ozifin employed an unconscionable system in respect to all relevant clients. Accordingly it says that ASIC's systems case against Ozifin must fail. 454 I would reject Ozifin's submissions. 455 First, Ozifin submits that the evidence adduced by ASIC does not establish a system of conduct, on the basis that I am in no position to infer that the 12 Ozifin investors chosen by ASIC were in any way representative of the balance or a not-insignificant proportion of Ozifin's other investors. In that respect, it points to ASIC's failure to adduce evidence of the basis upon which those 12 investors were chosen. But in my view such an exercise is not necessary in a case such as this where ASIC does not rely on any particular attribute of the people to whom the system of conduct was directed. The targeting of disadvantaged people does not form part of the system of conduct which ASIC alleges. Indeed, the evidence establishes that AGM, OT and Ozifin were entirely undiscriminating as to who they accepted as their clients. That lack of discrimination was itself an aspect of the system of conduct engaged in that was in all the circumstances unconscionable. 456 Second, Ozifin says that given that ASIC has had the benefit of the transcripts of all calls between the relevant clients and Ozifin, investors OF1 to OF12 may represent the totality of the investors that ASIC was able to identify who displayed a relevant vulnerability, and who communicated that vulnerability to Ozifin. But first, there is no evidence in support of the assertion that ASIC has had the benefit of the transcripts of all calls between the relevant clients and Ozifin. Apparently it has not. Further, whilst ASIC has had access to a large proportion of the recordings of calls between Ozifin and the relevant clients, the process of extracting and transcribing all the calls to which it has had access would have been unreasonably costly and time consuming. Only a limited number of calls were therefore transcribed by ASIC. 457 Third, the evidence adduced by ASIC has not been adduced as tendency evidence as such. 458 Fourth, Ozifin says that none of the features of the system alleged by ASIC constitute an allegation that the clients of Ozifin suffered any vulnerability or disadvantage. But ASIC is not required to establish that the clients of Ozifin, or any of them, suffered from any special disadvantage. So much is made express by s 12CB(4)(a) of the ASIC Act. ASIC is not required to establish that any investor suffered from a special disadvantage, although in other cases ASIC may have suggested or conceded as much. It is not the case that ASIC is required to establish that an identified person or class of people suffered from a special disadvantage which meant that they were incapable of making a judgment as to their own best interests and unfair or unconscientious advantage was taken of the opportunity created by that disadvantage. Moreover, in my view, none of the decisions cited by Ozifin support the proposition that ASIC must, in order to establish that the pleaded system of conduct was unconscionable, identify a person to whom the system of conduct was directed and who suffered any vulnerability or disadvantage. Of course, in other cases ASIC may have sought to so prove. But the statute does not so dictate in all cases. 459 Finally, OT has made similar points which I would also reject. 460 In summary, ASIC has made out its system of conduct case and pattern of behaviour case against each of AGM, OT and Ozifin. The necessary extrapolation from the sample set of investors is well justified. The underlying systems and approach used by each defendant had common elements across all defendants and had common features across investors of and for each particular defendant.

(h) Liability of AGM for conduct of OT and Ozifin 461 In my view the conduct undertaken by OT and Ozifin that constitutes the investor contraventions that I have discussed earlier can also be considered to be conduct undertaken by those defendants on behalf of AGM. But I would not accept ASIC's case that AGM was knowingly involved in, or aided, abetted, counselled or procured, the investor contraventions by OT and Ozifin. 462 Let me address the agency question.

Agency allegations 463 Sections 769B(1)(a) and (b) of the Corporations Act and s 12GH(2)(a) and (b) of the ASIC Act establish the relevant agency. Those provisions provide that conduct engaged in by an agent of a body corporate within the scope of the person's actual or apparent authority or by any other person with the consent or agreement (whether express or implied) of a director or employee of the body, whether the giving of the consent or agreement is within the scope of the actual or apparent authority of the director, is taken for the purposes of the provisions of Chapter 7 of the Corporations Act and Part 2, Division 2 of the ASIC Act, to have been engaged in also by the body corporate. Both limbs of those deeming provisions are applicable. OT and Ozifin when engaging in the conduct that gave rise to the investor contraventions were acting as agents of AGM and within their apparent authority. 464 Now a relationship said to give rise to an agency must be considered and characterised in its commercial context. Whilst the relationship here is one established by contract, the question whether a particular relationship is one of agency, and in particular whether the parties have consented to such a relationship, is to be determined objectively. Moreover, it is not determinative of the question that the parties to the relevant agreement said to give rise to the relationship of agency have so described it, or indeed whether they have sought to disclaim it. 465 Consideration must be given to the scope of the actual or apparent authority granted to the agent. AGM denies responsibility for any personal financial advice given by AMs engaged by or on behalf of Falcon, OT or Ozifin on the basis that AGM did not authorise such conduct. 466 Now mere prohibition of misconduct does not relieve the principal of responsibility. Further, in determining whether a particular act falls within the authority of an agent, it is not necessary that the particular act should have been authorised. 467 Further, whether the particular act of the agent fell within the scope of its actual or apparent authority depends on whether the principal put the agent in the principal's place to do a class of acts in the principal's absence. The consequences of that characterisation are that the agent is necessarily left to determine, according to the circumstances that arise, when an act of that class is to be done, and is trusted to determine the manner in which it is to be done. And the principal is therefore answerable for the wrong of the agent, provided that act was done, not from any caprice of the agent, but in the course of the agency. 468 In Australasian Brokerage Ltd v Australian and New Zealand Banking Corporation Limited (1934) 52 CLR 430 at 451 to 452 per Dixon, Evatt and McTiernan JJ, the High Court cited with approval the well known advice of the Privy Council (Mackay v Commercial Bank of New Brunswick (1874) LR 5 PC 394 at 410): It is seldom possible to prove that the fraudulent act complained of was committed by the express authority of the principal, or that he gave his agent general authority to commit wrongs or frauds. Indeed it may be generally assumed that, in mercantile transactions, principals do not authorize their agents to act wrongfully, and consequently that frauds are beyond 'the scope of the agent's authority' in the narrowest sense of which the expression admits. But so narrow a sense would have the effect of enabling principals largely to avail themselves of the frauds of their agents, without suffering losses or incurring liabilities on account of them, and would be opposed as much to justice as to authority. A wider construction has been put upon the words. Principals have been held liable for frauds when it has not been proved that they authorised the particular fraud complained of or gave a general authority to commit frauds… 469 Accordingly, expressions such as "acting within the scope of an agency" should be construed liberally. And more particularly is that so in the context of investor protection legislation that renders it sufficient that the act complained of falls within the agent's apparent authority. 470 Further, whether an agent is determined to be acting within its apparent authority is to be determined from the perspective of the third party who engages with that agent. 471 In my view, when undertaking the conduct that constituted the investor contraventions, OT and Ozifin were acting as the agents of AGM within the meaning of s 769B(1)(a) and (b) of the Corporations Act and s 12GH(2)(a) and (b) of the ASIC Act. 472 In summary, it seems well apparent to me that: (a) AGM and OT and Ozifin who were authorised representatives consented to an agency relationship; (b) AGM had provided authority to them to act on its behalf; and (c) the conduct of OT and Ozifin that constituted the investor contraventions was within the actual or apparent authority of AGM. 473 First, each of the CAR agreements stated explicitly that AGM was appointing OT and Ozifin as its authorised representatives pursuant to s 916A. Section 916A(1) states that a financial services licensee, which AGM was at the time that it entered the CAR agreements, may give a person a written notice "authorising the person, for the purposes of [Chapter 7 of the Corporations Act], to provide a specific financial service or services on behalf of the licensee." (emphasis added.) 474 The CAR agreements constituted notices appointing OT and Ozifin for the purposes of s916A(1). In order to be effective, those notices are to be construed as appointing them to provide financial services on behalf of AGM. Were it otherwise, those notices would be of no effect, and OT and Ozifin would not have been entitled to provide any financial services in Australia. Once appointed, the entitlement of OT and Ozifin to provide financial services in Australia arose under s 911B(1)(b). 475 Second, apart from a brief period following the execution of the CAR agreements, the CFDs and FX contracts issued to the clients of OT and Ozifin were issued by AGM. This is apparent from consideration of the PDSs that were available on the websites of OT and Ozifin, which in addition to identifying AGM as the issuer of the products, identified OT and Ozifin as representatives of the AGM. 476 Third, both the conduct of OT and Ozifin and the consistent terms of the PDSs published by OT and Ozifin entail that the statements in the CAR agreements that those agreements did not give rise to an agency relationship should be given little weight. They did not reflect the reality or substance of the relationship. 477 Generally, the conduct of OT and Ozifin that gave rise to the investor contraventions was conduct that occurred within the scope of the authority afforded to OT and Ozifin by AGM. Properly understood, the class of acts that AGM was putting OT and Ozifin in a position to undertake was the act of dealing in financial products on behalf of AGM, and the giving of financial product advice in relation to those products. 478 Moreover, the conduct that constituted the investor contraventions was within the actual authority of OT and Ozifin. Alternatively, the conduct occurred within their apparent authority. 479 In my view there is little doubt that ASIC's agency case is made out.

Knowing involvement allegations 480 It is necessary to establish actual and not constructive knowledge of the essential elements of the relevant contravention. But actual knowledge can be inferred in circumstances where the combination of suspicious circumstances and a failure to make enquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter. But whether such an inference is open will depend on the circumstances in which the person failed to make the necessary enquiries. That includes consideration of whether the person, by reason of their position, or the system in which they operated had some responsibility for the supervision of those undertaking the contravening conduct or had some form of reporting obligation or to answer enquiries regarding that conduct. 481 On balance I am not prepared to infer that AGM had actual knowledge of the essential elements of each of the investor contraventions. 482 Now ASIC has submitted that in the case of conduct by the AMs engaged by Ozifin, AGM was aware as early as 15 November 2017 from its review of several conversations between AMs engaged by Ozifin and its clients that those AMs: (a) failed to provide any balance in the conversations with clients between risk warning and potential profit; (b) were suggesting trading and advising clients to close trades; and (c) were dealing with clients of Ozifin who did not understand the operation of the products in relation to which the AMs were providing advice. 483 The limited remedial action that AGM apparently took having become aware particularly of some of the conduct concerning trading was to insist that Ozifin AMs should state that the information provided to the client was coming from Trading Central, and that the AM was going to tell the client what was in that report. AGM apparently considered that by providing that disclaimer, Ozifin would not be providing personal advice. But that view, communicated to Ozifin, reflected a misunderstanding of the difference between general and personal advice. 484 Further, by February 2018, compliance officers engaged by AGM had expressed concerns to Ozifin that its AMs did not provide sufficient balance in their conversations as they barely mentioned risks when they talked to clients unless clients asked about risk. 485 ASIC says that despite those concerns, there is no evidence that AGM increased the number of Ozifin calls that it monitored, or that it took any additional steps to determine whether Ozifin continued to engage in the conduct about which AGM had previously identified, and expressed concern. 486 Now in the circumstances, I am prepared to infer that the review by AGM of a limited number of telephone calls made by Ozifin AMs made AGM aware to some extent of the misconduct of those managers. Moreover, AGM's review must have raised suspicions as to the misconduct, yet it made the decision not to make inquiries to remove those suspicions despite having an obligation to ensure that its representatives complied with the financial services laws. But I do not consider that in such circumstances, AGM had actual knowledge of the constituent elements of the investor contraventions referable to Ozifin's conduct. I have also reached the same conclusion in respect of OT's conduct.

Compliance Contraventions 487 ASIC says that AGM failed to take the steps necessary to discharge its obligations under s 912A(1)(a) to do all things necessary to ensure that the financial services it provided under its AFSL were provided efficiently, honestly and fairly, and under various other provisions of ss 912A(1) and 961L to do those things necessary to properly supervise its representatives, which included both Ozifin and OT and the AMs engaged by AGM, Ozifin and OT. 488 ASIC has made out its case on this aspect. In my view the evidence discloses the following. 489 First, the training provided to AMs was inadequate, including in relation to the operation of CFDs and FX contracts. Whilst there was apparently some initial effort on the part of AGM to ensure that AMs engaged on behalf of OT and Ozifin received the sort of training that Mr Blundell identified would have been adequate, there is no evidence that: (a) AMs engaged on behalf of OT or Ozifin received any such training; or (b) AGM took any steps to follow up its initial admonition that such training should occur. 490 Second, AGM ought to have ensured that the AMs engaged by or on behalf of OT and Ozifin had no, or limited access to personal information of their clients, so as to reduce the prospect of providing personal financial advice. 491 Third, AGM ought to have reviewed at least 2% of the calls made by AMs to clients of AGM, OT and Ozifin. Now there is no direct evidence of the total number of telephone calls made to clients of AGM, OT and Ozifin in the period that they were operating, but I can be satisfied that it was a very substantial volume. 492 But in any event, the conduct of AGM's AMs, and its earlier defence of this proceeding, reveals that AGM did not regard the conduct its AMs engaged in to have involved any misconduct. Therefore, even if an employee or officer of AGM had listened to every call made by its representatives, it would likely have done nothing in response to their misconduct. Indeed, so much is evident from the response of AGM's compliance staff to the early conduct of Ozifin's AMs. AGM expressed no concern that Ozifin AMs were passing on and recommending "signals" to their clients, but simply that they were not identifying the source of those "reports". That approach manifests the deficiencies in AGM's compliance system, and in particular the training provided to the compliance staff tasked with listening to the calls made by AMs. 493 Fourth, AGM outsourced to the AMs certain key functions for providing financial product advice to AGM clients. But the responsibility for ensuring that the advice was provided in a fair, honest and efficient manner remained with AGM. AGM could outsource the function but not its responsibility under its AFSL. Moreover, prior to the provision of any services by Ozifin, OT or the AMs on AGM's behalf, AGM should have undertaken due diligence on all of the entities that provided the AMs. The due diligence should have confirmed that Ozifin and OT and all of the AMs had sufficient resources to provide the outsourced functions, had the requisite knowledge of Australian financial services laws and understood the obligations they were being given as a representative of an AFSL holder. AGM should have been confident that OT, Ozifin and all AMs could have provided the services fairly, honestly and efficiently, in accordance with AGM's obligations under its AFSL, prior to any services being provided. 494 AGM should have ensured that prior to any services being provided by the AMs, adequate training had been undertaken by all AMs. AGM should have ensured the training was completed to meet the obligations of its AFSL. The AMs should have completed relevant training courses for the provision of general advice to retail clients. At a minimum, OT, Ozifin and all AMs should have completed a course regarding their general obligations for providing financial product advice and a course regarding the provision of derivative products. If they were also providing advice on FX products, then a course regarding FX ought to have been completed. AGM should have ensured that OT, Ozifin and all AMs had completed the courses prior to engaging them to provide services to AGM clients. 495 Fifth, AGM should have had in place a system for monitoring the activities of Ozifin, OT, all AMs, Falcon and IBD, when providing financial product advice. As I have indicated, this system should have included the regular monitoring and review of telephone conversations, emails, chat messages and any other communications between the AMs and the clients. 496 Sixth, AGM should have established processes for the escalation by Ozifin, OT and the AMs to AGM of any possible breaches of the law, or if circumstances arose where the services were not being provided in a fair, honest and efficient manner. The processes should have clearly stated to whom within AGM issues should have been escalated by Ozifin, OT, Falcon and IBD. The processes should then have stated to whom at such entities AGM should have gone in order to rectify any issues in a timely manner. The various agreements between AGM, Ozifin, OT, Falcon and IBD providing the AMs should have clearly detailed a process for the AMs to be instructed to stop providing services on behalf of AGM should a matter have arisen where the AMs were not providing advice in a fair, efficient and honest manner. 497 Seventh, AGM should have reviewed all marketing material that was being distributed by the said entities on their behalf to ensure that there was no false or misleading information contained within the material. Further, there should have been a clear process in place to ensure that all marketing material distributed by Ozifin, OT, Falcon and IBD was passed to AGM for compliance review and approval. 498 Further, the compliance departments of AGM and Ozifin, OT, Falcon and IBD should have ensured that they had a close working relationship. Regular meetings across all entities should have ensured the timely sharing of information and the timely ability to rectify any issues regarding the provision of the financial advice. 499 Eighth, steps should have been taken by AGM to ensure that there was not, by reason of the terms upon which Falcon was engaged to provide account management services to the clients of AGM and the people engaged by or on behalf of IBD were compensated, a conflict of interest that arose in relation to the activities of the AMs engaged by Falcon and/or IBD on behalf of AGM in the provision of the financial services on behalf of AGM. 500 Prior to the commencement of services by Falcon and IBD, AGM should have thoroughly reviewed the terms of the agreement(s) regarding the services, such as the remuneration to be paid by AGM. It should also have reviewed the employment contracts signed by the AMs acting on their behalf. As part of the due diligence process, AGM should have requested to see the conflicts of interest registers of Falcon and IBD to ensure they existed and had been completed. 501 Further, a key conflict of interest that arose when AMs were providing advice related to the remuneration the AMs received. If an AM was to be remunerated on the basis of how much money a client deposited, how many trades they placed or how often they traded, this could give rise to a conflict of interest. The AM could be encouraging the client to engage in greater activity than the client would have normally wanted to, with the AM knowing that he would earn more money as a result. A review of the AM contracts by AGM would have highlighted this. 502 Further, AGM should have had access to the personal trading account statements of all AMs, and any proprietary trading accounts held by Falcon, IBD, Ozifin and OT. These statements should then have been reviewed against client trades to ensure that no-one was placing trades ahead of a client, namely, "front-running", and that the accounts were being managed appropriately. 503 Further, the terms of various agreements regarding the services to be provided should have been reviewed to ensure that there were no terms that prioritised the interests of Falcon and IBD ahead of clients. For example, it would have been in the interests of Falcon and IBD to have the clients trade more or deposit a certain amount of money to receive additional benefits from AGM. 504 In summary, in my view the evidence reveals numerous systemic deficiencies in the operations of AGM, Ozifin and OT which separately or cumulatively well justify ASIC's case of a breach by AGM of s 912A(1). 505 Now in reaching this conclusion I have applied the following principles concerning s 912A(1)(a) elucidated in Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liq) (2012) 88 ACSR 206 at [69] per Foster J which I restated in Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147 at [2347] to [2350]. 506 First, the words "efficiently, honestly and fairly" are to be read as a compendious indication requiring a licensee to go about their duties efficiently having regard to the dictates of honesty and fairness, honestly having regard to the dictates of efficiency and fairness, and fairly having regard to the dictates of efficiency and honesty. 507 Second, the words "efficiently, honestly and fairly" connote a requirement of competence in providing advice and in complying with relevant statutory obligations. They also connote an element not just of even handedness in dealing with clients but a less readily defined concept of sound ethical values and judgment in matters relevant to a client's affairs. I have emphasised here the notion of connotation rather than denotation to make the obvious point that the boundaries and content of the phrase or its various elements are incapable of clear or exhaustive definition. 508 Third, the word "efficient" refers to a person who performs his duties efficiently, meaning the person is adequate in performance, produces the desired effect, is capable, competent and adequate. Inefficiency may be established by demonstrating that the performance of a licensee's functions falls short of the reasonable standard of performance by a dealer that the public is entitled to expect. 509 Fourth, it is not necessary to establish dishonesty in the criminal sense. The word "honestly" may comprehend conduct which is not criminal but which is morally wrong in a commercial sense. 510 Fifth, the word "honestly" when used in conjunction with the word "fairly" tends to give the flavour of a person who not only is not dishonest, but also a person who is ethically sound. 511 These observations are consistent with the express object of Ch 7 of the Corporations Act set out in s 760A as follows: The main object of this Chapter is to promote: (a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and (b) fairness, honesty and professionalism by those who provide financial services; and (c) fair, orderly and transparent markets for financial products; and (d) the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities. 512 Further, it is also not in doubt that a contravention of the "efficiently, honestly and fairly" standard does not require a contravention or breach of a separately existing legal duty or obligation, whether statutory, fiduciary, common law or otherwise. The statutory standard itself is the source of the obligation. 513 On the question of the proper construction of s 912A(1)(a), my attention has been drawn to various observations made by the Full Court in Australian Securities and Investments Commission v Westpac Securities Administration Ltd that I discussed earlier in the context of financial product advice. But several points should be noted. 514 First, before the trial judge, Westpac did not question the statements of principle propounded by ASIC which in essence applied the principles discussed by Foster J. 515 Second, ASIC's three appeal grounds in that matter rather concerned s 766B(3); ASIC's notice of appeal was tendered before me in order to properly identify the s 766B(3) points that had been raised and that I have discussed earlier in my reasons. Further, to the extent that s 912A(1)(a) was raised by Westpac on any cross-appeal, as I say the parties' positions on construction seem to have been in substance as before the trial judge. 516 Third, some members of the Full Court queried whether the phrase "efficiently, honestly and fairly" should be read compendiously (O'Bryan J at [422] to [426]). But as this was not decided by at least a majority, I am bound to apply the single judge decisions unless I consider them to be plainly wrong, which I do not. 517 Fourth, Allsop CJ said (at [172]): Words such as "efficiently", "honestly" and "fairly" and a composite or compendious phrase or expression such as "efficiently, honestly and fairly" do not admit of comprehensive definition. Certainly a degree of articulation of instances or examples of conduct failing to satisfy the phrase will be helpful and of guidance, as will an articulation or description of the norms involved. 518 With respect, I agree with that statement. He then went on to say (at [173]): The provision is part of the statute's legislative policy to require social and commercial norms or standards of behaviour to be adhered to. The rule in the section is directed to a social and commercial norm, expressed as an abstraction, but nevertheless an abstraction to be directed to the "infinite variety of human conduct revealed by the evidence in one case after another." (See Gummow WMC, "The Common Law and Statute" in Change and Continuity: Statute, Equity and Federalism (Oxford University Press, 1999) at 18-19.) 519 Now neither Jagot J nor O'Bryan J went so far. With respect, I prefer to view s 912A(1)(a) as enshrining a statutory norm to be read conformably with s 760A and the other provisions of the Corporations Act and the ASIC Act, of course to be applied to an infinite variety of corporate delinquency and self-interested commerciality. But to say this is not to deny that it may implicitly pick up some aspects of what some might identify as social and commercial norms, although reasonable minds might differ as to where to ground such an otherwise free-floating concept. 520 Let me say something about "fairly". Judges applying s 912A(1)(a) have usually not sought to define "fairly" except to explain its structural setting in the composite phrase. This is unsurprising. And of course no dictionary definition could be adequate for the task given the intrinsic circularity with such definitions. For example, take the Macquarie Dictionary definition. First, the concept of "free from injustice" is question begging and conclusionary. It adds little to elucidate "fairly". Second, the phase "that which is legitimately sought, pursued, done, given etc." is also question begging. No content is given to what is legitimate. There is irremediable circularity unless legitimacy simply incorporates other statutory or common law/equitable normative standards of behaviour. Third, the phrase "proper under the rules" is also devoid of content unless "proper" means "in compliance with". Fourth, if one construes "fair" to include "free from dishonesty", then this all just suggests that the phrase "efficiently, honestly and fairly" should be read compendiously. 521 Could you convincingly define "fairly" by what it lacks? To say that fairly means free from bias, free from dishonesty, etc, is to stipulate necessary negative conditions. And to do so may give you some boundary conditions. But no positive conditions are stipulated. No content is given, let alone sufficient conditions. But to stipulate negative conditions may not be unhelpful. 522 Should "fairly" only be viewed from the perspective of an investor, borrower or other person interacting with the licensee? No. Fairness is to be judged having regard to the interests of both parties. Other statutory provisions may be designed to tilt the scales, but not s 912A(1)(a) and the statutory composite norm it enshrines. Disproportionate emphasis should not be given to what is the third part of a composite phrase in a manner which creates unsatisfactory asymmetry in favour of those with whom the licensee deals. This section is not a back door into an "act in the [best] interests of" obligation. Other specific provisions of the Act nicely fulfil that role. There is nothing to indicate that s 912A(1)(a) was to have that bias. 523 Finally, it ought not to be forgotten that s 912A(1)(a) is principally a licensee disciplinary command such that a breach thereof might sound in revocation of the AFSL, conditions being imposed on the AFSL or a pecuniary penalty being imposed. But that context gives rise to three points. 524 First, in such a context one would expect that the normative standard would be suitably vague and flexible. This is common when dealing with the stipulated standard of behaviour expected of licensees or regulated persons in a wide variety of contexts. But that does not invite conceptual inflation. 525 Second, one is looking at the licensee's behaviour more generally rather than with regard to any one person. After all, s 912A(1)(a) is expressed: (1) A financial services licensee must: (a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; … 526 The language is in the generality of "the financial services covered by the licence". 527 Third, and relatedly, one is not at all concerned to ascertain the boundaries and content of a cause of action or an element thereof sounding in damages in favour of an individual (cf claims for misleading or deceptive conduct or statutory unconscionability). 528 In summary, in my view it is not justifiable to take one word from a composite phrase, artificially elevate its significance and read it in a manner asymmetrically in favour of an investor. 529 As I say, on the evidence which I have set out earlier, AGM contravened s 912A(1)(a). 530 Further, in my view ASIC has made out its case against AGM concerning the other compliance contraventions dealing with s 912A(1) and s 961L as it concerns the conduct of the AMs, OT and Ozifin.

Conclusion 531 I am satisfied that the defendants engaged in each of the contraventions alleged by ASIC that I have identified in these reasons. I propose to make the declarations sought by ASIC in relation to each of those contraventions. 532 First, the questions raised by the declarations are real and not hypothetical or theoretical. Further, each of the proposed declarations discloses the basis upon which the conduct of the defendants has contravened the relevant provisions of the Corporations Act and the ASIC Act. 533 Second, ASIC had a real interest in raising the questions that are to be the subject of the declarations. As a public regulator, it is in the interests of ASIC to seek the declarations. The declarations will serve to record my disapproval of the contravening conduct and should also assist in achieving the necessary general deterrence. 534 Third, at least two of the defendants have been proper contradictors. 535 I will hear further from the parties as to the precise form of the declarations and on the balance of relief including on penalties and non-party compensation orders. I certify that the preceding five hundred and thirty-five (535) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.

SCHEDULE OF PARTIES VID 126 of 2018 Defendants Sixth Defendant: AUTHENTICATE PTY LTD (ACN 600 573 233)