Australian Securities and Investments Commission v Union Standard... [2024] FCA 1481 | Case summary

Australian Securities and Investments Commission v Union Standard... [2024] FCA 1481 | Case summary | Zoe

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ASIC v AGM Markets Pty Ltd (in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57 ASIC v MLC Nominees Pty Ltd [2020] FCA 1306; (2020) 147 ACSR 266 Australasian Brokerage Ltd v Australian and New Zealand Banking Corporation Ltd (1934) 52 CLR 430 Australia Securities and Investments Commission v Westpac Securities Administration Ltd [2019] FCAFC 187; (2019) 272 FCR 170 Australian Competition and Consumer Commission v Cornerstone Investments Aust Pty ltd (in liq) (No 4) [2018] FCA 1408 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 388 ALR 577 Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1 Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) and Others (No 3) [2020] FCA 208; (2020) 275 FCR 57 Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) [2020] FCA 1442; (2020) 277 FCR 223 Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liq) [2012] FCA 414; (2012) 88 ACSR 206 Australian Securities and Investments Commission v Cassimitis (No 9) [2016] FCA 1023; (2016) 336 ALR 209 Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd [2019] FCA 1932; (2019) 140 ACSR 561 Australian Securities and Investments Commission v Forex Capital Trading Pty Limited [2021] FCA 570 Australian Securities and Investments Commission v Forex Capital Trading Pty Ltd [2021] FCA 570 Australian Securities and Investments Commission v Get Swift Limited (Liability Hearing) [2021] FCA 1384 Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 Australian Securities and Investments Commission v Lending Centre Pty Ltd (No 3) [2012] FCA 43; (2012) 213 FCR 380 Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 2) [2020] FCA 1871 Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (Trial Ruling No 2) [2023] FCA 333 Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 147 BHP Group Ltd v Impiombato [2022] HCA 33; (2022) 405 ALR 402 Bing! Software v Bing Technologies [2009] FCAFC 131; (2009) 180 FCR 191 Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94; [2001] ATPR 46-210 Briginshaw v Briginshaw (1938) 60 CLR 336 Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 Chubb Insurance Company of Australia Ltd v Moore [2013] NSWCA 212; (2013) 302 ALR 101 Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97; (2023) 411 ALR 315 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 Cases cited: Guthrie v Spence (2009) 78 NSWLR 225 Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157 Islam v Director-General, Justice and Community Safety Directorate [2022] ACTSC 124 Jenyns v Public Curator (Qld) (1953) 90 CLR 113 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Mackay v Commercial Bank of New Brunswick (1874) LR 5 PC 394 Mayfair Wealth Partners Pty Ltd v ASIC [2022] FCAFC 170; (2022) 292 FCR 106 Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170 McGrath; in the matter of Pan Pharmaceutical Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230 Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992)110 ALR 449 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60; (2010) 269 ALR 262 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; (2012) 285 ALR 217 Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199 Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 PCH Offshore Pty Ltd v Dunn [2009] FCA 553 Productivity Partners Pty Ltd (trading as Captain Cook College) v Australian Competition and Consumer Commission [2023] FCAFC 54; (2023) 297 FCR 180 Productivity Partners v Australian Competition and Consumer Commission [2024] HCA 27 Re EncoreFX (Australia) Pty Ltd in Liq (No 2) [2021] FCA 27 Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555 Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; (2023) 277 CLR 186 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) [2014] FCAFC 50; 314 ALR 35 Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1 Sykes v Reserve Bank of Australia [1988] FCA 1405; (1998) 88 FCR 511 The Juliana (1822) 2 Dods 504 at 521; 165 ER 156 Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155; (2018) 266 FCR 631 Australian Securities and Investments Commission v Park Trent Properties Group Pty Ltd (No 3) [2015] NSWSC 1527 Waller v Freehills (2009) 177 FCR 507; [2009] FCAFC 89 Westpac Securities Administration Ltd v Australia Securities and Investments Commission [2021] HCA 3; (2021) 270 CLR 118 Yammie v Lantrak Holdings Pty Ltd (No 2) [2023] FCA 162 Bant E (ed), The Culpable Corporate Mind, Bloomsbury Publishing, (2023) p 183

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THE COURT ORDERS THAT:

The matter be listed for a further case management hearing at 9.30 am 19 February 2025, or such other date that is agreed by the parties and suitable to the Court. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT USG, EUROPEFX AND TRADEFRED AND THEIR BUSINESSES [28] USG [29] EuropeFX [34] EuropeFX [36] Marketing and promotions [38] Sourcing and "onboarding" of customers [40] Trading and account managers [45] Remuneration of account managers [49] Compliance and dispute resolution [51] EuropeFX [53] Termination of EuropeFX's CAR with USG [62] TradeFred [63] TradeFred [64] The way TradeFred provided its services [67] TradeFred [71] Losses incurred by TradeFred customers [73] Termination of the CAR and appointment of liquidators [74] CFDS AND MARGIN FX CONTRACTS [75] OVERVIEW - ALLEGED CONTRAVENTIONS AND KEY ISSUES [101] Alleged contraventions by EuropeFX [102] Personal advice contraventions [103] False, misleading or deceptive representations or conduct [110] Systemic unconscionability [118] Unconscionable conduct in respect of each of the EFX30 [121] Alleged contraventions by TradeFred [127] Personal advice contraventions [129] Misleading or deceptive representations or conduct [131] Systemic unconscionable conduct [134] Unconscionable conduct in respect of each of the TF20 [136] Alleged contraventions by USG [139] Misleading or deceptive conduct [141] Liability for the contravening conduct of EuropeFX and TradeFred [143] Failure to ensure financial services provided efficiently, honestly or fairly [144] Burden and standard of Proof [146] THE EVIDENTIARY LANDSCAPE [151] ASIC's evidence in its case against EuropeFX - overview [152] EuropeFX [159] ASIC's evidence in its case against TradeFred [168] ASIC's evidence in its case against USG [171] THE EVIDENCE OF THE EFX8 [174] Mr Wilson (EFX1) [206] Initial contact with EuropeFX and the opening of an account [209] Understanding of CFDs, Margin FX Contracts and trading risks [214] Trading and communications with EuropeFX account managers [223] Complaints [243] Ms Love (EFX2) [244] Initial contact with EuropeFX and the opening of an account [249] Understanding of CFDs, Margin FX Contracts and trading risks [262] Trading and communications with EuropeFX account managers [276] Complaints [297] Mr Kalusinghe (EFX3) [299] Initial contact with EuropeFX and the opening of an account [302] Understanding of CFDs, Margin FX Contracts and trading risks [304] Communications with EuropeFX account managers and trading [315] Complaints [338] Ms Elford (EFX4) [347] Initial contact with EuropeFX and the opening of an account [350] Understanding of CFDs, Margin FX Contracts and trading risks [357] Communications with EuropeFX account managers and trading [369] Complaints [390] Ms Nikiforos (EFX6) [391] Initial contact with EuropeFX and the opening of an account [393] Understanding of CFDs, Margin FX Contracts and trading risks [395] Communications with EuropeFX account managers and trading [402] Complaints [416] Ms Sapor (EFX8) [419] Initial contact with EuropeFX and the opening of an account [422] Understanding of CFDs, Margin FX Contracts and trading risks [426] Communications with EuropeFX account managers and trading [447] Complaints [474] Ms Boden (EFX9) [477] Ms Boden's credibility and reliability [480] Initial contact with EuropeFX and the opening of an account [489] Understanding of CFDs, Margin FX Contracts and trading risks [493] Communications with EuropeFX account managers and trading [507] Complaints [532] Ms Kuhn (EFX11) [535] Initial contact with EuropeFX and the opening of an account [538] Understanding of CFDs, Margin FX Contracts and trading risks [543] Communications with EuropeFX account managers and trading [557] Complaints [591] EVIDENCE RELATING TO THE EFX22 [594] Miriam Battersby (EFX5) [608] Paul Bonini (EFX7) [617] Darren Singleton (EFX10) [623] Xiaodong (Joan) Liu (EFX12) [628] Toni Aldous (EFX13) [634] John Isaacs (EFX14) [641] Sami Ayoub (EFX15) [648] Anne Marie Robinson (EFX16) [656] Lewis Stubna (EFX17) [663] Zina Curtin (EFX18) [668] David Grubb (EFX19) [676] Ken Geering (EFX20) [681] Nathan Lapham (EFX21) [686] Adam Cartwright (EFX22) [691] James Chircop (EFX 23) [696] Jessica Green (EFX24) [701] Ariel Larsen (EFX25) [707] Patrick Hillier (EFX26) [714] Zina Sofer (EFX27) [720] Margaret Scott (EFX28) [726] Mark Dand (EFX29) [732] Joe Costa (EFX30) [739] Summary of findings and conclusions in respect of the EFX22 [744] OTHER LAY WITNESSES IN ASIC'S CASE AGAINST EUROPEFX [752] Mr Parry [753] Evidence of "quality control" officers [757] THE EXPERT EVIDENCE [776] Mr Blundell [780] Mr Dowd [781] General observations [782] THE PERSONAL ADVICE CONTRAVENTIONS - OVERVIEW [789] Statutory provisions and relevant principles [790] ASIC's alleged categories of personal advice [809] Position Statements [810] Signal Provider Statements [814] Deposit Statements [817] Trading Strategy Statements [820] Customer objectives, financial position, or needs [823] Personal advice contraventions [827] ASIC's personal advice case against EuropeFX as originally pleaded [828] Contraventions admitted by EuropeFX [838] ASIC's narrowed personal advice case against EuropeFX [843] Findings in relation to the disputed personal advice allegations [850] Did each of the statements amount to a recommendation or statement of opinion? [851] Could each of the statements reasonably be regarded as having been intended to influence the EuropeFX customer to whom it was made in relation to a CFD or Margin FX Contract? [864] Were the statements made in circumstances where a reasonable person might expect that the EuropeFX representative had considered one or more of the EuropeFX customer's objectives, financial situation and needs? [867] Summary of findings and conclusions in relation to EuropeFX personal advice contraventions [883] Personal advice contraventions [889] ASIC's limited case in respect of personal advice contraventions by TradeFred [891] Findings [894] Summary of findings and conclusions in relation to TradeFred personal advice contraventions [901] FALSE OR MISLEADING REPRESENTATIONS AND MISLEADING OR DECEPTIVE CONDUCT CONTRAVENTIONS - OVERVIEW [902] Statutory provisions and relevant principles [903] The categories of allegedly false or misleading representations [915] Profit Representations [917] Revenue Representations [921] Money Risk Representations [926] Withdrawal Representations [930] Loss Recovery Representations [934] Equities Representations [938] Bank Account Representations [942] Plan Representations [946] Regulation Representations [950] Location Representations [954] Bonus Representations [958] FALSE OR MISLEADING REPRESENTATIONS OR MISLEADING OR DECEPTIVE CONDUCT - EUROPEFX [960] ASIC's false, misleading or deceptive statements case against EuropeFX as originally pleaded [961] ASIC's narrowed false, misleading or deceptive statements case against EuropeFX [964] Contraventions admitted by EuropeFX [969] Findings [976] Profit Representations [977] Profit Representation 5 [982] Profit Representation 7 [1012] The remaining 45 contested Profit Representations [1031] Contraventions of s 12DB(1) of the ASIC Act? [1041] Summary of conclusions in respect of the 47 contested Profit Representations [1043] Revenue Representations [1044] Money Risk Representations [1057] Withdrawal Representations [1073] Loss Recovery Representations [1085] Equities Representations [1100] Bank Account Representations [1105] Regulation Representations [1114] Location Representations [1129] Summary of findings in relation to EuropeFX false, misleading or deceptive representations [1135] MISLEADING OR DECEPTIVE REPRESENTATIONS - TRADEFRED [1139] Profit Representations [1148] Revenue Representations [1150] Money Risk Representations [1152] Withdrawal Representations [1154] Loss Recovery Representations [1157] Equities Representations [1160] Bank Account Representations [1163] Plan Representations [1168] Regulation Representations [1171] Bonus Representations [1174] Summary of findings in respect of TradeFred misleading and deceptive representations [1178] MISLEADING OR DECEPTIVE REPRESENTATIONS - USG [1179] USG [1185] Rob Clayton Report Representations [1190] Rob Clayton Representations [1194] Summary of findings in relation to USG misleading and deceptive representations [1198] UNCONSCIONABLE CONDUCT CONTRAVENTIONS - GENERALLY [1199] Statutory provisions and relevant principles [1200] UNCONSCIONABLE CONDUCT by EUROPEFX - OVERVIEW [1218] UNCONSCIONABLE CONDUCT BY EUROPEFX - SYSTEM OF CONDUCT AND PATTERNS OF BEHAVIOUR [1232] Misleading advertising and promotions [1238] "Onboarding" of inexperienced customers [1273] Inadequate training or a deliberate strategy? [1299] Profiting from customers' losses [1304] Incentives and the remuneration of account managers [1308] Patterns of behaviour of account managers [1312] Knowledge that dealing with inexperienced and vulnerable customers [1323] Inadequate explanations of concepts and risks [1331] Impermissible provision of personal advice [1344] Misleading and deceptive representations [1352] Encouraging reliance [1359] Pressure to trade and deposit funds [1363] Unfair promotions [1374] Encouraging use of inappropriate funds [1382] Impediments to withdrawals [1390] Inappropriate or unfair trading strategies [1395] Encouraging ongoing trading by reference to trading balance [1403] Inadequate training of account managers [1406] EuropeFX [1416] Unfair complaints resolution process [1427] Section 12CC ASIC Act considerations [1440] EuropeFX [1444] Conclusion - EuropeFX engaged in systemic unconscionable conduct [1457] UNCONSCIONABLE CONDUCT BY EUROPEFX TOWARDS THE EFX8 [1460] Outline of ASIC's case in respect of unconscionable conduct towards the EFX8 [1465] Outline of EuropeFX's defence or case in response [1487] Some general observations [1508] Unconscionable conduct - Ben Wilson [1513] Vulnerability [1514] Failure to ensure an adequate understanding of the financial services and risks [1520] Personal advice [1522] Misleading or deceptive representations [1524] Pressure to invest and deposit, encouraging reliance and unfair inducements [1525] Other unfair conduct [1529] Section 12CC considerations [1531] Conclusion [1533] Unconscionable conduct - Lesley Love [1535] Vulnerability [1536] Failure to ensure an adequate understanding of the financial services and risks [1540] Personal advice [1543] Misleading or deceptive representations [1545] Encouraging reliance [1546] Other unfair conduct [1549] Section 12CC considerations [1550] Conclusion [1552] Unconscionable conduct - Prasanna Kalusinghe [1554] Vulnerability [1555] Failure to ensure an adequate understanding of the financial services and risks [1560] Personal advice [1563] Misleading or deceptive representations [1566] Pressure to invest and deposit, encouraging reliance and unfair inducements [1568] Other unfair conduct [1574] Section 12CC considerations [1575] Conclusion [1577] Unconscionable conduct - Deborah Elford [1579] Vulnerability [1580] Failure to ensure an adequate understanding of the financial services and risks [1583] Personal advice [1588] Misleading or deceptive representations [1589] Pressure to invest and deposit, encouraging reliance and unfair inducements [1590] Other unfair conduct [1592] Section 12CC considerations [1594] Conclusion [1596] Unconscionable conduct - Jennifer Nikiforos [1598] Vulnerability [1599] Failure to ensure an adequate understanding of the financial services and risks [1604] Personal advice [1606] Reliance, encouraging reliance and pressure to invest [1607] Other unfair conduct [1610] Section 12CC considerations [1613] Conclusion [1615] Unconscionable conduct - Sandrine Sapor [1617] Vulnerability [1618] Failure to ensure an adequate understanding of the financial services and risks [1623] Personal advice [1627] Misleading or deceptive representations [1628] Reliance, encouraging reliance and pressure [1629] Risky trading strategies [1631] Other unfair conduct [1632] Section 12CC considerations [1634] Conclusion [1636] Unconscionable conduct - Julie Boden [1638] Vulnerability [1639] Failure to ensure an adequate understanding of the financial services and risks [1648] Personal advice [1650] Misleading or deceptive representations [1651] Encouraging reliance [1652] Other unfair conduct [1657] Section 12CC considerations [1659] Conclusion [1661] Unconscionable conduct - Leanne Kuhn [1663] Vulnerability [1664] Failure to ensure an adequate understanding of the financial services and risks [1670] Personal advice [1673] Misleading or deceptive representations [1676] Pressure to invest and deposit, encouraging reliance and unfair inducements [1677] Other unfair conduct [1680] Section 12CC considerations [1682] Conclusion [1684] Conclusion [1686] UNCONSCIONABLE CONDUCT BY TRADEFRED - SYSTEM OF CONDUCT AND PATTERNS OF BEHAVIOUR [1687] UNCONSCIONABLE CONDUCT BY TRADEFRED TOWARDS THE TF4 [1701] OTHER CONTRAVENTIONS BY USG [1714] USG [1715] Failure to ensure financial services provided efficiently, honestly and fairly [1726] Applicable statutory provisions and principles [1729] Relevant facts [1736] Were USG's actions illegal as a matter of Chinese law? [1745] Was it illegal for USG's Chinese customers to trade in USG's financial products? [1760] The territoriality issue - can the provision of financial services or financial products to customers who reside in a foreign jurisdiction found a contravention of s 912A(1)(a)? [1765] Can the provision of financial services in contravention of a foreign law result in a contravention of s 912A(1)(a)? [1794] Did USG ensure that its financial services were provided "efficiently, honestly and fairly"? [1800] SUMMARY OF FINDINGS AND CONCLUSIONs [1802] Appendix A - Defined Terms Appendix B - Key Individuals & Entities

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WIGNEY J:

This case concerns the conduct of three Australian companies that operated on the fringes of the financial services market between about 2017 and early 2020. Those three companies provided their customers, many of whom had little or no prior investment or securities trading experience, with a market and trading platform through which they could trade in highly risky over-the-counter derivative products known as contracts for difference (CFDs) and margin foreign exchange contracts (Margin FX Contracts). One of the companies, Union Standard International Group Pty Ltd (USG) held an Australian Financial Services Licence (AFSL). The other two companies, Maxi EFX Global AU Pty Ltd (EuropeFX or EFX) and Bright AU Capital Pty Ltd (TradeFred) were USG's corporate authorised representatives. Many, if not most, of the day-to-day operations of EuropeFX and TradeFred were outsourced and performed by entities or individuals who were located overseas.
USG, EuropeFX and TradeFred profited handsomely from their derivatives trading business. Most of their customers did not.
The Australian Securities and Investments Commission (ASIC) commenced an investigation into the conduct of USG, EuropeFX and TradeFred in 2019 and in due course commenced this proceeding. ASIC alleged that each of the companies contravened various provisions in the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
Specifically, ASIC alleged that EuropeFX: contravened s 911A of the Corporations Act on numerous occasions by providing personal advice to its customers in circumstances where it was only permitted to provide general advice; contravened ss 12DA and 12DB of the ASIC Act and ss 1041E and 1041H of the Corporations Act on numerous occasions by making false or misleading representations to its customers, or engaging in misleading or deceptive conduct, in connection with the provision of financial services; contravened s 12CB of the ASIC Act (by virtue of s 12CB(4)(b) of the ASIC Act) by engaging in a system of conduct or pattern of behaviour which was unconscionable; and contravened s 12CB of the ASIC Act on multiple occasions by engaging in unconscionable conduct in relation to certain identified customers. ASIC ultimately did not press the Court to make findings in relation to the alleged contraventions of ss 1041E and 1041H of the Corporations Act.
In relation to TradeFred, ASIC alleged that it: contravened s 911A of the Corporations Act on numerous occasions; contravened ss 12DA and 12DB of the ASIC Act on numerous occasions; and contravened s 12CB of the ASIC Act, both by engaging in a system of conduct or pattern of behaviour which was unconscionable, and by engaging in unconscionable conduct towards certain identified customers.
In relation to USG, ASIC alleged that it: contravened ss 12DA and 12DB of the ASIC Act on numerous occasions; separately contravened s 911A of the Corporations Act and ss 12DA and 12DB of the ASIC Act in respect of each of EuropeFX's and TradeFred's contraventions of those provisions on the basis that EuropeFX and TradeFred were acting as USG's agents when they made the impugned statements and representations; contravened s 12CB of the ASIC Act in respect of each of EuropeFX's and TradeFred's contraventions of that provision, again on the basis that EuropeFX and TradeFredwere acting as USG's agent when they engaged in the impugned conduct; and contravened s 912A(1)(a) of the Corporations Act by failing to do all things necessary to ensure that the financial services covered by its AFSL were provided efficiently, honestly and fairly.
The proceeding was actively and vigorously defended by EuropeFX, though EuropeFX did ultimately admit some of the alleged contraventions of s 911A of the Corporations Act and ss 12DA and 12DB of the ASIC Act.
USG and TradeFred did not actively defend the proceeding insofar as the allegations against them were concerned. That is because both companies were wound up before the matter proceeded to trial. The Court granted ASIC leave to proceed against USG and TradeFred pursuant to ss 471B and 500(2) of the Corporations Act respectively: see Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 2) [2020] FCA 1871. Submitting notices were filed on behalf of both companies. The Court did, however, hear submissions by amicus curiae in respect of the allegation that USG contravened s 912A of the Corporations Act.
ASIC's case against EuropeFX, TradeFred and USG was large and complex. ASIC adduced a huge volume of evidence. The evidence included, in summary: affidavit evidence from several customers of EuropeFX and TradeFred; affidavit evidence from two former employees of EuropeFX; expert opinion evidence from a person with specialised knowledge in respect of derivative markets in Australia; and voluminous documentary evidence, including business records of the three companies in question and hundreds of recordings and transcripts of telephone conversations between USG, EuropeFX and TradeFred sales and account representatives and their customers.
ASIC's case in respect of the alleged contraventions of s 911A of the Corporations Act by EuropeFX and TradeFred mainly hinged on the characterisation of statements made by representatives of EuropeFX and TradeFred during their telephone conversations with the customers. The critical issue was whether those statements, considered in context, were made in circumstances where a reasonable person might expect the representatives to have considered the customers' circumstances, financial situation and needs. ASIC initially alleged that EuropeFX, TradeFred and USG contravened s 911A on thousands of occasions. Ultimately, however, it agreed to narrow its case and require the Court to make findings only in relation to just over a hundred statements by EuropeFX (in addition to those that it admitted constituted personal advice) and twenty statements by TradeFred.
ASIC's case in respect of the alleged contraventions of ss 12DA and 12DB of the ASIC Act also largely hinged on the characterisation of statements or representations made by representatives of EuropeFX, TradeFred and USG during their telephone conversations with customers. ASIC alleged that the representatives made well over a thousand representations that fell within various defined categories, many of which related in some way to the profits or income that customers might expect to earn by trading in CFDs and Margin FX Contracts, or the nature and extent of the risks involved in such trading, or the circumstances or manner in which the companies conducted their business. ASIC's case was that representations that fell within those defined categories were false, misleading or deceptive for various reasons. ASIC initially alleged that the false, misleading or deceptive representations not only constituted contraventions of ss 12DA and 12DB of the ASIC Act, but also ss 1041E and 1041H of the Corporations Act. ASIC ultimately agreed to limit its case to contraventions of ss 12DA and 12DB of the ASIC Act. It also agreed to press the Court to make findings in relation to a much smaller number of representations.
Perhaps the most contentious and complex aspect of ASIC's case was its allegation that EuropeFX engaged in unconscionable conduct, both by way of a system of conduct or pattern of behaviour and in respect of certain identified customers. ASIC relied on affidavit evidence from eight individual customers of EuropeFX. Those customers, who were referred to during the proceeding as the EFX8, were extensively cross-examined. ASIC tendered all the recordings and transcripts of telephone conversations between EuropeFX representatives and the EFX8, and all the transcripts and recordings of telephone conversations between EuropeFX representatives and another 22 customers (the EFX22), that had been produced to it during its investigation. ASIC did not adduce affidavit evidence from any of the EFX22 and they were not called or made available as witnesses in the proceeding. The EFX8, together with the EFX22 customers, were referred to during the proceeding as the EFX30. ASIC relied on the evidence of and relating to the EFX30 both in relation to its systemic unconscionability case, and its case of unconscionable conduct in respect of the customers themselves.
As has already been noted, ASIC adduced expert opinion evidence from a witness with specialised knowledge in respect of derivative markets in Australia, including the markets for CFD and Margin FX Contracts. EuropeFX also adduced expert opinion evidence from a person who had specialised knowledge in respect of securities trading. The expert evidence addressed several questions and issues relevant to ASIC's case of unconscionable conduct. It also addressed questions relevant to some of the allegedly false or misleading representations.
ASIC also adduced evidence from two former Australian-based employees of EuropeFX. Those employees did not engage directly with EuropeFX's customers, but rather were involved in monitoring the conversations between EuropeFX representatives and their customers for the purposes of quality control. EuropeFX ultimately did not adduce evidence from any of its representatives who dealt with the EFX30 or were otherwise involved in the conduct of its business.
EuropeFX vigorously maintained that ASIC had failed to prove that it had engaged in an unconscionable system of conduct or pattern of behaviour, or that its conduct in respect of the EFX30 was unconscionable.
ASIC's principal case was that EuropeFX engaged in unconscionable conduct by way of its system or systems of conduct and patterns of behaviour. It initially claimed that EuropeFX engaged in unconscionable conduct in relation to each of the EFX30, but ultimately agreed to narrow its case in respect of the identified customers to the EFX8, at least if the Court found that EuropeFX had engaged in systemic unconscionable conduct.
ASIC's case that TradeFred engaged in unconscionable conduct was similar to its case against EuropeFX. It was, however, slightly narrower in scope and not as contentious, particularly given that TradeFred filed a submitting appearance.
The parties agreed, and the Court ordered, that issues concerning liability be heard and determined separately and before any issues relating to relief. This judgment accordingly only addresses whether USG, EuropeFX and TradeFred contravened the Corporations Act and ASIC Act as alleged by ASIC.
I will address the multitude of complex issues that are thrown up by ASIC's case in the following manner.
I will first provide a short summary of the facts and evidence concerning the general nature of the businesses conducted by USG, EuropeFX and TradeFred. It will, in that context, be necessary to provide a short description of the nature of CFDs and Margin FX Contracts, including the risks involved in trading in derivatives of that nature. I will then provide a short outline of ASIC's case against EuropeFX, TradeFred and USG and the key issues that must be addressed and determined in respect of the alleged contraventions.
After providing an overview of the evidence adduced by the parties, I will then summarise the key features of the evidence of and relating to the EFX8. I will then summarise the evidence relating to the EFX22, though in considerably less detail than the evidence of the EFX8. It is necessary to consider the evidence of and relating to the EFX30 at the outset because it is relevant to most of the alleged contraventions. It will, however, be necessary to revisit some of the evidence relating to both the EFX8 and the EFX22 in the context of the specific alleged contraventions by EuropeFX, particularly the unconscionable conduct allegations.
Having considered the evidence of the EuropeFX and TradeFred customers, I will then briefly address the evidence of the other lay witnesses called by ASIC in its case against EuropeFX. I will also provide an overview of, and make some general findings concerning, the evidence of the expert witnesses called by ASIC and EuropeFX. Specific aspects of the evidence of the expert witnesses will also be considered in more detail when addressing the specific alleged contraventions.
The first group of alleged contraventions which will be considered will be the personal advice contraventions by EuropeFX and TradeFred. The second group of alleged contraventions which will be considered will be the misleading or deceptive representation contraventions by EuropeFX, TradeFred and USG. It is necessary to consider those groups of contraventions first because some of the factual findings made in the context of those alleged contraventions are likely to be relevant to the allegations concerning unconscionable conduct. ASIC alleged, for instance, that the indicia of unconscionable conduct on the part of EuropeFX included the making of many personal advice statements and misleading or deceptive representations to customers. The alleged personal advice and false or misleading representations contraventions by TradeFred will be dealt with in brief terms given that it did not file a defence or adduce any evidence.
I will then address the allegations of unconscionable conduct. I will first address the allegation of systemic unconscionability on the part of EuropeFX. In addressing that allegation, it will be necessary to consider, among other things, whether the evidence as a whole, including the of and relating to the EFX8, and the evidence relating to the EFX22, supports a finding that EuropeFX engaged in patterns of behaviour and systems of conduct that were, in all the circumstances, unconscionable. Having addressed ASIC's case of systemic unconscionability, I will then consider and address whether ASIC made out its case that EuropeFX engaged in unconscionable conduct in respect of each of the EFX8. The allegations of unconscionability on the part of TradeFred will then be addressed, though again fairly briefly given the absence of any defence on the part of TradeFred.
Finally, I will address ASIC's allegation that USG was liable in respect of contraventions by both EuropeFX and TradeFred, as well as ASIC's allegation that USG contravened s 912A(1) of the Corporations Act by failing to do all things necessary to ensure that the financial services covered by its AFSL were provided efficiently, honestly and fairly.
To assist the comprehension of these reasons a list of defined or technical terms and abbreviations is provided in appendix A, and a list of relevant individuals and entities is provided in appendix B.
References in these reasons to a dollar amount refers to Australian dollars, unless an alternate currency is specifically referenced.

[19]

USG

USG was a corporation incorporated and registered in Australia. Its directors at various times during the period from 2017 to 2019 were Mr James Clinnick, Mr Anthony Alexander, Mr John Martin, Mr Darren Burns, Ms Anya Victoria and Mr Soe Hein Minn. The evidence indicated that its Chief Executive Officer during that period was Mr Shay Zakhaim. Mr Martin was USG's Responsible Manager and Head of Compliance.
USG obtained an AFSL on 1 February 2016. The AFSL authorised USG, in relation to retail and wholesale clients, to: provide general financial product advice for derivatives and foreign exchange contracts; to deal in those financial products; and to make a market in relation to those financial products. The AFSL did not permit USG to provide personal financial advice. The meaning of personal financial advice, in that context, is discussed in more detail later.
USG authorised EuropeFX and TradeFred to provide certain specified financial services on its behalf. A company who is so authorised is generally called a corporate authorised representative (or CAR). It is unclear precisely when EuropeFX and TradeFred were appointed as USG's CARs, though it appears that TradeFred was appointed between about July and September 2017, and EuropeFX was appointed by at least March 2018.
The business conducted by USG included dealing in derivatives by issuing and making a market for CFDs and Margin FX Contracts. It was common ground that, in conducting that business, USG dealt (within the meaning of s 766C of the Corporations Act) in financial products (within the meaning of Pt 7.1 Div 3 of the Corporations Act and s 12BAA of the ASIC Act) and carried on a financial services business.
The nature and features of CFDs and Margin FX Contracts are discussed in more detail later. It suffices at this point to note that USG was the principal and counterparty to all positions opened not only by its own customers, but also EuropeFX's and TradeFred's customers, by reason of, and pursuant to the terms of, Product Disclosure Statements (PDS) issued by it, EuropeFX and TradeFred. As the counterparty to all the positions, and by virtue of its arrangements with EuropeFX and TradeFred, USG generated revenue when its customers and EuropeFX's and TradeFred's customers made losses as a result of closing positions that had moved against them. The basis upon which USG, EuropeFX and TradeFred generated revenue and profits is discussed in more detail later.

[23]

Sourcing and "onboarding" of customers

EuropeFX also outsourced the sourcing and registration of new customers to a company called Global Win Solutions Ltd, a company based in Belize, which provided call centre services. The evidence indicated, or supported the inference, that it was sales representatives employed or retained by Global Win who first interacted by telephone with prospective customers of EuropeFX. They were responsible for the process of registering or "onboarding" new customers.
The evidence concerning the on-boarding and registration process will be considered in more detail later in these reasons in the context of the unconscionability allegations. As has already been noted, the evidence suggested that prospective customers who had clicked on or otherwise responded to online or social media advertisement or promotions operated by Affilimedia, BAFF or Bolacom, subsequently received a telephone call from someone who said they were from EuropeFX. It may be inferred that such persons were sales representatives employed or retained by Global Win. Those representatives generally endeavoured to persuade prospective customers to register with EuropeFX and to deposit funds for the purpose of trading.
If the customer was persuaded to register and open a trading account, the online registration process required the customer to complete an online questionnaire. That questionnaire required the customer to provide information concerning their personal and financial circumstances, including their income, their financial resources and their experience, if any, in respect of trading in various financial products, including CFDs. The questionnaire also required the customer to tick a box indicating that they had read a risk disclosure notice and had read and understood various other documents, including EuropeFX's PDS and Terms of Business.
The evidence concerning the completion of the online questionnaire by prospective EuropeFX customers will be considered in detail later in these reasons. Suffice it to say at this point that the evidence concerning the "onboarding" of prospective customers by Global Win sales representatives, acting on behalf of EuropeFX, supports the inference that the representative rushed the customer through those parts of the questionnaire which involved the customer acknowledging that they had read and understood the risk disclosure notice and PDS. Indeed, the evidence supports the inference that the customer was often discouraged from reading, or at least not encouraged to read, those documents. Rather, they were encouraged to simply tick the boxes and were told that a EuropeFX account manager would later explain everything to them. The overall inference that was available from the evidence was that the onboarding process was intended to encourage, or at least not discourage, prospective customers to open a trading account, even if they had no prior knowledge of or experience trading in CFDs, Margin FX Contracts, or any similar financial products. At the very least, the process was undiscriminating in that regard.
As will be seen, virtually none of the EFX8 or the EFX22 had any relevant knowledge of, or relevant experience in relation to, CFDs, Margin FX Contracts, or any similar financial products. Indeed, most had no, or very little, financial or investment experience at all. They were all nevertheless encouraged to open EuropeFX trading accounts.

[24]

Trading and account managers

Perhaps most significantly, the evidence indicated that EuropeFX outsourced all trading and trading account interactions with its customers to a company called XYX Media Technologies Ltd, a company based in Israel which provided call centre services. The overwhelming inference available from the evidence was that it was employees of XYX, mostly residents of Israel, who performed duties as "account managers" in respect of EuropeFX's customers. Among other things, they spoke with EuropeFX customers over the telephone about their trading and trading activities. As has already been adverted to, much of the evidence tendered by ASIC in its case against EuropeFX comprised recordings and transcripts of telephone conversations between account managers and customers. It may be inferred that those account managers were employees of XYX who were acting on behalf of EuropeFX pursuant to the agreement between EuropeFX and XYX. EuropeFX did not adduce any evidence to counter or rebut that inference. While the account managers may have been employed by XYX, they will generally be referred to throughout these reasons as EuropeFX representatives or account managers given that they were acting for and on behalf of EuropeFX in their interactions with EuropeFX customers.
The evidence concerning the interactions between the account managers and EuropeFX customers, in particular the EFX8 and the EFX22, will be addressed in considerable detail later in these reasons. It suffices at this point to note that the account managers interacted extensively with the customers about their trading throughout the period that they traded with EuropeFX. Not surprisingly, given their lack of relevant knowledge and trading experience, the customers were heavily reliant on the account managers.
The evidence clearly indicates that the account managers frequently and routinely gave the customers advice or recommendations about trades they should place (CFD or Margin FX buy or sell positions they should open or close), often based on information said to have been gleaned from third-party market information websites. The recommendations were frequently accompanied by promises, assurances or at least suggestions about the profits the customers could expect to earn if they carried out the recommended trade. Those recommendations often escalated to the point where the customers were effectively being pushed or pressured to open more and larger trades. The customers were also frequently pressured to deposit further money into their trading accounts, either to allow more trading, or to provide necessary margin for their existing positions. As will be seen, the recommendations in most, if not all, cases plainly constituted personal advice, even though EuropeFX was only authorised to provide general advice to its customers. As will also be seen, the account managers also frequently made false, misleading or deceptive representations to EuropeFX customers about matters relating to their trading or the financial services provided by EuropeFX.
The conduct of the EuropeFX account managers lies at the heart of ASIC's case that EuropeFX engaged in unconscionable conduct, both systemically and towards the relevant identified customers. ASIC contended that the account managers, among other things: failed to take any, or any reasonable, steps to ensure that the customers had a sufficient understanding of the relevant financial services and products and the risks of trading before actively encouraging them to trade; gave each of the EFX30 personal advice in circumstances where they knew they were not permitted to do so; made misleading statements to, or engaged in misleading or deceptive conduct towards, the customers; fostered and encouraged the customers to blindly rely on them and follow their recommendations; on occasion pressured each of the EFX30 to trade and deposit more funds into their trading accounts, sometimes by employing unfair tactics and promotions; and often encouraged the customers to engage in risky trading strategies.

[27]

EuropeFX's revenue and income stream

ASIC submitted that the evidence established that EuropeFX's revenue was primarily derived from and calculated by reference to the aggregate net losses incurred by its clients. I accept that submission.
The documentary evidence tendered by ASIC indicated that EuropeFX's revenue from its business was primarily derived from fees payable and paid to it pursuant to the terms of its CAR agreement with USG. The CAR agreement provided, among other things, that EuropeFX was to be paid between 86% and 90% of USG's profits derived from trades by EuropeFX customers who were allocated to USG's B Book. Trades by EuropeFX customers in USG's B Book were not hedged by default by USG, whereas trades in USG's A Book were hedged with a hedging counterparty. While provision was also made for the calculation of the fees payable to EuropeFX by referance to lots traded by customers in USG's "A Book", the evidence indicated that the overwhelming majority (95% to 99%), if not all, of EuropeFX's customers were allocated to USG's B Book.
As noted earlier, because USG was the counterparty to all the trades, it derived profit from trades by customers in the B Book when those customers made a loss in respect of those trades. That fact, combined with the fact that, as just noted, EuropeFX received fees calculated on the basis of a very large percentage of USG's profits derived from trading by virtually all of EuropeFX's customers, meant that EuropeFX's revenue was essentially derived from, or based on, the net trading losses incurred by its customers. In short, the more its customers lost, the more revenue it earned.
That conclusion was supported by relevant EuropeFX financial records obtained by ASIC during its investigation. An analysis of those documents indicated that EuropeFX's monthly income invariably corresponded with the net amount lost by its customers. Conversely, in those very rare months when EuropeFX's customers, in aggregate, made profits, USG invoiced EuropeFX, and EuropeFX paid USG, a "fee" representing those net profits. It should also be noted in this context that the losses suffered by EuropeFX's customers, and the income derived by EuropeFX as a result of those losses, were substantial. For example, in the period from 1 August 2018 to 17 December 2019, the total net loss suffered by EuropeFX customers was $69,894,004. It may be inferred that during that period EuropeFX derived fees corresponding with those losses.
EuropeFX contended that the evidence did not support the proposition that its revenue was primarily derived from the losses made by its clients. It submitted that the allocation of customers between USG's A Book and B Book was a matter for USG, that there was no evidence that EuropeFX was aware of USG's allocation of its customers between its A Book an B Book, that the evidence did not clearly establish that all, or virtually all, if its customers were allocated to the B Book, and that it was possible that USG may have engaged in some manual or internal hedging in its B Book.
In my view, those submissions have no merit. There was some documentary evidence which indicated that EuropeFX was able to arrange for its customers to be assigned to USG's A Book, but there was no evidence to suggest that it put any such arrangements into effect. I am also satisfied that the evidence supports the inference that Mr Sasso, and most likely other EuropeFX officers were well aware of the source of its revenue and how it was calculated, as one might expect. EuropeFX's own financial records reflected the fact that most, if not all, of its customers were allocated to USG's B Book and that EuropeFX's revenue had been calculated on that basis. The evidence indicated that Mr Sasso was involved in producing or approving EuropeFX's accounts and financial records. It may plainly be inferred that he was aware of what they recorded.
The suggestion that USG might have engaged in some manual or internal hedging in its B Book is not only somewhat beside the point, but is in any event at best speculative and unsupported by any evidence. It is also contrary to the opinion evidence of ASIC's expert witness, Mr John Blundell, which I accept, that retail CFD businesses like EuropeFX do not have a client base sizable enough to internally hedge by offsetting and internalising client trades.
EuropeFX disputed that its financial records supported the inference that it derived its income from the losses incurred by its clients. It appeared to accept that its financial records indicated that the net losses of its retail clients equalled its net income or revenue, though it characterised that equivalence as an "arithmetical coincidence". In my view, the arithmetical equivalence is no coincidence. EuropeFX also argued that if, as ASIC contended, 95-99% of its customers had been allocated to USG's B Book, it followed that 1 to 5% of its customers must have been in USG's A Book. It followed, so it was submitted, that the fact that its own financial records indicated that its net revenue equalled the net losses of its retail clients, meant that the financial records were either incorrect, or it had consistently been overpaid by USG. In EuropeFX's submission, the suggestion that it was overpaid by USG was implausible. I am unable to see any merit in those submissions. The more plausible or probable inference is that either all EuropeFX's customers were allocated to the B Book, or that for whatever reason it was remunerated on that basis. In any event, even if it was the case that 1-5% of EuropeFX's customers were in USG's A Book, which appears doubtful, it nevertheless still follows that the vast bulk of its revenue was derived directly from the losses incurred by its clients.
It should finally be noted that the inference that EuropeFX's revenue was derived directly from the losses incurred by its client may be more safely drawn given that EuropeFX did not call Mr Sasso, or any of its other employees or agents, to give evidence concerning the source of its revenue. Mr Sasso was EuropeFX's sole director and was an Australian resident. He was a qualified accountant and was responsible for EuropeFX's financial statements. He could readily have given evidence concerning the sources and calculation of EuropeFX's revenue. He was not called. EuropeFX conceded that a Jones v Dunkel inference (cf Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298) was available in respect of its failure to call Mr Sasso. In my view, the inference that EuropeFX profited from its client's losses was overwhelming and inescapable in all the circumstances.

[31]

The way TradeFred provided its services

Like EuropeFX, TradeFred outsourced almost all its day-to-day business activities to offshore service providers.
There is evidence that TradeFred outsourced its "sales support, customer account data and marketing activities" to TradeMagnet UK Limited, a company incorporated in England and Wales. TradeMagnet was a subsidiary of TradeFred Holdings. The "marketing activities" under the agreement between TradeFred and TradeMagnet included "engaging a third party to provide sales services" on TradeFred's behalf. A company named Capital Unit Media Limited appears to have been engaged to provide those sales services. The evidence suggested that Capital Unit was based in Israel. The sales services provided by Capital Unit included the provision of sales representatives who contacted prospective customers and encouraged them to open accounts, and account managers who engaged with those customers in respect of their trading.
The sales representatives who were retained to provide sales services on behalf of TradeFred received bonuses of up to US$75 per client depending on how many new clients they converted. A sales representative who signed up between 8 and 15 new clients would receive a bonus of $20 per client and a sales representative who signed up more than 60 clients would receive a bonus of $75 per client.
The evidence suggested that the individuals who provided account management services to TradeFred customers on behalf of TradeFred were, like the EuropeFX account managers retained by XYX, most likely based in Israel. Like the account managers who were retained to act on behalf of EuropeFX, the account managers who were retained to provide services on behalf of TradeFred earned commissions which were based on a percentage of the net deposits made by the customers with whom they engaged. They received commission of 2.5% of the customer's net deposits if the net deposits were between $10,000 and $29,999 and up to 6.5% commission if the customer's net deposits were between $500,000 and $749,000.

[35]

CFDS AND MARGIN FX CONTRACTS

As has already been made clear, the businesses conducted by USG, EuropeFX and TradeFred primarily, if not exclusively, involved trading in over-the-counter derivatives known as CFDs and Margin FX Contracts. Those financial products are both complex and inherently risky in nature.
A CFD, put simply, is a contract between a market-maker and a trader to exchange, at the closing of the contract, the difference in price between the opening price and the closing price in the underlying asset, multiplied by the number of units of that asset specified in the contract. The underlying asset might be a commodity (such as a barrel of oil or a quantity of gold) a stock market index (such as the All Ordinaries, ASX 200 or Dow Jones) or shares traded on a securities market, or bonds. The trader does not acquire any interest in the underlying asset. Rather, the trader takes a position on whether the price of the underlying asset will increase or decrease over time.
The issuer or market maker for a CFD makes the market by taking the opposite position to the trader. The market maker also effectively sets the prices, known as "bid" and "ask" prices. The bid price is the price at which the market maker will sell the particular CFD to a trader. The ask price is the price at which the market maker will buy the CFD from a trader. There is generally a difference between the bid and ask prices and the price of the underlying asset on the exchange on which the underlying asset is traded. The difference is referred to as the "spread".
A trader opens a position in respect of a CFD by either acquiring it at the then bid price, or selling it at the then ask price. The trader closes the position by trading in the opposite position to the original trade: selling the CFD at the new ask price (where the original trade was to acquire the CFD), or buying the CFD at the new bid price (where the original trade was to sell the CFD). The trader is thereby exposed to movements in the value of the underlying asset during the period when the trader's position is open. If the original trade was to buy a CFD and the price of the underlying asset increases by the time the position is closed, the trader will make a profit, subject to the payment of any applicable commissions or other fees. If, on the other hand, the price of the underlying asset decreases before the position is closed, the trader will make a loss.
Margin FX Contracts are very similar to CFDs and operate in more or less the same way. The only material difference is that, in the case of a Margin FX Contract, instead of agreeing to exchange the difference between the opening and closing price of an underlying asset, the parties agree to exchange the difference between the opening and closing value of one currency relative to the other. Examples of common "currency pairs" that may be the subject of a Margin FX Contract are the US Dollar against the British Pound and the US Dollar against the Euro.
Both CFDs and Margin FX Contracts are highly leveraged. That is because the trader is only required to outlay or deposit a small fraction of the actual price or value of the underlying asset or currency to open the position. The trader, however, is exposed to the totality of the movement in the price of the underlying asset or currency. In that way, a relatively small outlay may generate a relatively large profit. Equally, however, that small outlay might generate a relatively large loss.
Because CFDs and Margin FX Contracts are highly leveraged, the customer is ordinarily required to deposit funds in the dealer's trading account with the dealer which provide a sufficient margin to cover any potential losses. The amount that is required to be maintained in the trading account is generally referred to as the margin or margin level. If the market moves against the trader's open position and the trader has an insufficient margin, the dealer may make a margin call and require the trader to deposit more funds. Worse still, if the margin call is not met, or the market moves significantly against the trader, the trader's position may be automatically closed by the dealer and the trader's loss crystalised. Typically, all the funds in the trader's deposit account are exposed to adverse price movements when the trader has an open position.
EuropeFX's PDS for CFDs described them in the following terms: A Contract for Difference ("CFD") is a leveraged financial instrument that changes in value by reference to fluctuations in the price of an underlying thing such as the price of gold, silver or an index (such as the S&P500/UK 100 Index). We refer to those underlying things as "instruments". When trading CFDs, you and USG agree to exchange the difference in value of the CFD between when the CFD is opened and when it is closed. You will either be entitled to be paid an amount of money (if the value of the CFD has moved in your favour) or will be required to pay an amount of money (if the value of the CFD has moved against you). You can keep a CFD trade open for as long as you are able to meet your margin requirements (including a minimum Margin Level). CFD transactions are closed by you taking an offsetting, opposite position, or by us/USG under our Forced Liquidation procedures where applicable.
EuropeFX's PDS for Margin FX Contracts described them in the following terms: Margin FX trading contracts are agreements between you and USG which allow you to make a gain or loss, depending on the movement of underlying currencies. The Contract derives its value from underlying currencies (usually referred to as a currency pair) which is never delivered to you, and you do not have a legal right to, or ownership of such underlying currencies. Rather, your rights are attached to the contract itself. The money you will receive will depend on whether the currency you choose moves in your favor. If it does, then you will make a gain and your account will be credited. If it does not, then you will make a loss and your account will be debited. The contracts only require a deposit which is much smaller than the contract size (this is why the contract is "margined" or "leveraged").
While it is possible to describe CFDs and Margin FX Contracts in conceptually simple terms, there could be little doubt that they are, in practice, very complex financial products which carry a high degree of risk.
As for the complexity of those financial products, ASIC's expert witness, Mr Blundell, who had relevant training and experience in relation to CFDs and Margin FX Contracts, expressed the following opinion: Having been employed by a margin FX and CFD issuer for over the past seven years, I firmly believe that Margin FX and CFDs are complex financial products. They are derivatives that use leverage to potentially earn a high amount of profit on each transaction but are also high-risk products than can equally generate large losses on any transaction. Anyone trading Margin FX and CFDs must have a strong understanding of leverage, margin and the effect that price movements in the underlying asset have on margin level.
EuropeFX maintained that CFDs were not complex instruments. EuropeFX's submission that CFDs and Margin FX Contracts were not complex appeared to be based on the proposition that CFDs can be relatively easily traded and that it is only the complex "back-end" processes that are complex. I reject that submission. If the expression "back-end" processes or operations is intended to refer to or include, for example, the identification and calculation of figures for the leverage, margin, total margin, equity and net equity referable to a CFD or Margin FX Contract or a customer's CFD or Margin FX trading account, it can readily be accepted that the processes are very complex. Only someone with some level of training, knowledge and experience in respect of CFDs and Margin FX Contracts would be able to readily understand those processes.
I do not, however, accept the proposition that CFDs can be easily accessed and traded. Indeed, the evidence indicated that most of EuropeFX's customers, and the EFX8 in particular, could not access or trade CFDs with ease, at least until they had been trading for some time. Rather, in most cases the EuropeFX account managers effectively had to tell the customers exactly what to do to "access" and open or close a position in respect of a CFD or Margin FX. That often occurred in circumstances where the account manager had access to or visibility of the customer's trading screen and told the customer where to move the mouse, what icons to click on and what numbers to enter in fields on the trading screen. Most of the customers simply did as they were told.
A screenshot of EuropeFX's MT4 trading platform was in evidence. It could not seriously be suggested that someone with little or no trading experience could readily comprehend all or the information on that platform, or could readily navigate through it. Indeed, the trading screen may as well have been in hieroglyphics. It included figures for "balance", "equity", "margin", "free margin" and "margin level". An inexperienced investor, however, would effectively have little or no ability to ascertain how those figures were calculated, or what they represented or meant. Indeed, in cross-examination, even EuropeFX's expert witness, Mr George T Dowd III, had some difficulties identifying what the figure for "balance" took into account. He also accepted that there was no way that the figure for "margin" on the screen could be calculated using just the information on the screen and conceded that he would have needed a calculator to work out how the figure for "equity" was calculated.
More fundamentally, the mere fact that a customer might be able to easily access and trade CFDs does not mean that CFDs and Margin FX Contracts are not complex. The fact that a customer might be able to open or close a particular position in a CFD or Margin FX Contract does not mean that they know what they are doing, or understand exactly what the implications of opening or closing that position may be. Indeed, a customer might be able to trade in CFDs and Margin FX Contracts without really knowing what they are doing. The effect of Mr Blundell's evidence, which I accept, is that a customer cannot knowingly, safely or successfully trade in CFDs or Margin FX Contracts unless the customer has a sound knowledge or understanding of concepts such as leverage, margin and the effect that price movements in the underlying asset or currencies have on margin level. A customer who trades without a sound understanding of those matters is, to put it colloquially, flying blind. As will be discussed in detail below, the evidence revealed that most of the EFX30 were flying blind during most, if not all, of the time that they traded in CFDs and Margin FX Contracts.
Mr Dowd, an experienced discretionary foreign exchange, stock index and commodity derivatives trader, expressed the view that CFDs and Margin FX Contracts were "simple products to understand and trade" and that the "associated profit and loss calculations require only simple math". I will discuss my comparative assessment of the opinion evidence of Mr Blundell and Mr Dowd, where their opinions differ, in more detail later in these reasons. It suffices at this point to note that I do not accept Mr Dowd's opinion concerning the simplicity of CFDs and Margin FX Contracts. His evidence in that regard was plainly given from the perspective of a highly experienced institutional investor with expertise in respect of derivatives. It may, of course, be accepted that highly educated, trained, experienced and financially sophisticated traders of derivatives, in particular institutional traders, might consider that CFDs are not particularly complex. It is, however, doubtful that persons with little or no training or experience in relation to derivatives or similar financial products would easily or quickly grasp the nature and essential features of CFDs and Margin FX Contracts. It is particularly unlikely that inexperienced or financially unsophisticated persons would be able to easily or quickly grasp fundamental concepts such as leverage and margin. A sound understanding of those concepts would be necessary to fully appreciate the nature and extent of the risks inherent in CFD and Margin FX Contract trading.
In cross-examination, Mr Dowd to a large extent accepted that to trade successfully in CFDs, an investor would have to understand how the profit or loss from a trade is calculated, which would require the customer to understand the effect of the change in price of the underlying asset and also the amount of commissions and fees payable in respect of the trade. Perhaps more significantly, Mr Dowd in effect accepted that, for an investor to have a sound understanding of a CFD and how it is traded, the investor would have to understand the meaning and operation of concepts of leverage, margin (including "total margin" and "margin level") and "net equity" and how they are calculated. Those concepts are plainly not self-explanatory and would need to be learned, as Mr Dowd in effect accepted. Moreover, to successfully trade in CFDs, an investor would have to understand the relationship between margin level, net equity and total margin, and also understand what a margin call is and in what circumstances it might arise. Mr Dowd effectively accepted that to be so. He also accepted that, for an investor to successfully trade, it would be necessary for the investor to understand what a forced liquidation is and how margin calls and forced liquidation can be avoided. I do not accept that any of those concepts would be readily or easily understood by anyone with little or no prior knowledge of or experience in financial markets.
As for the nature and extent of the risk involved in trading in CFDs and Margin FX Contracts, in my view it is readily apparent that CFDs and Margin FX Contracts are highly risky financial products.
Mr Blundell's opinion, based on his experience and observations as Head of Compliance at an Australian company that issued CFDs and provided trading services to retail clients, was that CFDs are risky financial products, particularly for inexperienced investors. His evidence was that "if a person does not have experience in successfully trading CFDs or Margin FX Contracts, and also lacks an understanding in the nature of those products and the concepts of margin and leverage, then it is more likely than not that person will lose all the funds deposited into a CFD trading account within a short period". Even at the company where he worked, which had a strong and robust compliance structure, and did not permit inexperienced customers to trade until they demonstrated a certain level of relevant comprehension and competence, approximately 70% to 75% of the customers who traded in CFDs and Margin FX Contracts lost money over the course of the year.
Mr Blundell's opinion was that the main reason that inexperienced traders lost their funds within a short period was that they did not understand the effects that leverage can have on eroding all the funds that the trader had deposited into their trading account. His evidence was that: An inexperienced client will typically open positions that use a large proportion of their Net Equity, often in excess of half of their available funds. This means that it would only take a small adverse movement in prices to erode all of the net equity in the client's account and cause a forced liquidation. I am aware that inexperienced clients will invariably place a lot more than 1% of their Net Equity as margin when trading CFDs or Margin FX.
I accept that evidence.
Mr Dowd's opinion that the majority of risks associated with CFDs and Margin FX Contracts are similar to those which exist in equity markets. That view, however, appears to have been a product of his particular expertise as an institutional derivatives trader or investor. He accepted that equities trading was not his area of expertise. In any event, it is fairly obvious that the fact that CFDs and Margin FX Contracts are highly leveraged, and that the trader's potential losses are not limited to the amount outlaid, tends to make them riskier than, for example, investments in shares. On the one hand, in the case of an open position in a CFD, even a relatively small adverse movement in the price of the underlying asset might result in a margin call, or the automatic closure of the open position, which in turn might put all of the funds in the investor's trading account at risk. On the other hand, in the case of shares, if an investor buys shares in a company, he or she may lose money if the share price falls. It is, however, highly unlikely that the investor could or would lose all the money they outlaid to purchase the shares. That would generally only occur if the company completely failed and was wound up with debts exceeding assets.
I do not accept Mr Dowd's opinion in relation to the nature and extent of the risks associated with trading in CFDs and Margin FX Contracts. It was given from the perspective of someone with considerable experience as an institutional investor in certain derivatives and leveraged financial products. Mr Dowd had little if any direct experience in respect of assessing the nature and extent of the risks of CFDs and Margin FX Contracts for retail customers. Indeed, in the United States, which was the country in which Mr Dowd acquired most of his professional knowledge, training and experience, retail customers have not been permitted to trade in CFDs since at least 2011.
The position taken by EuropeFX in its submissions also appeared to be entirely at odds with risk disclosure notices that appeared in some of its contemporaneous documentation. As will be seen, in its defence to ASIC's case that it engaged in unconscionable conduct, EuropeFX placed considerable reliance on the fact that some of its communications with customers and prospective customers included a risk disclosure notice. For example, some of EuropeFX's communications included a notice in the following terms:

Risk Warning: 'CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.99% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.'

The content of EuropeFX's own risk disclosure notice effectively accorded with Mr Blundell's evidence.
In my view it is fundamentally important to approach this case, and in particular ASIC's allegations concerning the unconscionable conduct on the part of EuropeFX and TradeFred, on the basis that CFDs and Margin FX Contracts are, as EuropeFX's own risk disclosure notices indicated, complex financial products or instruments, that trading in them carries a high level of risk, and that there is a high risk that retail investors, particularly inexperienced retail investors, will lose money from such trading.

[38]

Personal advice contraventions

There was essentially no dispute that USG, and therefore EuropeFX as its CAR, was only permitted to give general financial product advice, not personal financial product advice. ASIC alleged that EuropeFX account managers nevertheless gave the EFX30 financial product advice (as defined in s 766B(1) of the Corporations Act) which was personal advice (as defined in s 766B(3) of the Corporations Act). ASIC alleged that the personal financial product advice given by the EuropeFX account managers fell into various categories defined in the Statement of Claim (SOC). Those defined categories of statements were: Position Statements, Signal Provider Statements, Deposit Statements and Trading Strategy Statements.
ASIC alleged that EuropeFX made over 2,000 personal advice statements and therefore contravened s 911A(5B) over 2,000 times. There was no dispute that EuropeFX account managers made the alleged statements. They are recorded in the transcripts of the telephone calls between the account managers and the customers. The issue was whether the statements constituted personal financial product advice.
EuropeFX ultimately admitted that it contravened s 911A on 177 occasions. It denied that any of the other statements its account managers made constituted personal financial product advice. It admitted, however, that statements made by EuropeFX account managers on a further 108 occasions had been accurately characterised by ASIC as falling within one or more of the defined categories of statement.
ASIC ultimately agreed to narrow its case and to press the Court to only make findings (in addition to the admitted contraventions) in respect of the statements which EuropeFX admitted were properly characterised or categorised as Position Statements, Signal Provider Statements, Deposit Statements or Trading Strategy Statements as defined. As will be seen, those categories of statements were effectively defined in such a way that any statement that fell within one or more of those defined categories effectively satisfied the definition of financial product advice in s 766B(1) of the Corporations Act.
In those circumstances, the central issue in respect of the alleged personal contraventions pressed by ASIC and not admitted by EuropeFX was whether those statements were made in circumstances which fell within s 766B(3) of the Corporations Act. ASIC did not press its original contention that the statements fell within s 766B(3)(a). The central issue, therefore, was whether the statements were made in circumstances which fell within s 766(3)(b) of the Corporations Act because they were made in circumstances where a reasonable person might expect the provider (the EuropeFX account manager) to have considered one or more of the recipient's (the EuropeFX customer's) objectives, financial circumstances and needs.
ASIC submitted that it was clear from the circumstances in which the relevant statements were made that a reasonable person might expect the EuropeFX account manager to have considered one or more of the customer's objectives, financial circumstances and needs. That was mainly because the account managers, in their initial engagements with the customers, had almost invariably asked the customers about their financial circumstances, financial needs and objectives or reasons for wanting to trade with EuropeFX.
EuropeFX did not advance any, or any detailed or substantive, submissions in respect of this issue.

[39]

False, misleading or deceptive representations or conduct

ASIC alleged that EuropeFX account managers made over 1,400 representations to the EFX30 that were false, misleading or deceptive. Those representations were alleged to have fallen within one or more of a number of categories defined in the SOC. Those defined categories were: Profit Representations, Revenue Representations, Money Risk Representations, Withdrawal Representations, Loss Recovery Representations, Equities Representations, Bank Account Representations, Plan Representations, Regulation. ASIC's case, as pleaded, was that all those representations gave rise to or constituted contraventions of ss 12DA and 12DB of the ASIC Act and s 1041E and/or s 1041H of the Corporations Act.
EuropeFX eventually admitted that its account managers made misleading or deceptive representations on 53 occasions. While it is somewhat unclear from the terms of its admission, it appears that EuropeFX admitted that, in making each of those misleading or deceptive representations, it contravened ss 12DA and 12DB of the ASIC Act and ss 1041E and 1041H of the Corporations Act.
EuropeFX denied that the balance of the representations made by its account managers gave rise to contraventions of ss 12DA and 12DB the ASIC Act or ss 1041E and 1041H of the Corporations Act. It did, however, admit that representations made by EuropeFX account managers on a further 127 occasions had been correctly or accurately classified or characterised by ASIC as falling within one or more of the ten categories defined in the SOC.
ASIC ultimately agreed to narrow its case and to press the Court to make findings (in addition to the admitted contraventions) the representations that EuropeFX admitted fell within the defined categories. ASIC also limited its case to alleging that the making of each of those representations constituted contraventions of either ss 12DA or 12DB of the ASIC Act. It did not press the Court to make findings as to whether they also constituted contraventions of ss 1041E or 1041H of the Corporations Act.
There was no dispute that EuropeFX account managers made the impugned representations. They are recorded and reproduced in the various transcripts of the telephone calls between the case managers and the various customers. Given that ASIC limited its case to alleged contraventions of either ss 12DA or 12DB of the ASIC Act, the central issue was whether the representations were false, misleading or deceptive.
In relation to some of the representations, the fact that EuropeFX admitted that they fell within one of the defined categories went a considerable way towards proving that the representations were misleading or deceptive. That was, or at least was likely to be the case, for example, in relation to representations that are accepted to fall within the Plan Representations, Money Risk Representations, Equities Representations, Regulation Representations and Location Representations categories. In the case of those representations, ASIC's case was that the question whether those representations were misleading or deceptive could essentially be approached in a global fashion without delving into the precise terms of each representation.
Similarly, some of the defined categories of representations were, or at least arguably were, representations in respect of future matters. For example, representations that fall within the Profit Representations, Money Risk Representations, Loss Recovery Representations and Bank Account Representations categories involved, or at least arguably involved, representations as to future matters. The key issue in respect of those representations was whether EuropeFX had adduced evidence, or was at least able to identify any evidence, which was capable of establishing that it had reasonable grounds for the making of those representations. If it had not, or could not, point to any such evidence, the representations could be taken to be misleading by reason of s 12BB(2) of the ASIC Act.
In the case of some of those representations, for example some of the Profit Representations, EuropeFX contended that there was some evidence capable of establishing that it had reasonable grounds for the making of the representation. That evidence included opinion evidence from Mr Dowd. ASIC essentially contended that EuropeFX had adduced no such evidence, or had not identify any such evidence. ASIC also contended that, in any event, the available evidence established that EuropeFX did not have any reasonable grounds for making the representations. In the case of some of the defined representation categories, EuropeFX made no real attempt to point to any evidence that might be capable of establishing that the account managers who made the impugned representations in respect of future matters had reasonable grounds for making them.

[40]

Systemic unconscionability

ASIC alleged that EuropeFX employed a system of conduct, or engaged in a pattern of behaviour, that was, in all the circumstances, unconscionable. ASIC relied, in support of that contention, on evidence which it submitted established that EuropeFX: utilised online advertising or promotional material which misrepresented the nature of the financial services and financial products offered by EuropeFX; had an "onboarding" system that was indiscriminate as to whether prospective customers had any relevant knowledge or experience in respect of CFDs and Margin FX Contracts; derived its revenue, or the bulk of its revenue, from its customers' trading losses; had a system of remuneration for the account managers which provided an incentive for the account managers to encourage and pressure customers to deposit more funds into their trading account; provided inadequate, or inappropriate training to the account managers and failed to deal with known misconduct by account managers; and had an unfair complaints resolution process.
The patterns of behaviour that ASIC contended could be discerned or inferred from the evidence primarily, though by no means exclusively, related to the conduct of EuropeFX account managers towards their customers. While the evidence relied on by ASIC in that regard was predominantly the evidence of the conduct of the account managers towards or in respect of the EFX30, ASIC submitted that the evidence as a whole supported the inference that the pattern of behaviour applied to all, or at least a substantial proportion of, EuropeFX's customers.
EuropeFX denied that its systems of conduct, or patterns of behaviour constituted unconscionable conduct and contended that ASIC had failed to provide that it had engaged in any such systemic unconscionable conduct. It submitted, among other things, that ASIC's sample size - by which it meant either the EFX8 or the EFX30 as a whole - was inadequate and had not been shown to be representative. EuropeFX also denied that it had engaged in any unconscionable conduct toward the EFX30 upon which ASIC sought to rely in support of its case of systemic unconscionability, and submitted that ASIC had failed to prove that it had engaged in any such conduct. It also contended that ASIC had failed to prove the other systemic features or indicia, such as the misleading Bitcoin advertising, the unfair remuneration systems, the allegedly inadequate training and disciplinary systems, and the allegedly unfair disputes resolution process. EuropeFX also submitted that it relied on USG, as the holder of the AFSL, and that USG was responsible for any such deficiencies.

[41]

Unconscionable conduct in respect of each of the EFX30

ASIC's case that EuropeFX engaged in conduct towards, or in respect of, the EFX30 which was, in all the circumstances, unconscionable was based on the evidence of and relating to the EFX8, and the evidence relating to the EFX22.
As has already been noted, ASIC adduced evidence from each of the EFX8. It also tendered recordings and transcripts of all the recorded telephone conversations between EuropeFX and the EFX8 that had been produced by EuropeFX. Each of the EFX8 was cross-examined at considerable length. ASIC also tendered recordings and transcripts of all the recorded telephone conversations between EuropeFX and the EFX22 that had been produced by EuropeFX.
ASIC contended that each of the EFX30 was a person who, to the knowledge of EuropeFX, was vulnerable or disadvantaged, particularly because they had, and were known to have had, no prior relevant knowledge about CFDs or Margin FX Contracts and had no experience trading in those products or any similar complex leveraged derivatives. ASIC also contended that that EuropeFX account managers had engaged in a number of different categories of unconscionable conduct towards those vulnerable customers, including: failing to ensure that the customers had an adequate understanding of CFDs and MarginFX contracts and concepts such as leverage and margin; giving personal advice when not permitted to; making misleading or deceptive statements; encouraging the customers to rely on them and pressuring them to trade and deposit funds into their trading accounts; encouraging them to obtain money to deposit into their trading accounts from inappropriate sources, such as superannuation funds or credit cards; impeding the customer's withdrawal of funds from their trading accounts, or dissuading them from doing so; advising or encouraging the customers to engage in inappropriate trading strategies; and dealing with their complaints unfairly. ASIC provided particulars of that conduct in Annexure E.1 to the SOC, which was a detailed and very lengthy schedule.
ASIC ultimately agreed to narrow its case in respect of its allegations that EuropeFX engaged in unconscionable conduct towards individual identified customers. ASIC's ultimate position was that if the Court found that EuropeFX had engaged in systemic unconscionable conduct, it would not press the Court to make any findings in relation to unconscionable conduct towards any of the EFX30 specifically. It did, however, "ask" the Court to make findings in respect of the EFX8. For the reasons explained below, I have decided to accede to ASIC's request to consider and make findings in respect of EuropeFX's conduct towards the EFX8. I do not propose to specifically address or make findings in respect of ASIC's allegation that EuropeFX contravened s 12CB of the ASIC Act in respect of each of the EFX22. As discussed earlier in the context of the overview of ASIC's case of systemic unconscionability, it will nevertheless be necessary to consider and make factual findings in respect of the EFX22 in the context of the systemic unconscionability case.
EuropeFX denied that its account managers had engaged in any such conduct towards the EFX30 (including the EFX8) and submitted that ASIC had failed to prove to the requisite standard that it had. It provided a very detailed response to Annexure E.1 to the SOC to that effect. EuropeFX submitted, in general terms, that: none of the EFX30 were vulnerable or disadvantaged persons; each of them were willing participants in the "market" in respect of CFDs and Margin FX Contracts; each of them had an adequate understanding of CFDs and Margin FX Contracts; in any event there was no basis upon which EuropeFX could have foreseen that they did not have an adequate understanding of those products; and that many of the EFX30 traded independently of the account managers.
The key issues in respect of ASIC's allegation that EuropeFX engaged in unconscionable conduct towards in or relation to the EFX8 are essentially factual. Were the EFX8 relevantly vulnerable or disadvantaged? Did EuropeFX account managers engage in any or all of the categories of conduct that ASIC alleged that they had engaged in? If the EFX8 were relevantly vulnerable or at a disadvantage, and it is found that the account managers did engage in some or all the alleged conduct, it is difficult to see how it could not be concluded that EuropeFX engaged in conduct that was, in all the circumstances, unconscionable.

[46]

Unconscionable conduct in respect of each of the TF20

ASIC contended that the TF20 were each, to the knowledge of TradeFred, vulnerable or disadvantaged, primarily because they had no prior relevant knowledge about CFDs or Margin FX Contracts and had no experience trading in those products or any similar complex leveraged derivatives. It also contended that that TradeFred account managers engaged in various defined categories of unconscionable conduct towards those vulnerable customers. Those categories were similar to those alleged by ASIC in its case against EuropeFX and included that the TradeFred account managers: failed to ensure that the customers had an adequate understanding of CFDs and MarginFX contracts and concepts such as leverage and margin; gave the customers personal advice when not permitted to do so; made misleading or deceptive representations to the customers; encouraged the customers to rely on them and pressured them to trade and deposit funds into their trading accounts; encouraged the customers to obtain money to deposit into their trading accounts from inappropriate sources; impeded the customers from withdrawing funds from their trading accounts, or dissuaded them from doing so; advised or encouraged the customers to engage in inappropriate trading strategies. ASIC also claimed that TradeFred did not fairly deal with customer complaints. ASIC provided particulars of that conduct in a detailed and lengthy schedule to the SOC: Annexure E.2 to the SOC.
As was the case in respect of EuropeFX, ASIC's position was that if the Court found that TradeFred had engaged in systemic unconscionable conduct, it did not press the Court to make any findings in relation to unconscionable conduct towards any of the TF20 specifically. It did, however, "ask" the Court to make findings in respect of the TF4.
The issues raised by ASIC's case that TradeFred engaged in unconscionable conduct, both systemically and in respect of the TF4, are essentially factual. Does the evidence tendered by ASIC tend to establish that TradeFred engaged in the conduct alleged by ASIC. If it does, it would be difficult to avoid the conclusion that the conduct was unconscionable.

[51]

Burden and standard of Proof

ASIC bears the burden or onus of proving that USG, EuropeFX and TradeFred contravened the Corporations Act and ASIC Act as alleged. The standard of proof is the balance of probabilities: s 140(1) of the Evidence Act 1995 (Cth). In deciding whether I am satisfied that ASIC has proved its case in respect of each of the alleged contraventions on the balance of probabilities, I am required to take into account, among other things, the nature of ASIC's causes of action, the nature of the subject matter of the proceeding and the gravity of the matters alleged: s 140(2) of the Evidence Act.
Several of the provisions of the Corporations Act and the ASIC Act that ASIC alleged were contravened by USG, EuropeFX and TradeFred are civil penalty provisions. The relief sought by ASIC includes the imposition of pecuniary penalties in respect of those contraventions. The factual allegations which underly all the alleged contraventions are also undoubtedly serious. These are considerations to which I must have, and have had, regard to in considering whether ASIC has proved its case.
As Mason CJ, Brennan, Deane and Gaudron JJ explained in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992)110 ALR 449 at 450-451: The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found". Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. (Footnotes omitted)
Their Honours then referred to the following well-known observations of Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 (at 362): The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved …
I must have, and have had, regard to those observations when considering whether ASIC has made out its case on the balance of probabilities.

[53]

ASIC's evidence in its case against EuropeFX - overview

ASIC's evidence in its case against EuropeFX fell within six broad categories.
First, as has already been noted, ASIC adduced affidavit evidence from each of the EFX8: Mr Ben Wilson (EFX1) Ms Lesley Love (EFX2) Mr Prasanna Kalusinghe (EFX3) Ms Deborah Elford (EFX4), Ms Jennifer Nikiforos (EFX6), Ms Sadrine Sapor (EFX8), Ms Julie Boden (EFX9) and Ms Leanne Kuhn (EFX11). ASIC tendered all the recordings and transcripts of telephone conversations between EuropeFX representatives and the EFX8 that were produced to it by EuropeFX in the course of its investigation. ASIC also adduced evidence from a prospective customer of EuropeFX, Mr Steven Parry, who deposited funds, but quickly became suspicious and did not trade. Mr Parry's evidence was particularly relevant to the issue of whether EuropeFX utilised or took advantage of misleading promotions concerning Bitcoin trading. Each of the EFX8 and Mr Parry were cross-examined at length.
Second, ASIC adduced evidence from two former employees of EuropeFX, Ms May Ajaz and Mr Xu (Kidd) Liu. Ms Ajaz and Mr Liu performed duties as "quality control" officers at EuropeFX during the relevant period. Among other things, they randomly listened to recordings of telephone communications between EuropeFX account managers and their customers and reported their findings to EuropeFX management. Ms Ajaz and Mr Liu were cross-examined, and aspects of their evidence were challenged or criticised by EuropeFX.
Third, as has already been adverted to, ASIC adduced expert opinion evidence from Mr Blundell, who was the Head of Compliance at StoneX Financial Pty Ltd trading as City Index, an Australian company which provides over the counter derivatives, including CFDs, to retail customers in Australia. Mr Blundell's opinion evidence addressed several questions concerning trading in CFDs and Margin FX Contracts and EuropeFX's conduct and engagement with its customers in respect of trading in CFDs and Margin FX Contracts.
Fourth, ASIC adduced evidence from various other witnesses about aspects of its investigation, including the production of documents and the preparation of transcripts and translations. It is unnecessary, at this point at least, to say anything further about this category of witnesses.
Fifth, ASIC tendered a huge volume of documentary evidence. The documentary evidence, broadly speaking, fell into the following categories. The first category comprised the recordings and transcripts of telephone conversations between EuropeFX representatives and the EFX8. The second category comprised recordings and transcripts of telephone conversations between EuropeFX representatives and the EFX22. Only selected parts of some of the recordings were played in Court. The third category comprised business records, mostly of EuropeFX, but also USG, including: financial and accounting records; agreements between EuropeFX and other persons or entities; and correspondence and communications from, or to, or relating to, EuropeFX, including in respect of complaints lodged by EuropeFX customers. The fourth category comprised various miscellaneous documents including, for example, some paragraphs of an affidavit sworn by Mr Sasso.
I should emphasise that the documentary tender by ASIC was so huge that I made it clear to the parties that I would not read or consider any documentary exhibit unless it was either identified or referred to in the evidence of a witness, or I was specifically taken to it by one of the parties in their submissions. As events transpired, that did not alleviate the massive burden imposed upon the Court by the tender of such a huge volume of evidence. That is because the parties both filed extremely lengthy written submissions which attached even lengthier schedules, summaries or aides-memoire. Those documents included barcode references to many thousands of documents. It would appear from the electronic court book that the bulk tender of documents by ASIC comprised almost 10,000 documents. I have endeavoured to consider all the documents identified in the submissions, summaries and aides-memoire, though these reasons will mainly address the documents to which particular attention was drawn in the submissions.

[54]

EuropeFX's evidence in summary

EuropeFX adduced evidence from four witnesses.
First, as has already been noted, EuropeFX adduced expert opinion evidence from Mr Dowd, an experienced discretionary foreign exchange, stock index and commodity derivatives trader, though one who had little, if any, experience in relation to trading in the markets for those or similar products in Australia. Mr Dowd provided answers to the same questions posed to Mr Blundell. Some of Mr Dowd's evidence in his report was rejected on the basis that Mr Dowd's had worked almost exclusively in the United States of America and essentially had no relevant education, training or experience, as a trader or otherwise, in any retail market for over-the-counter derivatives in Australia, including any retail market involving CFDs and Margin FX Contracts: see Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (Trial Ruling No 2) [2023] FCA 333.
Second, EuropeFX adduced evidence from a database expert, Mr James Spencer Greene, who formatted EuropeFX trading data so that the trading positions of nine customers of EuropeFX were able to be reproduced in a readable spreadsheet. Mr Greene's evidence ultimately did not feature prominently in the parties' submissions.
Third, EuropeFX adduced evidence from Mr Trent Whitbourn, an expert in respect of digital forensics, who was able to forensically reproduce copies of EuropeFX's former website using a digital library of internet sites called the "Wayback Machine".
Fourth, EuropeFX adduced evidence from one of its solicitors, Ms McKenzie Moore. Ms Moore's evidence primarily addressed the steps she took to contact various persons who appear to have had some involvement in the management of EuropeFX, including Mr Amar and Mr Zakhaim, Mr Ari Amsalem and Mr Martin. Ms Moore also unsuccessfully endeavoured to contact several other people who appear to have had some involvement with the companies to which EuropeFX outsourced the day-to-day conduct of their business. In short, Ms Moore endeavoured to explain why EuropeFX ultimately did not call any evidence from anybody who was involved in EuropeFX's business or relevant activities.
I should note, in this context, that ASIC submitted that Jones v Dunkel inferences should be drawn against EuropeFX arising from its failure to call and adduce evidence from Mr Sasso and Mr Amar. As I have already noted, EuropeFX conceded that a Jones v Dunkel inference should be drawn in respect of its failure to call Mr Sasso. That concession was properly given.
EuropeFX submitted that no Jones v Dunkel inference should be drawn in respect of its failure to call Mr Amar. I do not propose to address this issue in detail. The relevant principles in respect of Jones v Dunkel are discussed later in the context of a submission advanced by EuropeFX concerning the fact that ASIC did not call the EFX22. While Ms Moore's evidence in respect of her attempts to contact Mr Amar were not tested in cross-examination, I nevertheless found her evidence concerning her attempt to contact Mr Amar to be somewhat unpersuasive. In any event, I am reluctant in all the circumstances to draw Jones v Dunkel inferences against EuropeFX arising from the fact that it did not adduce evidence from Mr Amar, particularly given the rather uncertain nature of his connection with EuropeFX and his present whereabouts. That said, the reality is that the availability of inferences that may be drawn from the evidence as a whole, including in respect of facts and circumstances in respect of which the evidence revealed Mr Amar had some involvement, must be assessed on the basis that Mr Amar did not give evidence. I should also emphasise in that regard that I reject entirely EuropeFX's suggestion that a Jones v Dunkel inference should be drawn against ASIC in respect of its failure to call Mr Amar. Among other things, Mr Amar could not possibly be said to have been in ASIC's "camp".
I am equally reluctant to draw any Jones v Dunkel against EuropeFX arising from the fact that it did not call other people who the evidence revealed were involved in one way or another in the conduct of EuropeFX's business. That is particularly the case in respect of people who were involved with EuropeFX's business as a result of it having outsourced activities to companies located overseas. Once again, however, it is simply a matter of common sense that the availability of inferences from the evidence as a while must be assessed on the basis that none of those people gave evidence in respect of the activities in respect of which they were involved.
Returning to the evidence that EuropeFX did adduce, EuropeFX also tendered some documentary evidence. Some of that evidence will be referred to, if necessary or appropriate, when considering the specific factual issues in respect of which it was said to be relevant.

[57]

THE EVIDENCE OF THE EFX8

It is useful to provide an overview of the evidence of the EFX8 witnesses and address some of EuropeFX's general criticisms of that evidence. A more detailed summary of the evidence of each of the witnesses will then be given. That summary will also address the objective evidence concerning the discussions and dealings between those witnesses and EuropeFX sales representatives and account managers, mainly the recordings and transcripts of the conversations between the witnesses and the account managers.
I should emphasise that it is simply not feasible to provide a comprehensive account of the evidence of and relating to each of the EFX8. Each of the witnesses swore or affirmed very lengthy affidavits. Most of them were more than 150 pages long. Each of the witnesses was cross-examined at considerable length. More significantly, most of the witnesses had many conversations with EuropeFX account managers and many of those conversations were very long. The transcripts of the conversations between some of the EFX8 and EuropeFX account managers ran to hundreds, if not thousands, of pages in total. In these reasons I have referred to some selected extracts from the transcripts. It would have been impossible for me to refer to every conversation, or even every conversation referred to in the parties' submissions. As for the recordings, I did not listen to all the recorded conversations. Nor was I invited or requested to do so. I ultimately only listened to those parts of the recordings that were played in Court, or that one or other of the parties specifically asked me to listen to, or those that are otherwise identified to in my reasons.
As I have just noted, the evidence in chief of each of the EFX8 witnesses was given by affidavit. Shortly before the trial, EuropeFX applied for orders the effect of which was to require the EFX to give their evidence in chief orally. That application was opposed by ASIC. The grounds for EuropeFX's belated objection to the adducing of the EFX8's evidence by way of affidavit were: first, there were said to be similarities in the structure and content of the affidavits which gave rise to a suspicion that the affidavits did not represent the genuine recollections of the witnesses; second, the affidavits were said to be replete with selective extracts from, or paraphrasing of, the transcripts of the telephone calls between the witnesses and EuropeFX account managers; third, the affidavits contained a good deal of inadmissible evidence and it would take a considerable amount of time to address EuropeFX's objections to those parts of the affidavits; and fourth, the evidence of the witnesses was "largely superfluous" because of the availability of the transcripts of the telephone calls.
I rejected EuropeFX's belated application. In short, I was persuaded that the issues and criticisms raised by EuropeFX concerning the affidavits could, in all the circumstances, more appropriately be dealt when hearing and determining EuropeFX's specific objections to parts of the affidavits, or by permitting EuropeFX to cross-examine the witnesses, including in respect of the criticisms concerning the preparation of their affidavits, or in the course of the submissions concerning the admissibility and weight to be given to the evidence of the witnesses generally. I was also concerned about the lateness of EuropeFX's application and the disruption to the orderly conduct of the trial that would have resulted if the application had been allowed.
As events transpired, EuropeFX objected to very large portions of the affidavits. Those objections were ruled on as the trial progressed. EuropeFX also cross-examined the witnesses at some length concerning the preparation of their affidavits and, by implication, the extent to which the contents of their affidavits reflected their genuine recollections. EuropeFX also in due course submitted that the evidence of the witnesses should be given little if any weight because of the way the affidavits had been prepared and given the existence of the transcripts. EuropeFX's criticisms of the affidavits of the EFX8 and their evidence more generally will be addressed below.
It may be accepted that the affidavits sworn or affirmed by each of the EFX8 broadly followed a similar format. While that was the subject of criticism by EuropeFX, it was hardly surprising and I am unable, in all the circumstances, to accept that it reflected adversely on either the ASIC investigators who assisted in compiling the affidavits, or the witnesses themselves. The format and progression of the affidavits was logical and in my view reflected little more than that the witnesses' experiences in respect of their engagement and dealings with EuropeFX were generally quite similar.
In their affidavits, each of the EFX8 witnesses first gave an outline of their personal background and prior trading experience. With the possible exception of Ms Boden, none of the EFX8 had any, or any significant, prior experience in respect of trading in derivatives or any other similar complex financial products. Indeed, as has already been observed, it would be fair to say that, for the most part, each of the EFX8 was relatively inexperienced and unsophisticated in respect of securities and investments generally. More will be said about Ms Boden and her investment experiences later.
After referring to their background and trading experience, each of the EFX8 witnesses then explained in their affidavits how they came to be introduced to EuropeFX. While some of the witnesses did not have a particularly good recollection of how or in what circumstances they first came into contact with EuropeFX, some of them described clicking on, or otherwise responding in some way to, an online advertisement or promotion concerning trading in Bitcoin or cryptocurrency. They were then subsequently contacted by someone representing EuropeFX. The evidence of the witnesses on that topic will be addressed in more detail later.
The affidavits of the EFX8 then generally referred to the process whereby the witnesses came to open an account with EuropeFX. Their evidence in that regard generally referred to a document prepared by ASIC which was said reproduce information that the witnesses provided to EuropeFX, either in response to an online account opening questionnaire or otherwise. That information generally included the witness's employment, income, assets, trading experience and an acknowledgement that the witness had read and understood various documents, including EuropeFX's PDS, Terms of Business and Financial Services Guide. EuropeFX did not object to, or criticise the content of, the document that had been prepared by ASIC which reproduced that information in summary form. The EFX8 witnesses were cross-examined on the basis that the information reproduced in that document had in fact been provided by the witnesses during the account opening process.
The affidavits of the EFX8 then contained a detailed account of each witnesses' dealings and trading with EuropeFX. That account was often provided by reference to lengthy extracts from the transcripts of some telephone calls between the witness and a EuropeFX representative. On some occasions, the witnesses paraphrased parts of the transcript, or referred to what they understood was said or conveyed by the representative, or what they thought or felt at the time. Following objection by EuropeFX, those parts of the affidavits were generally made the subject of directions under s 136 of the Evidence Act, the effect of which was that the evidence was not admissible to prove the content of the conversation, or that the evidence was limited to being evidence of the witnesses' state of mind at the time.
Each of the EFX8 was cross-examined at some length concerning the process involved in drafting and compiling their affidavit. Not surprisingly, that process generally involved extensive interviews and interactions between the witness and ASIC investigators. Also unsurprisingly, it was the ASIC investigators who were primarily responsible for preparing the initial drafts of the affidavits based on the interviews. The witnesses generally agreed that the ASIC investigators chose the extracts of their conversations with the EuropeFX account managers that were included in the affidavits. It was also apparent that some of the extracts were not complete, in the sense that some parts of the exchanges reproduced in the extracts were omitted. Those omissions were mostly, though not always, denoted by ellipses in the text. It was apparent again that the ASIC investigators who compiled the affidavits were responsible for deciding which parts of the extracted conversations should be omitted.
In its submissions, EuropeFX criticised the manner in which the ASIC investigators assisted the EFX8 witnesses to draft and complete their affidavits. It submitted, among other things, that the extracts that were included in the affidavits were selective and that the omissions from the extracts gave a misleading impression of the overall exchange. As already noted, EuropeFX was critical of the fact that the affidavits followed a similar format or sequence and submitted, or at least intimated, that the affidavits did not contain a fair, or true and accurate, account of the evidence of the witnesses, but rather had been the product of excessive intervention by the ASIC investigators.
I do not consider that the criticisms EuropeFX levelled against ASIC in respect of the affidavits of the EFX8 was justified or valid. Nor do I accept that ASIC's role in compiling the affidavits somehow materially diminished the reliability or credibility of the evidence of the EFX8.
It was in my view open to ASIC to select the extracts from the transcripts that were to be shown to the witnesses or included in the affidavit. It would plainly not have been feasible to require the witnesses to read all of the transcripts of their conversations with the account managers, particularly those witnesses who had engaged with the account managers over many months. Nor would it have been feasible to include in the affidavits anything other than selected extracts from certain conversations. If the witnesses had given oral evidence in chief, it would undoubtedly have been open to counsel to select those parts of the transcript to question the witness about.
I am also not persuaded that ASIC was unfairly selective in choosing which extracts to include in the affidavits, or that the selectivity meant that the evidence in the affidavits were somehow misleading or unreliable. It was, of course, always open to counsel for EuropeFX to cross-examine the witness about other extracts from the transcripts. Counsel for EuropeFX did indeed frequently cross-examine the witnesses about other parts of the transcript that were not included in the affidavit. No criticism was, or could be, levelled against counsel for EuropeFX for being selective about which passages from the transcripts were the subject of cross-examination.
As for the omissions from the extracts that were included in the affidavits, I am satisfied that the words or passages that were omitted from the extracts were generally irrelevant, immaterial, or relatively benign or neutral. I am not persuaded that it was unfair or inappropriate in all the circumstances for the ASIC investigators to have omitted that material. I am also satisfied that most of the omissions were denoted by ellipses and that, where that was not the case, that was inadvertent and the result of oversight. In those rare instances where the omissions may not have been immaterial, counsel for EuropeFX had the opportunity to, and almost invariably did, draw that omission to the attention of the Court and cross-examine the witness in respect of the omitted material.
More importantly, I do not consider that the process by which the affidavits were compiled and drafted, the fact that the affidavits contained only selected extracts from the transcripts, or the fact that those extracts on occasion had words or passages omitted from them, reflected adversely on the witnesses or their credibility. Nor do I consider that any of those matters meant that the evidence of the EFX8 witnesses was unreliable or should be given little weight. It is unrealistic to suggest that, in a complex matter such as this, the witnesses themselves should draft and compile their own affidavits without any guidance or assistance, or that ASIC investigators should not be actively involved in that process. It would, of course, be inappropriate and problematic if the ASIC investigators coached or put words in the mouths of the witnesses, or crafted the affidavits such that they did not fairly represent the witnesses' own evidence. Despite the extensive cross-examination, I am not persuaded that that was the case in respect of any of the EFX8 witnesses' affidavits.
Nor am I persuaded that the selective use of extracts or omissions materially impinged on or adversely affected the reliability of the witnesses' evidence generally. That said, it may readily be accepted that the extracts in the affidavits must all be read in context. It would be wrong to unduly focus on parts of the transcript read in isolation.
EuropeFX submitted that the Court should give little weight to the evidence of each of the EFX8 witnesses where that evidence was not corroborated by contemporaneous records or objective evidence. The bases of that submission were: first, the inherent infallibility of human memory over time, particularly in circumstances where there had been intervening disputes or litigation; second, and relatedly, the EFX8 witnesses were giving evidence concerning events and their experiences which had occurred years ago; third, each of the witness's recollections and evidence was likely to have been infected by conscious or unconscious hindsight bias and knowledge of these proceedings; and fourth, the evidence of these witnesses could fairly be characterised as involving their "ex post interpretation [of events] through the lens of a disgruntled investor".
I do not accept that, as a general proposition, little weight should be given to the evidence of the EFX8 witnesses where that evidence was not corroborated.
It may readily be accepted that the evidence of the EFX8 witnesses concerning their interactions with EuropeFX representatives, and their trading experience generally, must be approached with some caution and circumspection. That includes both their affidavit evidence and their oral evidence, including in cross-examination. The witnesses were giving evidence concerning events and experiences that occurred some considerable time ago. There was undoubtedly some risk that the reliability of their evidence had been adversely affected by the effluxion of time, or subconsciously influenced by a degree of hindsight bias. There could also be little doubt, in those circumstances, that the best evidence of what was actually said between the witnesses and EuropeFX representatives was the recordings, aided by the transcripts of those recordings. The recordings, as opposed to the transcripts, also provided the most reliable guide to how the witnesses reacted to and felt about what was said to them. Inferences are often able to be drawn from pauses and the tone and tenor of the voices of the parties to a conversation.
Putting those fairly obvious observations to one side, having not only read the EFX8 witnesses' affidavits, but also having heard and observed their oral evidence, I was generally satisfied that each of the witnesses was essentially an honest and credible witness who was doing the very best they could to give a frank and honest recollection and account of their interactions and experiences with EuropeFX and its representatives and their trading generally. That is not to say that the cross-examination of some of the witnesses did not give rise to some issues concerning their credibility or the reliability of aspects of their evidence. Ms Boden was the subject of particular criticism by EuropeFX. It submitted that Ms Boden was an untruthful witness whose evidence should not be accepted if not corroborated. The reliability of Ms Love's evidence was also called into question by EuropeFX, though it was not suggested that she gave deliberately untruthful evidence.
I will deal with the criticisms and challenge to the reliability of the evidence of Ms Boden and Ms Love later in these reasons. It suffices at this point to note that there were aspects of Ms Boden's evidence that tended to suggest that she might not be an entirely credible or reliable witnesses. Ultimately, however, I am satisfied that her evidence in respect of the material factual issues was honest and reliable. As for Ms Love, while she was at times brusque during cross-examination and some minor aspects of her evidence might be open to question, I am not persuaded that her evidence in respect of material issues was unreliable.
Overall, I am not satisfied that there was anything in the evidence or circumstances of the EFX witnesses to suggest that they were being untruthful, or that their evidence had been tailored or influenced by self-interest, or tainted by "loser's regret", or that, beyond the ordinary fallibility of recollections as a result of the effluxion of time, their evidence was unreliable in any material respects. The witnesses were, for the most part, willing to make concessions where appropriate and were not overly combative or evasive in cross-examination. I saw little, if anything, in their demeanour while giving evidence to suggest that their evidence was untruthful or unreliable in any material respect.
In any event, the evidence of the EFX8 was generally consistent with and corroborated by the recordings and transcript and other documentary evidence.
The general thrust or theme of the questions that were put to the witnesses in cross-examination was that: they were willing participants in the trading in question; as part of the "on-boarding" process they had the opportunity to read, among other things, EuropeFX's PDS and Terms of Business and had represented to EuropeFX that they had read and understood those documents; they read notices on various EuropeFX documents that warned them about the risk of trading in CFDs and Margin FX Contracts and had heard EuropeFX representatives read them similar notices or disclaimers; they were aware of the risk in trading in CFDs and Margin FX Contracts; they were told by EuropeFX representatives, and understood, what CFDs and Margin FX Contracts were; they were similarly told about and understood other concepts relevant to trading in CFDs, such as leverage and margin; and they told EuropeFX representatives, or at least intimated to them, that they understood those concepts. Much of that cross-examination proceeded by counsel for EuropeFX taking the witness through what was recorded in parts of the transcripts of their calls with EuropeFX representatives.
There was, it must be said, a general air of unreality in relation to some of the propositions that were put to the witnesses in cross-examination. That air of unreality becomes particularly apparent when those propositions, and the transcripts which were the focus of the questioning, are considered in the context of the circumstances of each of the witnesses at they were dealing with EuropeFX. Those circumstances included their almost complete lack of knowledge and experience in respect of derivatives, derivative markets and trading, and the concepts that must invariably be understood before one could sensibly trade in complex financial products such as CFDs and Margin FX Contracts. The air of unreality is even more stark and apparent when one actually listens to the recordings of the telephone calls, particularly those parts of the calls where the EuropeFX representatives purport to explain what CFDs and Margin FX Contracts are, or purport to explain concepts such as leverage and margin and how those critical concepts apply and operate in the context of trading in CFDs and Margin FX Contracts, or purport to advise the witness of the inherent risks in trading in CFDs and Margin FX Contracts.
While I will revisit those issues to some extent when separately analysing the evidence of each of the EFX8 witnesses, having read and heard the evidence of the witnesses and either read the transcript, and listened to those recordings played in Court, of the key exchanges between the witnesses and EuropeFX representatives, my overriding and overwhelming impressions are: first, that, whatever they may have been told by EuropeFX representatives, none of the EFX8 had any real or sound understanding of what CFDs and Margin FX Contracts were; second, that none of the EFX8 had any real or sound understanding of the key concepts of leverage and margin and how they applied to the trading that they engaged in; third, that, as a result, none of the EFX8 had any real or sound understanding or appreciation of the degree or extent of the risks involved in their trading in CFDs and Margin FX Contracts generally; fourth, none of the EFX8 had any real or sound understanding or appreciation of the risks involved, or advisability of, particular trades that they executed, either on the advice or suggestion of EuropeFX representatives or independently; and fifth, when they executed trades, either while they were on the telephone with a EuropeFX representative or otherwise, the EFX8 relied heavily on the advice and guidance of the EuropeFX representatives.
One other common feature or theme of the cross-examination should be noted. Each of the witnesses was cross-examined at some length by reference to parts of the transcripts of the telephone calls where, after being told something by the EuropeFX account managers, the witnesses respond "yeah", or "uh-huh", or "mmm" or words or sounds to similar effect. On occasion, the witnesses responded in those terms when the account manager asked if they understood something they had purported to explain. The proposition that was then put to the witnesses was, in effect, that they had represented to the EuropeFX account manager that they in fact understood the explanation. When the transcripts are read fairly and in context, however, it is readily apparent that on most occasions, the witnesses' responses of "yeah", "uh-huh" and "mmm" are really no more than an indication that the witnesses were listening and endeavouring to follow what was being said. Moreover, in many, if not most, instances, the explanations given by the account managers in respect of CFDs and concepts such as leverage and margin were borderline nonsensical. The suggestion that the witnesses in fact understood the explanations, or intimated to the account managers that they understood the explanations, is in those circumstances somewhat fanciful. So too is the suggestion that the account managers actually believed, or had reason to believe, that the EFX8 actually had any sound understanding of what CFDs and Margin FX Contracts were, or had any sound understanding of critical concepts such as leverage and margin.
Bearing those general observations in mind, it is useful now to summarise the evidence of each of the EFX8 and make some general findings concerning their dealings with EuropeFX and its representatives. I do not propose to give a completely comprehensive account of every telephone communication between each of the EFX8 and the EuropeFX representatives with whom they dealt. Given the huge volume of material that would simply not be feasible. Likewise, I do not propose to give a comprehensive account of every trading position opened or closed by each of the EFX8 and the circumstances in which those trades occurred. That would require a judgment of War and Peace dimensions. Rather, I will address the evidence and make findings concerning various relevant topics, including: how each of the EFX8 first came to be contacted by or engage with EuropeFX; the "onboarding" procedure and how the EFX8 came to open live trading accounts, including the information they were given and the information they provided in the course of that process; the extent to which each of the EFX8 had any prior knowledge of, or trading experience in respect of, CFDs, Margin FX Contracts, or any like financial products; the nature and tenor of the information, advice and recommendations the EFX8 received from their EuropeFX account managers, including whether they were encouraged or even pressured to trade and deposit funds and whether they were subjected to any inappropriate or untoward conduct; the end result of their trading; and their engagement with EuropeFX's complaints resolution process.
The following summaries of the evidence of the EFX8, and the findings of fact that I have made on the basis of that evidence, are based on my consideration of: the written and oral evidence of each of the witnesses; my observations of each of the witnesses as they gave their oral evidence, mainly in cross-examination; the transcripts of the telephone calls between the witnesses and the EuropeFX representatives with whom they dealt; the audio of some parts of the conversations that were played in Court; and the documentary evidence concerning the trades made by each of the witnesses. I have, of course, also had regard to the parties' submissions, including their voluminous written submissions and summaries, concerning each of the witnesses and their evidence.
I should reiterate and emphasise that what follows purports to be no more than summaries of the some of the key aspects of the evidence. The evidence relating to the EFX8, particularly the recording and transcripts of the telephone calls, was vast and voluminous. It would take hundreds, or perhaps even thousands, of pages to provide comprehensive accounts of the evidence in these reasons. Likewise, the summary does not separately refer and respond to each and every submission made by the parties in respect of each witness. The parties' written submissions, including many annexed schedules and summaries, were thousands of pages long. I have read the written submissions, including the summaries and schedules, and endeavoured to respond to what I perceived to be the key or central submissions. I was assisted in that regard by the parties' oral submissions which, as one would expect, tended to focus on the key submissions.

[59]

Initial contact with EuropeFX and the opening of an account

Mr Wilson first came to engage with EuropeFX after clicking on a link in an advertisement on a social media platform that referred to Bitcoin and other cryptocurrency trading. After clicking on that link, he was prompted to provide his name, email address and mobile telephone number. Shortly thereafter, he received a telephone call from a woman who introduced herself as a representative of EuropeFX. His recollection was that she set up his trading account during that telephone call.
Mr Wilson's evidence was that, as part of the account opening process, he provided certain personal and financial information in response to questions that were put to him over the telephone. He denied that he provided that information in an online questionnaire. The information that he provided included that: his annual income was between $30,000 and $99,999; his liquid net worth was between $30,000 and $99,999; and that he had no trading experience in options, commodities, futures or CFDs. Documentary evidence recorded that Mr Wilson had also told the EuropeFX representative that he had experience in trading in "OTC forex exchange". Mr Wilson's evidence, however, was that he did not have any such experience and did not even know what that term or expression meant. He also maintained that, at the time he traded with EuropeFX, he did not know what options, futures or CFDs were. I accept that evidence.
Mr Wilson agreed in cross-examination that during the account opening process he was told that he could download certain documents, including EuropeFX's PDS and Terms of Business. There is nothing to suggest that the EuropeFX representative who "onboarded" Mr Wilson told him that it was important for him to read those documents or encouraged him to do so. His best recollection was that he did skim read the PDS and briefly looked at the Terms of Business. He understood that they were important documents.
EuropeFX submitted that there was no basis to conclude that Mr Wilson would not have been able to understand the PDS. I reject that submission. In any event, it misses the point. As already noted, the EuropeFX representative who assisted Mr Wilson to open his trading account did not require or even encourage Mr Wilson to read the PDS before his account was opened. It is perhaps not surprising in those circumstances that he only skim read it. There is also no indication that the EuropeFX represented endeavoured in any way to ascertain whether Mr Wilson understood the contents of the PDS and Terms of Business. I reject the suggestion that a person with no prior knowledge or experience of CFDs, Margin FX Contracts or similar products would be able to acquire a sound understanding of those products and the risks involved in trading in them by skim reading the PDS. While Mr Wilson may have acquired a very general understanding of the nature of the products referred to in the PDS, the evidence of his subsequent exchanges with his EuropeFX account managers reveals that his understanding was at best cursory or superficial.
I also reject EuropeFX's submission that there was no basis to find that it was foreseeable to EuropeFX that Mr Wilson did not or would not have understood the PDS. The inference I would draw from the evidence is that EuropeFX made no effort to ensure that Mr Wilson had read the PDS, let alone that he understood it. In any event, as will be seen, it must have been obvious to the account managers who subsequently dealt with Mr Wilson that, even if he had read the PDS, he had not fully understood it.

[60]

Understanding of CFDs, Margin FX Contracts and trading risks

As has already been noted, the overall substance and effect of Mr Wilson's evidence was that throughout the period he traded with EuropeFX he had no real understanding of the nature of CFDs or Margin FX Contracts. He also had no real appreciation of the risks involved in trading in those products. I accept his evidence in that regard.
While Mr Wilson was no doubt an intelligent and educated man, he was not financially sophisticated and had no prior knowledge or experience in respect of trading in complex and risky financial products like CFDs and Margin FX Contracts. His education and training in design, massage, permaculture and geotechnics would not have assisted him in that regard. The fact that Mr Wilson had, on the advice of friends or family, previously invested modest sums in cryptocurrency and bought a parcel of shares through an online broker hardly made him an experienced or sophisticated trader or investor.
There is no reason to doubt Mr Wilson's evidence that, when he first engaged with EuropeFX, he did not know what CFDs or Margin FX Contracts were. It is also readily apparent that he had no appreciation of the risks involved in trading in those products, or any real understanding of concepts that would need to be understood before one could understand or appreciate why trading in them was risky. For example, Mr Wilson's evidence, which I accept, is that he did not know what leverage was. If he did not know what leverage was, it is difficult to see how he could have appreciated the nature and extent of the risk involved in trading in CFDs or Margin FX Contracts.
Perhaps more significantly, it is readily apparent that Mr Wilson did not gain any sound understanding of CFDs, or concepts such as margin and leverage, or the risks associated with trading in leveraged derivatives like CFDs and Margin FX Contracts, as a result of anything that he was told during his lengthy telephone exchanges with the EuropeFX account manager with whom he mainly dealt. I will refer to some specific exchanges between Mr Wilson and his account manager shortly. It suffices at this point to note that the few explanations that the account manager gave Mr Wilson in relation to those products and concepts were at best cursory, simplistic and very difficult to understand. Even a seasoned trader would have found it difficult to comprehend much of what the account manager was saying. Mr Wilson also made it clear to the account manager that he was not taking in or understanding much of what the account manager was saying. For example, towards the very end of the period during which he traded, the following exchange occurred between Mr Wilson and his account manager: BEN WILSON: Right. So the other thing that I find annoying about this is because there's so many features and functions of what this is doing here, but you're - I understand you're guiding me through, and I'm appreciative of it, but it's like it's a lot to take in as well and to try and take in. You know, I still feel like I'm going in blind. You're explaining the concepts to me. I understand that. JACOB: I don't think it is, my friend.
Likewise, I am unable to accept that anything that Mr Wilson read, or anything that the account manager named Jacob said to him, adequately apprised Mr Wilson of the risks inherent in trading in CFDs. He no doubt knew that there were some risks, though he did not fully understand or appreciate the full nature and extent of the risks, or how those risks compared with the risks involved in trading in other financial products such as shares.
It is true that in his first telephone call with Jacob, Jacob said that he was "obligated" to read Mr Wilson a disclaimer in the following terms: Trading in forex and CFDs on margin carries a high level of [risk to] capital. This forex may not be suitable to all the investors. The markets are volatile and subject to risk. EuropeFX provides general advice only. This won't take into account any individual financial situation, needs or investment objectives, and the advice may not be appropriate at the time of providing the advice. I will provide you with general market information according to third party sources. In addition EuropeFX does not accept superannuation funds.
Jacob also quickly read the disclaimer during a later telephone call. Mr Wilson's evidence was that he found it difficult to understand the disclaimer. He did not understand terms used in the disclaimer, such as "forex", "CFDs" and "margin" and, while he understood that there was a risk with trading, he did not understand how the risk in trading in EuropeFX's products was riskier than, for example, trading in shares on a stock exchange. As for the reference to "general advice", Mr Wilson did not reflect on what that meant in the context of his relationship with EuropeFX, or how the statement that EuropeFX only provided general advice was consistent with the advice that Jacob came to give him.
I accept Mr Wilson's evidence concerning his understanding of the risk notice or disclaimer. While he agreed in cross-examination that, as a general proposition, he would have understood some of the words used by Jacob when he read the disclaimer, it does not follow that he fully understood or appreciated the import of what Jacob read to him at the time. Perhaps more significantly, Mr Wilson's evidence was that Jacob's rather formulaic reading of the risk disclaimer was "overruled" by the nature of his dealings and relationship with Jacob. His evidence included: … I probably state I would have heard it all but whether I actually understood and comprehended what the actual terms was providing or the gravity of it because he was an account manager and in creating that personable connection was kind of - I feel like that sort of overruled the idea that, you know, there was this one person or an account manager set up for me. He was very specific and took the time to ask me a lot of questions about my personal life and try to get to know me.
Mr Wilson's obvious confusion was in my view perfectly understandable in all the circumstances.

[61]

Trading and communications with EuropeFX account managers

Mr Wilson's principal point of contact with EuropeFX was an account manager named Jacob, with whom he spoke over the telephone. Mr Wilson had lengthy telephone calls with Jacob on 13 and 16 September 2019. ASIC alleges that during those telephone calls Mr Wilson was given personal financial product advice on 22 occasions. As will be seen, I have found that Jacob gave Mr Wilson personal advice on at least four occasions. ASIC also alleged that Jacob made false or misleading representations on 21 occasions. As will be seen, I have found that Jacob made at least three misleading or deceptive statements to Mr Wilson.
Mr Wilson's evidence was that Jacob led him to believe that he was his [Mr Wilson's] "financial adviser or broker", and that Jacob would guide him and work together with him to achieve his objectives. I accept that evidence. During their initial discussions, Jacob told Mr Wilson that he would be part of Jacob's "team", and that Jacob would be with him "step-by-step to understand what you want" so he [Mr Wilson] could "accomplish something". In that context, Jacob asked Mr Wilson a series of questions about his personal situation and financial position, what he wanted to "accomplish" and what his "goals" were in trading with EuropeFX. Mr Wilson no doubt expected or understood that Jacob would take his financial position and objectives into account during their dealings. Why else would Jacob have asked for that information?
Jacob also told Mr Wilson about various "packages" that EuropeFX made available. To take advantage of those packages, Mr Wilson would have been required to deposit between $25,000 and $100,000 into his trading account. As will be seen, Jacob subsequently sought to persuade and pressure Jacob to take up one of those packages. Jacob also told Mr Wilson that EuropeFX was regulated by ASIC.
At Jacob's suggestion, Mr Wilson agreed to download an "app" which allowed Mr Wilson to share his computer screen with Jacob. When Mr Wilson spoke with Jacob, Mr Wilson would often share his screen with Jacob and Jacob would tell Mr Wilson where to move his mouse and click to perform actions such as opening or closing positions.
One of many things that is remarkable about Mr Wilson's first substantive conversation with Jacob is that, despite being aware that Mr Wilson had no prior knowledge of or experience in trading CFDs or Margin FX Contracts, he made no attempt to ascertain whether Mr Wilson had any knowledge or awareness of what a CFD or Margin FX Contract was, and made no attempt to explain what those financial products were, or what the risks involved in trading in them were, before giving Mr Wilson a trading "opportunity" which was said to be a "live event … on gold". That opportunity was supposedly based on a "signal" provided by "Trading Central". Jacob then went on to explain some trading patterns regarding gold.
At the time, Mr Wilson believed that Jacob was recommending that he invest in gold, and he understood that he would be buying gold. He plainly did not appreciate that Jacob was suggesting he open a position in gold CFDs. Indeed, it is clear that he did not even understand what a gold CFD was. Jacob then went on to give Mr Wilson an incomprehensible explanation about the profit he could supposedly make if he opened a trade in gold. Jacob then asked Mr Wilson which of the various packages he would like to take. After Mr Wilson appeared to baulk at taking up any of the packages, Jacob gave Mr Wilson the following explanation of "risk management": JACOB: But there is risk management. I mean it's numbers. Right now it's 50/50. The numbers, right. BEN WILSON: Mmm. Mmm. JACOB: There is something, they're called "pending orders". Do you know what is it? BEN WILSON: No. JACOB: The risk management is already - okay. When you're trading with a package you already have 50 per cent discount on the commission of the trade, okay, first of all. Second of all, there is something that called "pending orders". That means that if right now you're opening a trade on gold to buy, right - you took let's say the biggest one. You have A$100 - BEN WILSON: Yeah. JACOB: -- in your account. Right. BEN WILSON: Yeah. JACOB: So approximately $50,000 will be executed for the trade. Right. BEN WILSON: Right. JACOB: Okay. Beautiful. So it's called "buy". Now you can make money in the financial market on both of the direction from "buy" and "sell". Okay. BEN WILSON: Yeah. JACOB: "Sell" means that you want to make money on the potential movement down. "Buy" means that you want to make money on the potential movement up. Right. BEN WILSON: Yep. Yep. JACOB: Beautiful. If right now you are opening on buy position, okay, on a buy position, you are opening $50,000. That means that you have on every dollar in one dollar out, right, sitting in your free margin to protect you from the fluctuation. Make sense? BEN WILSON: Yes. JACOB: It sounds to me like you are not sure. BEN WILSON: Yeah, no. Run that by me again.
It is not surprising that Mr Wilson asked Jacob to "run that by [him] again". Jacob's further explanation, however, was equally incomprehensible.
I do not propose to provide any further detailed commentary concerning the nature and quality of Jacob's explanations relevant to trading in CFDs and Margin FX Contracts. It suffices to note that in my view Jacob did not give Mr Wilson any rational or comprehendible explanations about the nature of CFDs or Margin FX Contracts, or about concepts such as leverage and margin, or the nature and extent of the risks involved in trading in CFDs or Margin FX Contracts. It must also have been readily apparent to Jacob that Mr Wilson had no sound understanding or appreciation of what he was going to be trading in or the risks that were involved in that trading. That did not, however, deter Jacob from recommending trades to Mr Wilson, or effectively directing him how to effect those trades on his trading screen.
It is obvious from the exchanges between Jacob and Mr Wilson, considered as a whole, that Mr Wilson was heavily reliant on Jacob when it came to opening and closing CFD positions and trading generally. It is equally clear from the engagement between Jacob and Mr Wilson that Jacob actively fostered that reliance. Jacob told Mr Wilson that: "[w]henever you need me I will be there"; and "I'm here on the phone whenever you need me"; and "I will be dedicated to you". Jacob (somewhat bizarrely) went so far as to liken the relationship that he envisaged would exist between him and Mr Wilson to a marriage relationship: JACOB: Lovely. And I can tell you this, step-by-step you will understand more and more. Exactly like - I like to consider trading like marriage. Okay. If you are not living with a person in the same house you will never trust her and you will never have with her real chemistry. Okay. Everything is fake before you are living together. Do you agree with me? BEN WILSON: Everything is fake before what? JACOB: Before you are living together. Because a lot of times people can go out together for one year and then they are living together, and after one week they cannot - they cannot suffer one another.
Mr Wilson's reliance on Jacob was in any event perfectly understandable in the circumstances. He relied on Jacob because he had no idea what he was doing.
On more than one occasion, Jacob recommended, advised or at least intimated that Mr Wilson should either open or close positions and told Mr Wilson where to scroll and click on the trading screen to effect those transactions. That advice was often said to be based on "signals" obtained from third-party websites, such as "Trading Central" and "Investing.com". Jacob told Mr Wilson that he would be "with you on the line to get you the signals from Trading Central". When Mr Wilson asked Jacob about his role, Jacob agreed that it was to advise Mr Wilson when it was "best to buy or sell". Jacob's advice in that regard was frequently accompanied by suggestions about how much profit could be made from the proposed trades. To give but one example, after intimating that Mr Wilson should open a position in a gold CFD based on something that was supposedly said on Investing.com, Jacob said: Now the short take profit, according to Investing.com, potentially, is $1,518.70 … Would you like to open that trade? So the volume is 0.30. This is what you want right? … Write down "0.30", yeah. And then you take profit according to Investing.com is $1,518 potentially - 1518.
Mr Wilson's evidence was that he often felt pushed or pressured by Jacob to make particular trades or deposit further money to his trading account. He also said that he felt that he was "in a vulnerable state … kind of succumbing to suggestions". I accept that evidence. It is readily apparent from the transcripts of the telephone calls why Mr Wilson felt that he was being pressured and why he considered himself to be vulnerable: see for example rows 3, 7, 8 and 10 of Annexure E.1 to the Statement of Claim (SOC). It suffices to a few specific examples.
On 16 September 2019, Jacob again asked Mr Wilson which of the "packages" he would like to take. When Mr Wilson again told Jacob that he could not afford to take any of them - meaning that he could not deposit $25,000, which was the smallest package. The following exchange then occurred: JACOB: Okay? I'm with you. Ben, whatever you decide, I'm with you. So far you've already made on your account, I don't know, 100 or $200, right? BEN WILSON: Mmm. JACOB: But in the end of the day, what you're going to do with it? To buy a sandwich? It's not what I want; it's what you need. You came here with a goal. You told me your target. I'm just giving you the opportunity -- BEN WILSON: Yeah. JACOB: -- according to Trading Central. BEN WILSON: Yeah. JACOB: What is the maximum that you can afford for yourself - the maximum? Which package? BEN WILSON: Well, where I'm at at the moment or the one below - the one up, which is the gold, but I can't do that right now. JACOB: How long do you need -- BEN WILSON: And like - well, like we were talking about the other day, with - you were going to give me seven days to work it out and to see if I could develop that trust and -- JACOB: My friend, the oil -- BEN WILSON: -- that, you know. JACOB: The oil opportunity is here. It's not tomorrow. It's not tomorrow, for God's sake. BEN WILSON: Yeah, I know, yeah. JACOB: You know what - you know what, let's do something else. Leave it, leave it, leave it, leave it. Leave it. Half of the smallest package, okay, is 12,500. BEN WILSON: Yeah. JACOB: Okay, by adding another 7,500, with your card, right here and right now, you can take advantage on 1,875 barrels of oil, okay? BEN WILSON: Yeah. JACOB: After this trade, two things can happen. One, if you see some potential profit, you understand the potential; two, you - if everything goes according to the plan, we have trust and confidence; three, you know that you could make better - better results, but you didn't, but at least you will have the energy of how it feels to make beautiful amounts of money potentially. Because the potential profit of $12,500 is 11,000 US -- BEN WILSON: Yeah. JACOB: -- according to Trading Central. Is that okay with you, to go for half with the gold? And more than that, I will give you the benefit of the gold for one week till you decide.
On another occasion, when Mr Wilson again baulked at depositing $25,000 to secure one of the packages, Jacob said: "Wait a second. It's about confidence and trust - so you really don't have the confidence? Be honest with me. Very important". On other occasion, when the same suggestion was broached, Jacob said: "[w]hat is the closest amount that you can make to 25k and to feel confidence with and give me the benefit of the doubt by the end of next week?" On yet another occasion, Jacob said the following to Mr Wilson: How much - how much liquid you have? Let me request you this: how much liquid you have? How much you can generate right now if you are really scratching yourself to at the bottom of the barrel?
On some occasions, Mr Wilson deposited funds while he was on the phone with Jacob.
I accept Mr Wilson's evidence that he felt pushed or pressured by Jacob to trade and deposit more money into his trading account. It is again readily apparent from the transcripts of the telephone calls why Mr Wilson felt pressured.
Jacob also advised Mr Wilson on occasion to engage in certain trading strategies. One of those strategies was referred to as "double direction trading" or "DDT". In simple terms, that strategy involved opening both buy and sell positions in a CFD. Mr Wilson's evidence was that he was confused by Jacob's explanation of that strategy and did not understand the concept. It is perhaps not difficult to understand why when one considers the explanation that was given to Mr Wilson, which included: JACOB: Let's say right now, okay, you open one position up, one position down, right? BEN WILSON: Mmm-hmm. JACOB: You're waiting for one of the directions to make more money than the commission. You're closing it and you're reopening it. BEN WILSON: Yeah. JACOB: You understand? And with the same size, the same direction that you close, and then actually you always have one position on buy, one position on sell, so you are protected. You cannot lose in the end in the day because as long as it's like this - so if here you are in loss of $200, here you are in profit of $200, you understand? BEN WILSON: Mmm.
Jacob subsequently effectively directed Mr Wilson to open a number of buy and sell positions in accordance with that strategy. He then proceeded to give Mr Wilson the following advice: JACOB: Exactly. You paid commission with 5K, but remember once one of them closing their commission, making more than the commission, closing it, and then you reopen it. Always you need to be here to reopen it. But remember, now, if you're going to sleep or something, remember you're paying double commission, double swap, but always you can take advantage on both of the directions and this is why it's so potential and so beautiful. BEN WILSON: So if I go to sleep -- JACOB: So you're keeping it like this, hedged. BEN WILSON: The -- JACOB: If you want. BEN WILSON: Sorry, say that again? JACOB: So if you are going to sleep, you can keep it hedged; that's it. You wake up in the morning and you do it again, if you want.
Mr Wilson's evidence was that at the time he did not understand what Jacob meant when he referred to paying double commission and double swaps. He also did not understand exactly what Jacob meant when Jacob said that he could keep his trades hedged while he slept. He understood at the time that the market would keep on running overnight. As events transpired, Mr Wilson went to sleep and left open the positions that he had opened pursuant to the double direction trading strategy. When he awoke, those positions had automatically closed for a total loss of $18,157.59, leaving Mr Wilson with a balance of $97.00 in his trading account.
Many of Mr Wilson's trades were executed while he was on the telephone to Jacob. On those occasions that Mr Wilson instituted trades while not on the telephone with Jacob, it is fairly apparent that he did so in an attempt to follow the advice or instructions that Jacob had given him, including in respect of double direction trading. Mr Wilson did open four positions late one night when he was not on the phone with Jacob. He subsequently received notification that his account had a low margin. After receiving that notification, he unsuccessfully attempted to contact Jacob and then closed one sell position and opened a further sell position in an attempt to protect the account. That attempt was unsuccessful. Several of his open positions were automatically closed overnight at a substantial loss.

[63]

Ms Love (EFX2)

Ms Love affirmed a detailed affidavit and was cross-examined at length.
As adverted to earlier, EuropeFX was critical of Ms Love's evidence. It submitted that it was "available to the Court to find that she was evasive in her answers, and that some of her evidence can only be understood as an attempt to distance herself from her conduct, now regretted, in actively pursuing trading with [EuropeFX] and her post facto regret for the losses she suffered as a result of her trading". That submission appeared to be primarily based on Ms Love's evidence when cross-examined about a sentence in her affidavit to the effect that she did not consider it likely that she was responsible for some trades which appeared to have been made while she was not on the telephone with her account manager. EuropeFX submitted that her evidence in that regard was implausible and that Ms Love was unable to explain why she included that evidence in her affidavit.
It may perhaps be accepted that Ms Love's evidence in cross-examination on that topic was not entirely pellucid or satisfactory. I would not, however, characterise her responses to the questioning as being evasive. Ultimately Ms Love maintained, perhaps not surprisingly, that she had no recollection of making the trades in question. In any event, that short exchange in cross-examination was not reflective of her evidence as a whole. My assessment of Ms Love was that she was an essentially frank and honest witness who gave credible and reliable evidence about her dealings with EuropeFX as she recalled them. She was at times blunt and curt in cross-examination, though it does not follow that she was evasive. I reject the submission that her evidence was tainted in any material way by an attempt to distance herself from her conduct or by an post facto regret for the losses she suffered trading with EuropeFX. I also reject the underlying premise of EuropeFX's submission to the effect that she "actively pursued" trading with EuropeFX.
Ms Love was 57 years old when she began dealing with EuropeFX. She was an interior designer. She had very limited investment experience. She had bought and sold properties and owned some shares with her former husband. She had never traded or invested in CFDs or any other derivatives.
Ms Love made an initial deposit with EuropeFX of $300 on 30 January 2019. She ultimately deposited a total of $39,300. She traded with EFX from 3 April to 5 April 2019 and opened approximately 30 CFD positions. She lost all the money she deposited with EuropeFX, though she recovered $20,000 from EuropeFX after lodging a complaint.

[64]

Initial contact with EuropeFX and the opening of an account

Ms Love first came to engage with EuropeFX after she clicked on an advertisement which was either on Facebook or in an email she had received. That advertisement had something to do with investing. When she clicked on the advertisement, she was directed to an online form which she completed. She later received a telephone call from a man named Gavin who said he was from EuropeFX and who said they would assist her in activating her account. As discussed earlier, it is likely that Gavin was in fact from Global Win, the company to which EuropeFX had outsourced the onboarding of prospective customers.
Ms Love told Gavin that she had limited trading experience. It would appear from a later conversation that Ms Love had with another EuropeFX representative, Benjamin, that Ms Love had "worked in stocks and shares a long time ago" but that she did not know a lot about actual or current trading. Gavin told her that most of EuropeFX's clients had no trading experience and that he would put her in contact with an account manager who would guide her through the process and would "kind of holding [her] hand". Gavin also asked her what she was "looking to achieve" with the account. He told her that EuropeFX was regulated "under" ASIC and was a "local-based" company.
After getting Ms Love to log into the EuropeFX website, Gavin asked Ms Love to enter some personal details into an online questionnaire. At one point during the telephone call, Gavin transferred the call to another representative named Zack who also assisted and directed Ms Love in relation to the completion of some parts of the questionnaire before transferring the call back to Gavin. While Ms Love had no clear recollection concerning the completion of the questionnaire, documentary evidence suggested that she provided the representatives with certain information concerning her annual income, her net worth and her trading experience. The information included that she had no trading experience in securities, options, commodities, futures, CFDs or foreign exchange.
The evidence also indicated that, at Gavin's suggestion, Ms Love clicked on a box which indicated that she had read a "risk disclosure" notice. That notice relevantly read as follows: Risk Disclosure Notice. Based on the answers you provided in the Assessment of Appropriateness section of the Questionnaire you completed earlier, together with the risks associated with CFD trading, we do not consider that a CFD account is appropriate for you. If, after further consideration, you still wish to open a CFD account you should be aware that you may be exposing yourself to risks that fall outside your knowledge and experience. You should familiarize yourself with the demo account available on our platform and the free educational material and risk warning for CFDs on our website before commencing trading with us. You may also wish to seek independent financial advice. CFDs are leveraged products which carry a high level of risk to capital. Prices may move rapidly against you and you could lose your entire deposit. If you wish to continue with your application, please accept the declaration below by ticking the box. If you have any queries, please do not hesitate to contact us. Declaration - I acknowledge your warning that a CFD account may not be appropriate for me. However, I wish to proceed with my application and I understand the risks associated with CFD trading. I am aware of your demo account and the educational material on your website. Based on the information above, EuropeFX believes that trading leveraged Foreign Exchange would definitely entail risk on your part. (Irrelevant symbols and notations deleted)
Ms Love's evidence was that she had no recollection of reading that notice. She also maintained that, had she understood that EuropeFX did not consider that a CFD account was appropriate for her, or that CFDs were "leveraged products which carry a high level of risk to capital", she would not have proceeded to open an account. Her recollection was that she clicked on the box indicating that she had read the notice because Gavin told her to do so and she believed that she would receive training before she started trading. In cross-examination, Ms Love also said that she subsequently endeavoured to locate or access certain documents, including the risk disclosure notice, on EuropeFX's website. Her evidence was that she was unable to locate or access those documents at the time.
The transcript of the telephone call between Ms Love and Gavin supports Ms Love's evidence about the risk disclosure notice. This is what Gavin said to Ms Love about the notice as he guided her through the onboarding questionnaire: … And then you will have a little risk disclosure window that will pop up. We're going to need to click the little square that's inside.
As can be seen, Gavin did not ask or tell Ms Love to read the notice. He simply told her to tick the box. He simply told her to tick the box that apparently appeared on the screen. In all the circumstances, I accept Ms Love's evidence that she did not read the risk disclosure notice. It may perhaps be accepted that it was unwise and imprudent for Ms Love to have clicked on the box without having read and understood the notice. It is, however, perhaps understandable in the circumstances. Gavin minimised the importance or significance of the notice and told Ms Love to tick the box and move on.
In cross-examination, Ms Love agreed that if she had read the notice, she would have understood the words in notice "if not the actual technical terms". That concession hardly assists EuropeFX. Even putting to one side that the scenario that was put to Ms Love was entirely hypothetical given that she was not been asked to, and did not, actually read the notice, it is in any event difficult to accept that Ms Love would have understood the real import of the notice given that she did not know or understand the meaning of "technical terms", by which she meant terms like CFDs, margin and leverage. I accept Ms Love's evidence that when she was onboarded she did not know what a CFD was and had no understanding of the concept of leverage. It is, in those circumstances, difficult to see how she could have fully understood the true import of statements concerning the risk involved in trading in CFDs and leveraged products.
The next question on the questionnaire was" "Do you understand the nature and risk of margined transactions?". The evidence indicates that Ms Love ticked the "yes" box in answer to that question, despite the fact that she obviously did not understand the nature and risk of margined transactions. The transcript of Ms Love's telephone call with Gavin clearly indicates that she ticked the "yes" box because Gavin told her to do so. This is what he said: Now, the next question is relevant to someone that's going to be trading on their own. Okay? As I mentioned, you are going to be guided by our manager. So what we are going to click is he is going to click yes and he is going to go over these details with you.
As can be seen, Gavin did not ask Ms Love whether she actually understood the nature and risk of margined transactions. Rather, he intimated that it was unnecessary for her to turn her mind to that question at the time because at some later point she was going to be "guided" by a manager who would "go over these details" with her.
The evidence also indicates that Gavin took a similar approach to that part of the questionnaire which recorded that Ms Love had read and understood the PDS, Terms of Business and Financial Services Guide. Gavin told Ms Love to "take a look at them", but then said that she could also "come back and print them out". When Ms Love said "[s]o I have to just tick all these, obviously, and agree?", Gavin said "correct". It must have been blindingly obvious to Gavin at the time that Ms Love had not in fact read any of the documents. It is also worth noting that the exchange concerning the documents occurred over approximately 30 seconds. Gavin also told Ms Love that the "terms and agreement" simply said that Ms Love was "not obligated to us at any given time." It is not surprising, in those circumstances, that Ms Love did not read the Terms of Business. Gavin effectively intimated that it was unnecessary for her to do so.
It should perhaps be noted at this point that, in its defence, EuropeFX relied heavily on the fact that, when they were onboarded, EuropeFX customers were required to and generally did click on a box indicating that they had read a risk disclaimer notice. ASIC was only able to obtain four recordings of telephone calls of the onboarding procedure. The recording of Ms Love's exchange with Gavin and Zack was one of them. The other three recordings included very similar exchanges between EuropeFX or Global Win representatives and prospective customers.
The evidence relating to EuropeFX's onboarding of customers and the inferences that can be drawn from it is discussed in detail later in these reasons. It is sufficient to observe at this point that, in each of the recorded conversations, the representative guided the prospective customer through the online questionnaire and effectively told them how to answer the questions. In each of the conversations the representative directed the customer to tick the box indicating that they had read the risk disclaimer notice without either reading the disclaimer to the customer, or taking any step to ascertain or ensure that the customer had read the notice, or taking any step to ascertain or ensure that the customer understood the notice. In each of the conversations, the representative effectively directed the customer to tick the box indicating that they understood the nature and risk of margined transactions, including by telling the customer that the EuropeFX account manager would later explain the question. The representative never explained what a margined transaction was or gave any explanation about the risks of margined transactions. The representative made no attempt to ascertain whether the customer in fact had any understanding or appreciation of the risk of margined transactions, even though it must have been readily apparent that the customer in fact had no idea what a margined transaction was.

[65]

Understanding of CFDs, Margin FX Contracts and trading risks

When she commenced trading with EuropeFX, Ms Love did not understand what a CFD was. Her evidence was that she believed that CFDs were like shares and that, when she opened a trade in a CFD, she was acquiring an underlying asset. It is also readily apparent from Ms Love's evidence, and from her many telephone discussions with EuropeFX representatives, that she did not have any real or sound understanding of the concepts that it would have been necessary for her to understand if she was to have any appreciation of the risks involved in trading in CFDs, such as margin or leverage, or trading concepts such as hedging.
It is equally readily apparent that Ms Love's knowledge or appreciation of the nature of CFDs and concepts such as margin and leverage did not appreciably or materially improve as a result of anything any of her account managers said to her. I was not taken to, and was unable to find, a single instance of a EuropeFX representative giving Ms Love a meaningful or comprehendible description or explanation of a CFD in any of the many telephone conversations the recordings and transcripts of which were in evidence.
As for an explanation of key trading concepts, the following example of a EuropeFX representative's explanation of leverage rather typifies the nature and quality of the explanations of important trading concepts given to Ms Love by EuropeFX representatives. The explanation was given by reference to an example involving 10,000 units of oil. The representative, Benjamin, asked Ms Love to put 10,000 in her calculator and multiply it by what he said was the market price of 62.35. That produced a figure of 623,500. Benjamin then asked Ms Love if she had that sort of money. When Ms Love, perhaps not surprisingly, responded that she did not, the following exchange occurred: BENJAMIN I know this, no. Now, what I want you to understand that if you go to the bank - if you go to other - other companies, if you're not doing it with the VIP department, this is what you need to invest in order to trade on 10 contracts of crude oil. But what happened there in the VIP department, you have leverage. Do you know what leverage is? MS LOVE: Yes. BENJAMIN: What is leverage? MS LOVE: Is that when you buy short or buy short or sell? I don't know. I don't know what's the -- BENJAMIN: No, in some other - in some other financial institution, yeah, you're right, in some other financial institution. But here, it works little bit - little bit differently. Leverage, it's a buying power, which mean if you want to take 10 contracts and you - and what you get right now, it's the buying power, which mean you take all this amount. You take all this amount and you divide it by 50. The leverage is 50 - five zero. MS LOVE: Yeah. BENJAMIN: Instead to invest $623,500, the investment is just 12,470 and the potential profit is 6 - it's 3,000 US dollars. This is the leverage.
Ms Love's evidence was that she did not understand what Benjamin meant when he referred to leverage, or what he meant when he said "[t]he leverage is 50". That is hardly surprising. The explanation was vague and incomplete. In cross-examination, Ms Love initially accepted that she must have understood Benjamin's explanation because she said "yeah". She then added: "[s]aying mmm-hmmm is following, not understanding it". I reject the suggestion that Ms Love in fact understood Benjamin's explanation. I accept Ms Love's evidence that she had no understanding of leverage at the time.
Ms Love also did not fully appreciate the inherent risks in trading in CFDs. Her evidence was that she did not know that trading in CFDs was any riskier than investing in shares on the Australian stock market. That is understandable given her lack of understanding of CFDs and concepts such as leverage and margin. In this regard, explanations that were given to her in respect of those concepts often emphasised that depositing further funds would lower the risk of Ms Love losing money from her trading. For example, on one occasion, after guiding Ms Love to open a position on crude oil, Benjamin gave the following explanation regarding margin: BENJAMIN: Now what I want to show you, it's something that's called "margin level". Okay. Now what is the margin level? Are you with me? LESLEY LOVE: 101 points. Yeah, yeah, I'm with you. BENJAMIN: 101. LESLEY LOVE: 101 points. BENJAMIN: Yeah. As much as you are - as much as your margin level is high so your position is secure. Okay. As much as your margin level is high, so your account is secure - your position is secure. What is the margin level? How you created the margin level - are you with me? LESLEY LOVE: Yeah. BENJAMIN: Okay. So open calculator, please. LESLEY LOVE: My calculator? BENJAMIN: Yeah. So you take -- LESLEY LOVE: My calculator? BENJAMIN: Yeah, your calculator. LESLEY LOVE: Right. Yeah. BENJAMIN: To calculate the margin level you take the equity. LESLEY LOVE: It keeps changing. BENJAMIN: Why is that? I'll tell you. Because when the -- LESLEY LOVE: Because it's going up. BENJAMIN: When it's going up so the margin level goes up. LESLEY LOVE: Okay. BENJAMIN: So equity -- LESLEY LOVE: Okay. BENJAMIN: -- divided by the margin. As you see, it's still going up. LESLEY LOVE: Mmm-hmm. BENJAMIN: But it's still low. It's very low right now, but I will explain now what you can do. And multiply by 100. This is the formula. Equity divided by the margin.
After Benjamin guided Ms Love through some calculations on margin, he gave the following further explanation: BENJAMIN: But let's focus on the equity. As much as the equity is high so the margin level is high. Now what is the equity? The equity, my dear, it's the balance. LESLEY LOVE: Yeah. BENJAMIN: Plus open position - if it's profit or loss. LESLEY LOVE: Yeah. BENJAMIN: You see? Now, you see this now in negativity for now, it's not lost. It's not closed. It's negativity. So we take the balance minus the position - the open position and you get the equity. LESLEY LOVE: Mmm-hmm. BENJAMIN: Do you understand it? If not I will repeat. I want you to understand it one hundred percent. LESLEY LOVE: Yeah. I'm - I understand it. BENJAMIN: So the conclusion is to increase the margin level you need to increase the equity. In order to increase the equity you need to do one of those two things, or make positivity here or increase your balance. But when you increase your balance is just back-up the position. You don't put inside the market. It's called "back-up the position". Why is it important to back-up the position? It's called "risk management". Now if the margin level will touch in 30 per cent the position will close automatically. And from negativity it will become lost. LESLEY LOVE: Mmm. BENJAMIN: Ask me question. Tell me what you don't understand. LESLEY LOVE: I can - I do understand it. I'm getting it. BENJAMIN: Okay. You understand. You need to avoid from getting to 30 per cent. Now 104 is very low because it's too close to the 100. One hundred, it's very low and usually investors work between 100 and 80 - I mean it's your choice. But as much as your margin level is high so it's good for you. LESLEY LOVE: I'm not going to put any more money in. I'm not putting any more in. I've already put in way - from what I was originally going to
After Ms Love expressed repeated concerns with depositing more money, Benjamin said: When you increase the margin level, okay, you are not put money in the market. You not put it in a risk in the market. You not put it in a position, I mean. You put it in the back - in the back-up- just in the back-up in order to increase the margin level."
It is true that Benjamin asked Ms Love whether she understood what he was explaining, and Ms Love said that she did, or that she was at least "getting it". The problem, however, is that the explanation of margin was at best superficial and one-sided. It emphasised that depositing further money would "secure" Ms Love's "position" and was a form of "risk management". The explanation was effectively given to Ms Love as a means by which to encourage her to deposit further money. It was not made clear to Ms Love that there was always a risk that she could lose the further money that she deposited.
I was not taken to any recording or transcript where a EuropeFX representative gave Ms Love an adequate explanation of the risks in trading in leveraged derivatives such as CFDs. Nor was I able to locate any such recording or transcript. Such explanations as were given to Ms Love tended to downplay the risk and emphasise the potential profits from trading. It is again sufficient to give one example.
Ms Love was initially reluctant to deposit more than $300 because she wanted to learn to trade before exposing herself to any risk. A EuropeFX representative named Ben, however, appeared to suggest to her that it was riskier to deposit $300 than it was to deposit $10,000. When Ms Love queried that suggestion, Ben gave Ms Love the following nonsensical explanation: … Not only this; it's more risky than trade with 1,000. And 10,000 is less risky than 1,000 and 20 is less than 10. Why is that? Because the person attach - the possibility - I will give you an example. Let's say you open now a new brand of shoes, okay? So at the first - the beginning nobody knows your brand. You need to pay advertisement, pay salary, pay construction of stores. Pay everything. At the beginning, you only pay, pay, pay. It is true enough financially speaking you cannot survive the first year before you start to make benefits. And you will close even if your shoes are very good and people will like it. If you have enough - you are strong enough financially speaking, so you will survive this moment and after that you will start to see the benefits. This is the same on the trading. This is like all investments. If you have the possibility to survive more time on the market so it's less risky. Even if there is more money in the risks, this is less chance that you will lose this amount, this big amount, than losing 250, than losing 1,000. This is way more easy. 1,000 - it's small point movement. And the thing is that even if you will take very, very small position, after a time - after a while that you will feel more comfortable, you cannot stay looking every day an hour at your screen and taking only 0.1 of a contract, taking only a few shares. You cannot. Nobody does it. You start to believe in yourself, then you take a full contract, two contracts, three contracts, and you burn your 5,000 in a few minutes. In one trade. Even if you make a profit, profit, profit, one trade is enough to burn all the 5,000 just like this…
When Ms Love asked whether, if she deposited $10,000, she could lose all that money, Ben said: Technically speaking, there is a chance. But all my job here is to teach you how to play in the way that even if you lose a trade, you will never lose 10,000. Okay? You will never lose all the accounts.
The gist of Ms Love's evidence about that exchange in cross-examination was that she understood that she would not lose all of the money she deposited because Ben "would be there to hold [her] hand and show [her] and put things in place that [she] would not lose it". It may readily be accepted that Ms Love appreciated that trading in the products offered by EuropeFX involved some risk, and that there was some risk that she may lose the money that she deposited into her trading account. That said, I accept Ms Love's evidence to the effect that, in the face of constant reassurances from the EuropeFX representatives with whom she dealt, she did not fully appreciate the nature and extent of the risks involved.
In all the circumstances, and having regard to Ms Love's evidence as a whole, I reject the apparent contention by EuropeFX that its representatives gave Ms Love an adequate explanation of the risks involved in trading in CFDs or Margin FX Contracts. The explanations they gave were manifestly inadequate. I was not taken to a single instance where Ms Love was given a comprehensible or satisfactory explanation of CFDs, Margin FX Contracts, or concepts, such as leverage, that a customer would need to understand if they were to fully understand the nature and extent of the risks involved in trading in those financial products.
I do not doubt that Ms Love was a reasonably intelligent and articulate woman who had had a measure of success, including financial success, in her chosen career. She did not, however, have any relevant trading experience and had no prior knowledge of, or involvement with, sophisticated leveraged derivatives or the risks involved in trading in such financial products. I would also readily infer that EuropeFX, through its representatives, either knew or ought to reasonably have known that to be the case. Nothing said by any EuropeFX representative was capable of adequately apprising Ms Love of the nature of the financial products involved or the inherent risk in trading in them.

[66]

Trading and communications with EuropeFX account managers

EuropeFX account managers were in constant telephone contact with Ms Love during the period that she traded with EuropeFX.
Ms Love primarily dealt with a EuropeFX representative named Benjamin, though she also spoke to representatives named Gavin, Zack and Ben. Ms Love's evidence was that once she started trading, Benjamin would call her several times a day. ASIC alleged that, during her communications with EuropeFX, EuropeFX representatives made 37 personal advice statements. As will be seen, EuropeFX admitted that its representatives made seven personal advice statements and I have found that EuropeFX made at least another seven such statements. ASIC also alleged that EuropeFX made 24 false or misleading representations. As will be seen, EuropeFX admitted that its representatives made five false or misleading statements to Ms Love and I have found that they made a further three misleading or deceptive statements.
From the very outset, Ms Love was led to believe that EuropeFX account managers or representatives would train, guide and advise her in respect of her trading. Not surprisingly, in those circumstances, and in circumstances where she had no prior knowledge of or experience in trading in CFDs, Ms Love came to heavily rely on the advice and recommendations of EuropeFX account managers when she did begin trading.
Ms Love had a telephone call with an account manager named Ben on 8 March 2019. During that call, Ben asked Ms Love a series of questions in order to "understand a little bit more about [her]" and so he was "able to provide [Ms Love] with the service [she] need[ed]". Those questions included what Ms Love was "looking for" in relation to EuropeFX and "how much benefit would make [her] a happy client". Similarly, in a later telephone call Ms Love had with a EuropeFX representative named Benjamin, who described himself as a "senior trading specialist", Benjamin asked Ms Love questions about her "goal" and told her that he would "build" her a "business plan" for her retirement and generate "consistently potential profits".
Ms Love's evidence was that Benjamin "guided" her to open most of her trades and gave her advice about trading strategies that she should utilise. Benjamin also told her that he would show her "all the opportunities" to increase her profits. Many of the "opportunities" that Benjamin recommended to Ms Love were based on what was said on third party websites such as Investing.com. Benjamin also offered to put her account in a "VIP account" so she could be provided with "VIP services".
Ms Love maintained that most of her trades were made while she was on the telephone with Benjamin, though she candidly acknowledged that she did open or close some trades on her own in accordance with the trading strategies that Benjamin had told her to use. Benjamin also assisted Ms Love to use a program which enabled him to view the trading platform on her computer, so he was better able to guide her trades. Ms Love claimed that Benjamin often encouraged her to deposit more funds into her trading account so she could either open more trades, increase her margin or, somewhat counterintuitively, lower her risk. As noted earlier, Benjamin often told her that increasing her "balance" was called "risk management". Perhaps not surprisingly, Ms Love's evidence was that she did not understand how depositing more money somehow amounted to risk management. She nevertheless generally accepted that advice.
It is obviously not possible to refer in any detail to the many conversations Ms Love had with Benjamin and other EuropeFX representatives. It perhaps suffices to summarise a series of exchanges between Ms Love and Benjamin, and the sequence of events that occurred during or shortly after those exchanges, on 3 April 2019, the day that Ms Love first opened a CFD trade with EuropeFX. During those exchanges, Benjamin referred to Ms Love potentially achieving a 30 percent return on her investment by opening a position in crude oil. He talked up that opportunity by reference to information on the website of Investing.com, which he suggested showed a "nice potential to buy - strong buy". He encouraged her to deposit AUD$15,000, which was the amount he told her would enable her to take that position. While Ms Love endeavoured to make that deposit, the following exchange occurred: BENJAMIN: …I'm waiting on the line. Let me see what's going on with the crude oil in meantime. LESLEY LOVE: Hang on. BENJAMIN: Meantime the crude oil has jumped since we -- LESLEY LOVE: I can't do both. I can't do that and do the crude oil. Hang on. BENJAMIN: It's already - it started to jump. BENJAMIN: ...Let me check the crude oil for a moment. Okay. Great. Great. Still on the strong buy. You didn't miss it. LESLEY LOVE: I hope not. Because its now gone up, hasn't it, the buy? BENJAMIN: Yeah, yeah, yeah. It started to climbing up little bit. But it's okay. The potential still exists. Yeah, according to Investing.com the potential still exists. It's still strong buy.
After Ms Love was able to deposit $15,000 into her trading account, Benjamin effectively directed her how to open the position in crude oil CFDs by telling her the numbers that she was required to enter in the relevant fields in the trading platform. Within a very short space of time, Ms Love deposited a further $12,000, essentially because Bejamin told her that she needed a balance of $50,000 in order to get to the "VIP department". Ms Love then opened a position on a EUR/USD Margin FX Contract based again on nothing more than Benjamin's recommendation and directions.
It is readily apparent from what was said between the pair on 3 April 2019 that Ms Love had little idea what she was doing. The overall impression one gains from the exchange is that Ms Love deposited a total of $27,000 and opened positions on CFDs and Margin FX Contracts purely on the strength of Bejamin's representations about potential profits based on what had supposedly been said on Investing.com. She opened those positions by following Benjamin's directions about what to enter on the trading screen. She was effectively just doing what Benjamin told her to do in order to make the profit that Benajamin effectively told her she would make.
Much the same can be said in respect of the positions that Ms Love opened and closed over the following two days, including those that formed part of a hedging strategy recommended by Benjamin. It is sufficient to give two examples.
On 3 April 2019, Ms Love had made several trades which had closed for a profit of $7,447.99. At 5.39am on the next day, Benjamin called Ms Love and directed her to the Investing.com website. The following exchange then occurred: BENJAMIN: So you remember what you need to do, you can to catch the moment, okay and continue with the Euro/USD? LESLEY LOVE: Okay. BENJAMIN: Now, now, since we don't know what will be in the announcement, what they will publish, so there is a technique that is called hedging. I want to show you, okay? LESLEY LOVE: Yep. BENJAMIN: Now, let's go to the website there. First of all -- LESLEY LOVE: Yeah. BENJAMIN: -- wait a second. First of all before that click on the technical, scroll down. LESLEY LOVE: Yeah. BENJAMIN: No, no, and I want you to click "7 minute", "5 minutes", "15 minutes", "30 minutes" like yesterday and tell me what you see? BENJAMIN: Yeah, it is not stable now. How you can take advantage of that, there is a very good -very potential technique that you can to do, it is called hedging, that you open - go to the web page there - that you open the same - I mean the Euro/USD today both of the direction? LESLEY LOVE: Yeah because I had it up yesterday because I was watching it, this one right? BENJAMIN: Yeah, this one. Now, you open the same amount of the contract one-by-one sale. This is hedging. So what is happening, because it is going to be very volatile, so one of them will go up, one of them will go down, right? LESLEY LOVE: Ah-ha. BENJAMIN: One-by-one sell, one go up, one go down. Now, when one of them make you profit in positivity, you can close it with profit and wait until the position with the negativity will be in a potential profit as well. See it is very volatile so it will be like roller coaster, there is a chance - big chance it will be like roller coaster. LESLEY LOVE: Yeah, yeah, yeah. BENJAMIN: Okay. So with the amount that you have right now can afford to yourself to take up to 35 -- LESLEY LOVE: Take 25? BENJAMIN: Up to 35 - you can take up to 35, not up to 25, up to 35 you can take if you want.
Benjamin then said, "if you want to do hedging you open buy and immediately after that open sell." After Ms Love asked, "So what, I wait until it goes up in the profit that I am happy with and I - how do I close it though?" Benjamin then offered to close the position "with" Ms Love. After Benjamin directed Ms Love to "check" the Euro/USD, the following exchange occurred: BENJAMIN: Okay, yeah, hedging it is buy and then sell, okay. One moment. Click on "okay". Wait a moment, please. Click "(indistinct) USD". Maybe you can change even up to 20? LESLEY LOVE: Let's try 25 and see what happens? BENJAMIN: Okay. LESLEY LOVE: Are you there? BENJAMIN: Wait. Yeah. Okay, now, maybe the buy, now the buy. LESLEY LOVE: I thought I had that in there. So what am I doing now the buy? BENJAMIN: This is the buy, yeah. LESLEY LOVE: What was that last one? BENJAMIN: Sell it was sell, yeah. It was sell, yeah.
As is clear from the above extracts, Ms Love was effectively told what to trade by Benjamin and had little understanding of what positions she was opening or closing. In cross-examination, Ms Love maintained that she did not understand at the time that Benjamin's advice about the movement in the EUR/USD currency pair was general advice. Ms Love also said that while she understood the examples of hedging that Benjamin gave her on the call, that "didn't mean [she] understood the process totally". I accept that evidence. It is difficult to accept that an inexperienced trader like Ms Love would have understood Benjamin's very superficial and garbled explanation of hedging. It is also important to note that Benjamin's explanation emphasised the potential positives of the strategy, not the risks that it entailed. In particular, he said that Ms Love could close and take the profit in respect of the position that had moved in her favour and leave open the position that had moved against her and wait until it recovered. What he did not tell her is that there was no guarantee that the position would necessarily recover and that she might ultimately have to close it and incur a loss that eclipsed the profit she had made from the other position.
A similar exchange occurred on 5 April 2019. Benjamin again directed Ms Love to go to Investing.com and look at the USD/JPY currency pair. The following exchange then occurred: BENJAMIN: Yeah, as I say, go into Investing.com, it's trying to buy right now. So what you can do right now -- LESLEY LOVE: Mmm-hmm. BENJAMIN: -- it's open and I will be with you online. When you will see a profit, you can close. Open and close, open and close and that way - this way you can achieve a quick - LESLEY LOVE: Okay. BENJAMIN: -- potential profit and of course I'm with you online. I (indistinct) for that.
Benjamin again effectively directed Ms Love what to do: LESLEY LOVE: Okay, what am I doing? BENJAMIN: Okay. Okay, that's it. Now, I'm wait with you on the line. When you will see profit, you can just close it and then you can repeat -let's go to the trade. This is - will do the - this is - first of all, this is a trade, the left one, when you will see some profit - LESLEY LOVE: Mmm-hmm. BENJAMIN: -- some potential profit -- LESLEY LOVE: Mmm-hmm. BENJAMIN: -- you can close it and this is - will do the - will minimise the risk because I'm with you online. Okay-- LESLEY LOVE: Mmm-hmm. BENJAMIN: -- one moment. LESLEY LOVE: Mmm-hmm. BENJAMIN: This is very close. Started with the negativity. It's become positivity; right? Yeah, I know. LESLEY LOVE: Hey? BENJAMIN: It was - oh, and now it's positive. Okay. LESLEY LOVE: Say what? BENJAMIN: It's good for you -- LESLEY LOVE: (Indistinct) that again -- BENJAMIN: -- for now? LESLEY LOVE: -- or wait? No, (indistinct). What did you think, that I should just do it and keep going? BENJAMIN: Yeah, you can close and - oh, whoa, it was 500. You can close and repeat, close and repeat, I'm with you online, if you want. LESLEY LOVE: Okay.
I accept Ms Love's evidence concerning her trading with EuropeFX, which was broadly to the effect that she really did not know what she was doing and was mostly guided to open and close positions by Benjamin and other EuropeFX account managers. While Ms Love was extensively cross-examined, none of the evidence she gave during that cross-examination causes me to doubt her evidence in that regard. As noted earlier, I consider her to have been an honest witness who was doing her best to accurately describe her trading experience with EuropeFX. In any event, Ms Love's evidence concerning her trading experience was essentially consistent with and corroborated by the recordings of her conversations with Benjamin and other EuropeFX representatives.
It is equally readily apparent from the recordings and transcripts that Ms Love relied on, and was encouraged to rely on, Benjamin and the other EuropeFX account managers with whom she dealt. Ms Love's reliance on the EuropeFX account managers was hardly surprising in the circumstances. She had no prior trading experience and no knowledge or understanding of CFDs, Margin FX Contracts or the concepts that it would have been necessary for her to understand if she was to trade independently in any meaningful respect. During the onboarding process, Gavin intimated to Ms Love that her EuropeFX account managers would train her how to trade. Benjamin encouraged Ms Love to rely on him by, among other things, conveying that he was an experienced trader and misleadingly representing to her that he would build her a plan so she would achieve her goals. Ms Love's evidence was that she at all times believed that there would always be someone from EuropeFX to "hold [her] hand" so as to ensure that she made and did not lose money from her trading. It is difficult to imagine that Ms Love would have traded, or continued to trade, but for the ongoing encouragement and influence of Benjamin and the other EuropeFX account managers.
Another feature of Ms Love's engagement with EuropeFX was that she was on occasion dissuaded by EuropeFX representatives from withdrawing funds from her trading account. For example, on 5 April 2019, Ms Love told Benjamin that she wanted to withdraw $12, 000, $10, 000 and $15,000 over the course of a few weeks. Benjamin told Ms Love that "it will be very difficult, I mean, if you want to work about - for your bigger goal, which is your home, it will be very difficult if you will." Benjamin and Ms Love then discussed her goals for the trading account and the following exchange occurred: BENJAMIN: 500,000. This is what you want to make from the trading account? LESLEY LOVE: No, I want to make more than that, that's what I want to take at the end of it. I'm going to keep trading, I want to make more than 500,000, that's just what I need to draw out. BENJAMIN: Mmm-hmm, okay. In how much time do you want to made it those - in how much time do you want to do this 500,000? LESLEY LOVE: 14, 15 months. A year and a half. BENJAMIN: Four - wait a moment. LESLEY LOVE: 18 months. BENJAMIN: 5,000, which mean you want to make more than that and then withdraw 5k -- LESLEY LOVE: Yeah. BENJAMIN: -- 500k, which mean -- LESLEY LOVE: Yeah. BENJAMIN: -- you want to make approximately 1 million and 500, you say. LESLEY LOVE: Probably, yeah. BENJAMIN: And you want to withdraw 30 per cent, which is 500k. Wait a moment. LESLEY LOVE: Yeah. BENJAMIN: Okay. 1 million 500 divided by let's say 15 month, which is 100k per month. This is your goal. LESLEY LOVE: Which is doable. It is doable. BENJAMIN: Of course, I mean, how much you made in today? LESLEY LOVE: 48,000. BENJAMIN: Right. LESLEY LOVE: Well - yeah, 48,000 but then I've put my money in too, haven't I, but that's (indistinct) my -- BENJAMIN: Well, yeah -- LESLEY LOVE: -- pocket, isn't it, after everything? BENJAMIN: Well, yeah, I - I mean, yeah, I - in order to hold positions and the - those position will become from negativity to positivity, you need to invest little bit more. You cannot - let me talk to you honestly, okay. LESLEY LOVE: I can't invest - I understand about these (indistinct) -- BENJAMIN: I'm not talking about - not now -- LESLEY LOVE: -- things but at this moment - mmm. BENJAMIN: -- or the - I'm talking about the future, let me finish, I'm talk about the future. LESLEY LOVE: Yeah. BENJAMIN: If you want to do those amounts, I mean, it will be - it's not impossible but it will be very difficult to do it with this balance, okay, and as I told you, usually I'm not --
Benjamin then proceeded to direct Ms Love to Investing.com and open positions on NASDAQ. As can be seen from this example, Ms Love was discouraged from withdrawing funds from her account on the basis that it would make it "very difficult" if not "impossible" for her to achieve her "bigger goals." Ms Love was also promised that it was "doable" for her to make substantial profits from her trading on the basis that she deposited further funds into her account. Significantly, Benjamin did not mention the potential for her to lose the money she deposited, aside from his nonsensical comment that positions could move from "negativity to positivity."
Later on the same day as Ms Love's call with Benjamin, Ms Love received a call from Anastasia, who said she was Benjamin's manager at EuropeFX. Anastasia told Ms Love that she had received an alert that Ms Love's margin level was low and that she had a "very big minus" in her account. Ms Love told Anastasia, "I don't have any available funds to fix it" and asked her to "tell me how we can fix it so we get back to a reasonable margin". Anastasia then told Ms Love that her account "need[ed] oxygen" and went on to say "to this oxygen that the trade need, you need to open the account for some new signals, according to a third-party indicator…to try to make some…collect dollars but opening hedging…will maybe create you some profit potentially but it's not going to fix the situation" and told Ms Love that "you need more money." After some further discussion about Ms Love's trading experience and trades, the following exchange occurred: ANASTASIA: So what do you want to do? I'm really asking you, what do you want to do? What do you want to do next? Do you want to close some hedging? If you will close hedging your margin -- LESLEY LOVE: Well, I'd have to. ANASTASIA: -- level will go to 30 per cent, 40, 30 per cent. LESLEY LOVE: Mmm. Well, I don't know what I can do. I'm looking to you to that and without oxygen, I don't know what that is. Can I change - oh, Jesus Christ. Can we change some of these deals so that we put them - a profit or loss - a total profit on them, like -- ANASTASIA: You can put take-profits on some of them but you have hedged, so - I mean, you can always put take-profits or stoploss but you are on a hedge and then if one of them will get close from the stoploss, you will never know if your margin level is going to down. LESLEY LOVE: Mmm. I (indistinct) honestly -- ANASTASIA: I mean, it would get close automatically. LESLEY LOVE: -- I don't have any extra cash to give you. I've left myself with literally nothing for myself for the weekend. I have no extra cash to give you. ANASTASIA: You don't even have like a credit card that you can use or - LESLEY LOVE: I've given money on my credit cards already, they're all at their limit. ANASTASIA: I'm thinking about how - I mean, how I can help you, what can I say. The only thing that I'm thinking about is credit card debt. LESLEY LOVE: I don't have any extra credit cards, everything --
The conversation continued along those lines, with Ms Love repeatedly saying that she had "maxed out" her credit cards. Anastasia also explained to Ms Love that the "profit" she could see on her account was "not calculating the commission." Relevantly, Ms Love's evidence was that it was during this conversation that she became aware, for the first time, that the profits displayed on the trading screen did not take into account the commission. It is apparent from the terms of this conversation that Ms Love was panicking about losing the money she had deposited and was seeking any way to recover the position of her trading account. It was in my view inappropriate, in that context, for Anastasia to pressure Ms Love to deposit further money using her credit card, in order to address the "big minus" in her account. It is also apparent from this exchange that Ms Love had given no independent thought to her trades, and that she did not fully appreciate why her account was in a "minus", or why her statement did not show the amount of commission payable to EuropeFX.

[70]

Understanding of CFDs, Margin FX Contracts and trading risks

Like some of the other EFX8 customers, Mr Kalusinghe was by no means unintelligent or lacking in education and accomplishment. Among other things, he had tertiary degrees from universities in Sri Lanka and had a responsible job. That said, when he first came to engage with EuropeFX, he had no knowledge of or experience with CFDs or other derivatives, or securities trading more generally. Moreover, I formed the distinct impression from Mr Kalusinghe's evidence and the nature of his exchanges with EuropeFX representatives that he was far more ignorant, naïve and gullible in respect of matters of finance and investment than even he was prepared to admit.
Mr Kalusinghe's evidence was that he did not know what a CFD was at the time he traded with EuropeFX. I accept that evidence. He gave the following evidence in the course of cross-examination concerning his trading in NASDAQ CFDs: HIS HONOUR: Can I ask you this - - -? MR KALUSINGHE---Yes HIS HONOUR- - - Mr Kalusinghe, as you sit there now, thinking back to this period of time, what did you think you were trading? What were you - did you think you were buying and selling when you - - -? MR KALUSINGHE---I didn't have much knowledge at that time. I just follow. Sean ask - initially told me he will look after everything step-by-step. I always relied on him. HIS HONOUR: Doing the best you can now, what did you think it was you were buying and selling? MR KALUSINGHE---At that time, yes, we bought NASDAQ. HIS HONOUR: NASDAQ what? What were you buying? What did you understand NASDAQ to be?---At that time? MR KALUSINGHE: Yes?---At that time I didn't know anything. He told me NASDAQ is index, that's it. HIS HONOUR: Right. And when you say you were buying and selling NASDAQ, NASDAQ what? Shares? Or what? MR KALUSINGHE ---I didn't have much knowledge at that time. I didn't know…I just thought, yes, that's the way and I administered, yes. I thought he's looking after everything.
I do not consider or accept that Mr Kalusinghe's ignorance was feigned. It is also not surprising that Mr Kalusinghe did not know what he was trading. As already indicated, he had no prior knowledge or experience with CFDs and I was not taken to, or otherwise able to find, any instance where any EuropeFX representative gave Mr Kalusinghe a sensible or comprehendible explanation of a CFD. The same could be said in respect of Margin FX Contracts. EuropeFX plainly knew that Mr Kalusinghe had no relevant trading experience in respect of derivatives and, on my assessment of the exchanges between Mr Kalusinghe and the EuropeFX account managers, it must have been obvious to EuropeFX that he had little or no real appreciation of CFDs or CFD trading throughout the period he traded with EuropeFX. The same could be said in respect of Margin FX Contracts and trading in those products.
Mr Kalusinghe candidly accepted that he was aware that there was some risk to investing and that he was willing to accept that risk initially as he was only risking his initial deposit of $250. His evidence, however, was that he did not understand how the risk of trading with EuropeFX compared to the risk of investing in shares or property. I accept that evidence. It is difficult to see how Mr Kalusinghe could possibly have fully appreciated the risk involved in trading in CFDs in circumstances where he had no real understanding of what a CFD was, or what trading in CFDs actually involved. Nor did he have any sound understanding of the concepts that it would have been necessary for him to understand if he was to fully understand the nature and extent of the risk involved in trading in those products. I was not taken to, or otherwise able to find, any instance of Mr Kalusinghe being given a sensible or comprehendible explanation of the key concepts involved in CFD trading, such as leverage and margin. It is clear that, as his dealings and trading with EuropeFX progressed, Mr Kalusinghe came to understand the importance of margin in a simplistic respect, however I am unable to accept that he ever had a sound understanding of the concept itself, or how margin was calculated, or how it was impacted by his trading.
EuropeFX submitted, in broad terms, that Mr Kalusinghe understood what CFDs and Margin FX Contracts were, understood the concepts involved in trading in those products, and understood the risks involved. Its submissions to that effect were largely based on answers given by Mr Kalusinghe in cross-examination in which he accepted that he would have understood the words used by EuropeFX representatives when they were explaining things to him, and that he frequently said "yes" or "yeah" after those explanations.
There are a number of problems with EuropeFX's reliance on that evidence. First, the fact that Mr Kalusinghe might have understood the individual words used by the representatives when they were giving an explanation does not mean that he understood or fully appreciated the import or meaning of the explanation itself, particularly in circumstances where the explanations often involved complex concepts that were essentially alien to Mr Kalusinghe at the time. Second, many, if not most, of the explanations that Mr Kalusinghe actually received were far from comprehendible or understandable, and would have been difficult for anyone to understand, let alone someone who had no prior knowledge or experience in respect of CFDs and Margin FX Contracts and no relevant trading experience. Third, as Mr Kalusinghe ultimately explained, he said "yes" or "yeah" as the account managers' explanations proceeded mainly because he wanted the representatives to "continue with the conversation", even though he only understood about 10 or 15 percent of what was being said. I generally accept Mr Kalusinghe's evidence in that regard. I do not accept that on every occasion that Mr Kalusinge said "yep" or "yeh" during the course of an exchange with a EuropeFX representative that he was acknowledging that he understood all that was being said. That is even more apparent when one listens to the recorded exchanges, as opposed to merely reading the transcripts.
The problem with EuropeFX's submission that Mr Kalusinghe in fact understood the explanations of the key concepts which were given to him by EuropeFX representatives may be illustrated by the following example. During a telephone conversation between a EuropeFX representative and Mr Kalusinghe on 15 August 2018, shortly before he placed his first trade, the EuropeFX representative, Sean, purported to give Mr Kalusinghe an explanation of margin and free margin. The explanation included the following exchange: …. You need to have free margin. As you can see here, that is the free margin, which I will explain what is that all about. But you need at least 100 per cent backup, okay when you make a trade. What does this mean? Imagine, for example, you have 10,000 account, okay? KALUSINGHE: Yeah. SEAN: You can open positions, for example, with 3,000 out of it, okay, meaning your margin will be 3,000 but the free margin will be 7,000, right? KALUSINGHE: Mmm-hmm. SEAN: In case you have 10,000 account. KALUSINGHE: Okay. SEAN: Your balance shows you - your balance will show you 10,000 but the margin is how much money you have in open trade. So if you have margin 3,000, which means you invested 3,000 to buy NASDAQ shares, your free margin will be 7,000 that is how it is divided; understand or you wanted me to explain you again? KALUSINGHE: I little bit understand, yeah. SEAN: Let me explain you one more time. KALUSINGHE: Explain again, please. SEAN: Okay. Imagine this time we have 5,000 account, not 10 -- KALUSINGHE: Okay. SEAN: -- 5,000 only, okay? KALUSINGHE: Yep. SEAN: 5,000, you tell me "Sean I want to buy shares with 1,000 out of this" so -- KALUSINGHE: Yep, okay, let's -- SEAN: -- for example, 10 shares only and to pay 1,000 for them and all the rest of the money will be free margin. Free margin will be 4,000. KALUSINGHE: All right, okay. SEAN: Understand? KALUSINGHE: Yeah, cool. SEAN: Out of the 5,000, 1,000 will be invested, the rest will be in free margin. KALUSINGHE: Yep, understood. SEAN: The more free margin you have the better for you. Of course, the reason why your free margin KALUSINGHE: (Indistinct). SEAN: -- is the money you have - exactly, so support the market fluctuations mate. Because if you buy NASDAQ from that point and NASDAQ will go back to trend line you will have minus -- KALUSINGHE: Oh, okay. SEAN: -- and you need to support that minus. KALUSINGHE: Okay, okay, yep, understood, yeah. SEAN: Understand. You need to support that minus otherwise you can lose your whole account, which is no point to open the trade at the first, right? KALUSINGHE: Yep. SEAN: I mean, again, if you know then if NASDAQ go down, for example, and you might have minus 1,000 but you don't have that 1,000 in free margin why would you open the account - the position at the first? It won't be that smart. But if you have enough to support the NASDAQ even if it goes back to trend line, or you have enough even to double it up, you have control mate and that is what you need, control. That is the best you can have right? I mean, like I said, we don't predict the future but we can have control in the account, which is the most important thing, right? KALUSINGHE: Yep, understood. SEAN: You with me? KALUSINGHE: Yep. SEAN: Do you understand the point of margin and free margin? KALUSINGHE: Yes
It is difficult to imagine how anyone, let someone who had no prior knowledge or experience in trading in complex leveraged derivatives like CFDs, was likely to have comprehended that explanation of margin and free margin. It was at best a highly simplistic and somewhat confusing explanation.
Mr Kalusinghe was taken through that exchange at length during cross-examination. He agreed that he said "yep" or "yes" when Sean asked him if he understood the concepts of margin and free margin. He also agreed that he said that because he in fact understood. When asked about what he actually understood from the exchange, however, it was readily apparent that he in fact had no real understanding of the concepts. His evidence was as follows: HIS HONOUR: What did you understand? KALUSINGHE: So he shows me the pattern and I understood if - if it comes some lower level, so if I have a more margin, so capture that, like, the account doesn't close automatically. HIS HONOUR: Right. So what did you understand - after this description of free margin, what did you understand about the concept of free margin, are you able to recall?--- KALUSINGHE: Yes. He told me that in the - well, the three figures it shows on the bottom of the platform. So he told that I have to maintain that minimum margin, then whatever I have invested. That what he showed me always. HIS HONOUR: And did you understand, firstly, how that figure was calculated and, secondly, what the significance of that figure was? KALUSINGHE: Not really. But I didn't know how to calculate that. But he shows ..... yes, 10,000, if I financed 3000, the 7000 is the margin. HIS HONOUR: I see? KALUSINGHE: I have to maintain that only - that one I understood at that time.
When pressed further in cross-examination about his positive responses to Sean's questions concerning his understanding, Mr Kalusinghe's evidence was that because it was the "very beginning" he just wanted to "continue the conversations" and that he didn't understand because it was "totally new". When challenged about why he did not ask for any clarification, Mr Kalusinghe's evidence was that there was a "lot of information" and he just wanted to "go through that, finish off that one". I accept that evidence. I do not consider that Mr Kalusinghe's evidence about why he responded in the way he did when difficult concepts were being explained to him was disingenuous or implausible. In any event, the explanation of margin and free margin that was given to Mr Kalusinghe was, in all the circumstances, entirely inadequate. There were numerous other instances where it was suggested that Mr Kalusinghe had signalled that he was following, or had understood what the EuropeFX representative was saying, but when queried about what he in fact understood, it was readily apparent that he had no real understanding or appreciation of the technical and complex trading concepts that were supposedly being explained.
My overall assessment, based on the exchanges between Mr Kalusinghe and the EuropeFX representatives in the many telephone calls he had with them, and Mr Kalusinghe's evidence as a whole, is that, throughout the period he traded with EuropeFX, he had a very limited understanding of CFDs and Margin FX Contracts, very little understanding of the concepts that he would have needed to understand if he were to appreciate what trading in those derivatives involved, and an inadequate and naïve appreciation of the risks involved in trading in such derivatives. I also find it very difficult to accept that the EuropeFX representatives with whom Mr Kalusinghe primarily dealt would not have appreciated his relative ignorance and naivety in respect of those matters. Indeed, I would infer that the EuropeFX representatives who dealt with Mr Kalusinghe well knew from their exchanges with Mr Kalusinghe that he did not have a sound understanding of the nature of the products he was trading in, did not have a firm grasp on concepts such as leverage and margin, and did not fully appreciate the risks involved in his trading.

[71]

Communications with EuropeFX account managers and trading

Mr Kalusinghe dealt with several different EuropeFX account managers, including Steven, Sean, Edward and Robbie. ASIC alleged that during his communications with EuropeFX, EuropeFX representatives made 161 personal advice statements to Mr Kalusinghe. EuropeFX admitted 23 contraventions arising from personal advice contraventions. As will be seen, I have found that EuropeFX representatives gave Mr Kalusinghe persona advice on at least two further occasions. ASIC also alleged that EuropeFX representatives made 123 false or misleading representations to Mr Kalusinghe. EuropeFX denied all those allegations. As will be seen, however, I have found that EuropeFX representatives made at least six misleading or deceptive representations to Mr Kalusinghe.
The documentary evidence concerning Mr Kalusinghe's engagement and trading with EuropeFX was vast, mainly because he traded for a fairly lengthy period and had many conversations with EuropeFX representatives. Mr Kalusinghe was also extensively cross-examined. For the reasons given earlier, it is not feasible to give a detailed or comprehensive account of Mr Kalusinghe's evidence. It suffices to identify some general findings I have made, having considered the evidence as a whole, including Mr Kalusinghe's written and oral evidence, the transcripts of his telephone calls and the recordings of some of those calls that were played in Court, as well as other documentary evidence concerning his trading.
Mr Kalusinghe's evidence was, in effect, that he was reliant on his account managers when it came to trading. His general recollection was that he understood, as a result of his discussions with the EuropeFX account managers, that the account managers would look after him and guide him "step by step". He also believed that, when the account managers told him what to do, he thought that they were helping him. He felt that the account managers built his trust and gave him the feeling that "everything will be alright". He recalled that his account managers were able to see his screen and that they effectively directed him where to click or press on the trading screen to open or close trades. His general recollection was that while he was trading, he "did not know anything", that he "just did what the account manager said", that he "always relied on them", and that he generally "felt totally lost".
While those recollections were expressed in very general and high-level terms, the substance of Mr Kalusinghe's evidence in that regard was largely corroborated by the recordings and transcripts of Mr Kalusinghe's many conversations with EuropeFX representatives. Mr Kalusinghe also gave similar evidence when cross-examined about specific exchanges with his account managers, or specific trades. In respect of one particular trade, for example, Mr Kalusinghe's evidence was that "I just went with him [the account manager] … he told me that everything he is looking after me … whatever he told, yes, I followed".
Mr Kalusinghe's evidence that he largely relied on the EuropeFX account managers was hardly surprising or implausible given his lack of any prior knowledge or experience in respect of trading in CFDs or any similar or comparable financial products, as well as his lack of any real or sound understanding or appreciation of exactly what it was that he was trading in and the trading concepts that he needed to understand in order to understand the risks involved. It is equally unsurprising that Mr Kalusinghe came to rely on the EuropeFX account managers in circumstances where, while they were not permitted to give him personal (as opposed to general) advice, they nevertheless repeatedly gave him recommendations, if not directions, about what positions he should open or close, or what trading strategies he should adopt. The recommendations and directions were given in circumstances where the account managers were able to see Mr Kalusinghe's trading screen. More importantly, they were given in circumstances where Mr Kalusinghe, or a reasonable person in his position, would no doubt have had good reason to expect that the EuropeFX representatives had considered Mr Kalusinghe's objectives, financial situation and needs.
The specific allegations concerning the giving of personal advice to Mr Kalusinghe are discussed in more detail later in these reasons. As has already been noted, EuropeFX representatives gave Mr Kalusinghe personal advice on at least 25 separate occasions. Many of those occasions related to recommendations about the position Mr Kalusinghe should take in respect of specific CFDs, or the trading strategies that he should adopt: see rows 67, 70, 72, 73, 74, 77, 81, 86 and 94 of Annexure A.1 to the SOC. As also discussed in more detail later in the context of ASIC's allegations concerning misleading or deceptive representations, EuropeFX account managers repeatedly made representations to Mr Kalusinghe concerning the profits that he was likely to earn from trades that they recommended (see for example Annexure C.1 to the SOC at rows 46 and 78), and representations about how Mr Kalusinghe could recover his trading losses by opening further positions (see for example Annexure C.1 to the SOC at rows 78, 127, 133 and 137). It stands to reason that Mr Kalusinghe came to rely on the EuropeFX account managers given that they continually gave him such prescriptive and positive advice and recommendations about his trading.
EuropeFX submitted that Mr Kalusinghe's evidence concerning his reliance on the account managers should be rejected because he placed many trades while he was not on the telephone with an account manager. It produced a schedule (Annexure D to EuropeFX's closing submissions) which it claimed accurately recorded or revealed numerous instances where Mr Kalusinghe (among others) engaged in "independent" trading because they opened or closed positions at a time when they were not on the telephone with a EuropeFX account manager. ASIC maintained that the schedule was inaccurate in many respects. I do not propose to resolve the complex dispute between EuropeFX and ASIC as to whether the schedule was or was not entirely accurate. That is because it is largely unnecessary to resolve the dispute.
It may be accepted that Mr Kalusinghe opened or closed positions on several occasions when he was not on the telephone with one of his account managers. He candidly acknowledged in his affidavit that on some occasions he opened positions himself, though he indicated that he started to do that "around the middle" of his trading, when his account started to "go into the negative" and he was "trying to recover a minus" on his account. It does not necessarily follow, however, that those trades were truly "independent", in the sense that they were made independently of any advice, recommendations or directions that Mr Kalusinghe had received from one of the account managers. More importantly, it does not necessarily follow that Mr Kalusinghe was not reliant on the account managers, particularly in the early period of his trading.
There could be no doubt that, as Mr Kalusinghe's trading progressed, he was able to open and close, in a mechanical sense at least, positions on the EuropeFX trading platform while he was not on the telephone with one of the EuropeFX account managers. He also often did so. Some of the positions he opened or closed in those circumstances, however, were opened or closed very shortly after a telephone call with one of the account managers and in effect mechanically carried out a recommendation or instructions that had been given to him during that telephone call. Other trades were made in circumstances where Mr Kalusinghe was effectively endeavouring to mimic or replicate a trade that had earlier been the subject of a recommendation by an account manager. As already noted, Mr Kalusinghe's evidence was that most of the other positions he opened or closed while not on the telephone occurred mid-way through his trading when his account started to "go into the negative" and he was attempting to follow earlier recommendations or advice from his account managers. Unfortunately for him, his endeavours in that regard were usually unsuccessful.
I am ultimately inclined to accept Mr Kalusinghe's evidence that he was generally reliant on the EuropeFX account managers when it came to opening and closing positions, particularly during the early stages of his trading. As his trading progressed, his knowledge and ability to open and close trades on the EuropeFX trading platform undoubtedly increased and he was not as reliant on the account managers when it came to mechanically opening or closing positions on the trading platform. He was also increasingly able to ascertain when his open positions had turned against him. I accept that many of the positions that Mr Kalusinghe opened or closed himself occurred in the context of him endeavouring to deal with the escalating difficulties with his account as it turned negative. Even at that point, however, it was readily apparent that Mr Kalusinghe was ill-equipped and floundering when he was not on the telephone with his account managers and was not able to strictly follow their directions.
EuropeFX representatives plainly recognised that Mr Kalusinghe was ill-equipped to trade independently. On occasion, they even told Mr Kalusinghe, or at least intimated to him, that he was not equipped to trade without their assistance. For example, as late as 15 November 2018, a EuropeFX representative, Robbie, said the following to Mr Kalusinghe when he indicated that he did not wish to place a trade while he was on the phone at that time, and that he would consider the position himself the next day: ROBBIE: My friend … I will wish you good luck. I am here to work with you right now, okay? As I told you, I'm not working for you, I'm trying to help you. You're not doing for me a favour by working with me. I don't have the time for the all clients. I get you a place in my - you know, in my group and my department because Sean asked for me. But if you don't have the time and you don't want to work with me, you don't have to. I will wish you good luck and, you know, let's hope that this time while you are trading - while you will trade by yourself you will not do the same mistake and you're not going to lose this money as well. (Emphasis added)
The evidence also revealed that Mr Kalusinghe was frequently pressured to open or close trading positions and pressured to deposit further funds into his trading account by EuropeFX representatives. It is sufficient for present purposes to give a few examples.
On 26 September 2018, Sean recommended to Mr Kalusinghe that he increase his position in FTSE CFDs. He also told Mr Kalusinghe that, if he deposited an additional $15,000, he would get up to the "premium account" and qualify for discounted commissions. Sean returned to the topic of both the FTSE CFD recommendation and the lure of the premium account the following day. After discussing various other trading options and the effect they would have on Mr Kalusinghe's margin, the following exchange occurred: SEAN: So it's like we will have, like, 20K left in free margin. It still won't be enough for the FTSE, mate. But, like, that's why I said, you see, this 15K we spoke about, Prasanna, and I know how difficult is that for you. Maybe it's even the last money you have, I know that, but this 15K will get two things. We get the account up to 100K, okay, which is -- PRASANNA KALUSINGHE: Sorry, Sean -- SEAN: -- you can save that money for this commission that you see here, all these figures here, which is a lot when you go for the yearly. You know, when you look yearly, we can save a lot of money just for the figures. Okay? That's for one hand. Now -- PRASANNA KALUSINGHE: Yeah, Sean, so I can understand what you are saying, but at the moment I am very, very difficult situation. SEAN: I know, I know. PRASANNA KALUSINGHE: I don't have - I am waiting for salary to feed my family. SEAN: I know, I know, buddy, but you see, look -- PRASANNA KALUSINGHE: If you can do something with your manager -- SEAN: It's not just about the commission, my friend. It's also to have the funds in order to go ahead with FTSE, which already we closed position overnight. We have just the -- PRASANNA KALUSINGHE: Okay, Sean. SEAN: -- last 250 left. If we can manage the funds for this, listen, and we go up to 7,800 potentially, we can make 25K more. That means 50,000 free margin, will be, 50K free margin. Your - your balance potentially will be more than 150 if we close that position in profit potentially in one week. Then we get the control back. We can actually get - take care of that minus because it gets bigger and bigger every day. It's not just about the - the commission and the - the discount we get. It's also to get control of that minus before it will be too late. We have 100K balance we need to take care of, Prasanna. If the market will go -- PRASANNA KALUSINGHE: Yeah, Sean, I - I can understand, but that's not an option at the moment. At the moment -- SEAN: If we got -- PRASANNA KALUSINGHE: Sorry, Sean. At the moment, that's not any option, because I can't do any more. I - I have to sell something, either my car or something, but I can't do it. I got to go to work. If you can do something within this amount, I highly appreciate. Otherwise, I would like to withdraw this 28,000 and close all. SEAN: Yeah, but you see, that will be too bad because, you know, we don't know what's going to happen. You see, maybe in one week, your situation will be different. That's what I'm - you see, that solves the problem.
By 30 October 2018, Mr Kalusinghe's trading account had been significantly depleted. He endeavoured to withdraw the remaining funds in his account, which totalled just over $3,000. He then had a lengthy discussion with a EuropeFX account manager, Robbie, about his financial position. He told Robbie that he had no more money and that he had already put everything he had into his trading account. Undeterred, Robbie endeavoured to persuade Mr Kalusinghe to deposit more money into his trading account so he could open more trades and start to recover his losses. Robbie referred to NASDAQ CFDs and said that "the potential right now is huge". Mr Kalusinghe repeatedly told Robbie that he had no more money. The following exchange then occurred: ROBBIE: Prasana, I don't need you to put 50 or a hundred thousand. I need you to put, you know, a few -- PRASANA KALUSINGHE: No, I can't. I don't have any money, but that's the only money I have. If we can do some recovery from this, yes, I would like. Otherwise, I would like to keep that money and the - practise as much as possible. Then one day I'll start again. That's my position. ROBBIE: Sorry? PRASANA KALUSINGHE: So I'll - I would like to do some demo account and practise as much as possible, which I get confident, and which I get, and so I can win, yes, then I would like to start live again and (indistinct). But I don't have money. This is the only money I have now. ROBBIE: I know that the money it's not the issue. It's not that you don't have the money; you just lost your confidence, that is the issue. PRASANA KALUSINGHE: Yes, and -- ROBBIE: That is the main problem here, because, you know, between me and you, the money's not an issue so that if you don't - if you want you cannot get more funds to the - to the account. You just lost your confidence, you lost your trust, right? PRASANA KALUSINGHE: Yes, that's one, one reason. You guys didn't help me. Like, the past, I ask several times. Even I didn't get training. Okay, never mind, so that's the past. So, okay so -- ROBBIE: But this is why me and you we're talking right now. What I'm saying, give you one more chance to show you how we can potentially fix the situation, that's it.
The conversation between Robbie and Mr Kalusinghe continued in a similar vein for some time, with Mr Kalusinghe telling Robbie that he had no more money and Robbie telling Mr Kalusinghe that he could not recover his losses using the remaining $3,000 in his account and otherwise pressuring him to deposit more. The following exchange again typifies the conversation: PRASANA KALUSINGHE: Sorry, Robbie, I don't have money. So that's the one only thing I have. So if you can show me anything, yes, I would like . Otherwise, I would like to keep it and I'll come later one day and do the trading because I want to get more confidence and more practice. ROBBIE: So let me help you. Let me build up the confidence. But, listen, let me - try maybe again. I'm not expecting for you to put 50 or 60,000. Try maybe to get into the account, maybe to complete the account. You already have 3,000 in the balance. Maybe try to complete the account only to 20,000, okay. And I will help you also with -- PRASANA KALUSINGHE: Sorry, I don't have -- ROBBIE: -- with the discount of the commission. PRASANA KALUSINGHE: Sorry. Sorry. Sorry, Robbie, I don't have. Okay, so what we can do, so thank you very much for trying to help me. So if you can, we can do that something from this amount, let's do. Otherwise, these funds -- ROBBIE: So, Prasana, tell me -- PRASANA KALUSINGHE: -- I will (indistinct). ROBBIE: -- 3,000 is not enough. PRASANA KALUSINGHE: -- (indistinct) this account. ROBBIE: 3,000 is not enough even to buy one contract of NASDAQ. So don't tell me what you cannot do; tell me what you can do, okay? PRASANA KALUSINGHE: I can't -- ROBBIE: Not what you can - no. PRASANA KALUSINGHE: I can't fund at all now. So that's bottom line, no more funds. ROBBIE: How come? My friend -- PRASANA KALUSINGHE: Please. ROBBIE: -- don't tell me you put everything that you had in that - you know, in that account. Practise with something small. PRASANA KALUSINGHE: No, sorry. ROBBIE: Practise with something small, maybe even 5, 10,000, let me help you. Let me show you that you -- PRASANA KALUSINGHE: Sorry, I don't have, Robbie. I know you try to help me. I don't have. ROBBIE: So you don't ...
The call then ended.
That is by no means an isolated example. Other examples of EuropeFX account managers pressuring Mr Kalusinghe to deposit further funds and invest are summarised in Annexure E.1 to the SOC, in particular at rows 26, 33, 34, 35, 36, 37, 41, 42, 56, 80, 81, 95, 96, 101, 104, 105, 106, 109, 110, 111, 112 and 118. The pressure to invest was often accompanied by claims that Mr Kalusinghe would miss out on a supposedly positive development in the market.
EuropeFX representatives also encouraged Mr Kalusinghe to deposit or invest more to take advantage of EuropeFX's "VIP" program which offered investors discounted commissions if their deposits or trading account reached a certain level. Examples of the promotions offered to Mr Kalusinghe are summarised in Annexure E.1 to the SOC, in particular at rows 58 and 60.
In one instance, the account manager named Sean encouraged Mr Kalusinghe to deposit a further $15,000 more in order to reach premium account status with "trading commissions, up to 30 per cent discount", "VIP services" and "six eyes on the account." Mr Kalusinghe responded as follows: Sean, sorry, I - I - I understand what you are going to say, so but I am very sorry to say that I don't have money, mate. I am waiting for next salary to live.
EuropeFX representatives also on occasion encouraged Mr Kalusinghe to borrow money so he could deposit funds into his trading account, or were at least aware that Mr Kalusinghe was using, or proposed to use, borrowed funds. For example, on yet another occasion when Sean pressured Mr Kalusinghe to deposit more money into his trading account, the following exchange occurred: SEAN: With this 15K, we get a lot of things. We will - first of all, and the most important, we can get into the FTSE with 100 shares, which already could be with 7K profit since yesterday, first of all, in one day. Not to mention - PRASANNA KALUSINGHE: Sorry, Sean, sorry, but I am very sorry to say that that's not an option. I can't do that. SEAN: And tell me, there is no-one who can loan you money, maybe, like, I don't know, friends or family?
Examples of some other occasions where this occurred are summarised in Annexure E.1 to the SOC at rows 35, 44, 65 and 103.
EuropeFX representatives also often impeded or discouraged Mr Kalusinghe from withdrawing money from his trading account. They usually did so by suggesting that Mr Kalusinghe would miss out on trading opportunities, or miss out on the opportunity to recover his losses, if he withdrew funds. For example, on one occasion, Mr Kalusinghe made a withdrawal request for approximately $10,000 before he went on holidays. An account manager named Robbie then contacted Mr Kalusinghe and said: I'll tell you what, if you will withdraw right now those funds that will not help you to get the money back, right? It will not help you to recover your loss… Even if you are going for the holiday we can place something that can potentially work for us for the long run, okay? So potentially we can start and recover the money that you lost in the meantime while you are in the holiday. Okay?
Other examples of such occasions are summarised in Annexure E.1, in particular at rows 87, 97, 98, 107 and 108.

[72]

Complaints

Mr Kalusinghe eventually lodged a complaint with EuropeFX by email on 12 October 2018. A EuropeFX representative, Michelle, contacted Mr Kalusinghe in response to the complaint and endeavoured to persuade Mr Kalusinghe not to lodge a complaint with ASIC, saying, among other things that: "I guarantee you that no need to go to ASIC" because she would act in his best interests in conducting an internal inquiry; and "I will ask you is not to contact ASIC because it could have a big repercussion on our company".
Mr Kalusinghe nevertheless lodged a complaint with ASIC. He also lodged a complaint with AFCA in respect of his engagement and trading with EuropeFX.
Michelle also told Mr Kalusinghe that EuropeFX's investigation had revealed that its representatives had done nothing wrong. She also effectively blamed Mr Kalusinghe for all his losses. I would infer from the evidence that EuropeFX never conducted any investigation into Mr Kalusinghe's trading, or the conduct of the EuropeFX account managers with whom he dealt.
In its submissions, EuropeFX relied on the fact that Mr Kalusinghe continued to trade with it even after he had lodged his complaints. When one considers the evidence of what occurred after Mr Kalusinghe lodged his complaints, however, if anything it further exposes the extent to which EuropeFX and its account managers unfairly took advantage of Mr Kalusinghe's ignorance, gullibility and vulnerability. The following is a short summary of what occurred.
Shortly after he lodged his complaint with EuropeFX, Mr Kalusinghe was contacted by an account manager named Robbie, who claimed that he was the "head manager of the recovery department". Robbie told Mr Kalusinghe that he was aware of the losses that Mr Kalusinghe had made and that he would help Mr Kalusinghe to recover those losses. He said to Mr Kalusinghe: "don't try to do things yourself" because he did not want him to make the "same mistakes." He then proceeded to pressure Mr Kalusinghe to deposit more money and open positions in respect of NASDAQ CFDs by telling him that he would profit from those trades and thereby recover his losses. Mr Kalusinghe's evidence was that he felt that he was being pressured and bullied by Robbie, though he ultimately relented and deposited further money and generally opened the positions that Robbie told him to open.
It might, at first blush, appear remarkable that Mr Kalusinghe would deposit more money and open more trades after he had lodged complaints about the conduct of his EuropeFX account managers. When the conversations between Robbie and Mr Kalusinghe are closely considered, however, it is not surprising at all. It is simply a further example of a EuropeFX representative exploiting Mr Kalusinghe's obvious vulnerability.
A further point to note about the exchanges between Robbie and Mr Kalusinghe that occurred at this point is that Robbie misled and deceived Mr Kalusinghe about the basis upon which both he and EuropeFX were remunerated. Mr Kalusinghe squarely asked Robbie how he and EuropeFX earned income. Robbie replied as follows: MR KALUSINGHE: Is your main income is our commission? ROBBIE: What do you mean? I don't understand your question. MR KALUSINGHE: Right, okay. I - to clear that - it's all right. Your main income from client is the trade, once we open the trade, that's the commission you are taking? ROBBIE: I make (indistinct) all successful, I make in my, you know, my commission also from your trading volume. From your trading volume, okay? MR KALUSINGHE: Yes, (indistinct). ROBBIE: (Indistinct) better for me because I would make more money, the company would make money as well, and this is why my interest that you will make as much as possible because only in that way you will keep trading with us for the long term and you will make - you know, you will open more and more trades, okay? MR KALUSINGHE: Yep, okay. (Indistinct). ROBBIE: This is my main -- MR KALUSINGHE: (Indistinct). ROBBIE: -- is to become successful. MR KALUSINGHE: Yeah, okay, cool. If any trade lose, are those moneys also going to your company or not? ROBBIE: First of all, because we are receiving a commission, but I will tell you something. If you are losing on a trade, okay, why it's not in our interest because if you are losing that trade then you will be upset and probably will stop trading because you lost money, right? And then the company - if you will stop trading, the company will stop making money as well, okay? So this is why -- MR KALUSINGHE: (Indistinct). ROBBIE: It's to help you -- MR KALUSINGHE: (Indistinct). ROBBIE: -- to be successful. MR KALUSINGHE: Yep, okay. Thanks. Just clear me, if whatever my losing money, does it go to your company or -- ROBBIE: Only the commission. The commission, my friend. When you open a trade you are paying a small commission. The commission goes to the company.
Robbie's responses to Mr Kalusinghe's questions were at best misleading. The correct answer to Mr Kalusinghe's last question was that EuropeFX was remunerated on the basis of the losses incurred by its customers who were not in USG's A Book. I would readily infer from the evidence as a whole that Mr Kalusinghe was a EuropeFX customer who was in USG's A book. It was misleading at best to say that EuropeFX only earned commissions from trades being opened. Likewise, it was misleading for Robbie to tell Mr Kalusinghe that he earned commission based on Mr Kalusinghe's trading volume. Rather, he earned commission based on the amount of money Mr Kalusinghe deposited.
EuropeFX eventually agreed to settle its dispute with Mr Kalusinghe by paying him $75,000.

[74]

Initial contact with EuropeFX and the opening of an account

Ms Elford first came to engage with EuropeFX after conducting an internet search for Bitcoin. EuropeFX was one of the results of that search. She clicked on the EuropeFX website and signed up for a Bitcoin newsletter. She subsequently received telephone calls, including one from a EuropeFX representative.
While Ms Elford's evidence relating to Bitcoin was quite vague, it is in any event readily apparent from her contemporaneous communications with EuropeFX representatives that she somehow came upon EuropeFX as a result of her internet searches concerning trading in Bitcoin. The evidence indicated that Ms Elford told one EuropeFX representative that "it was actually the Bitcoin that I was actually trying to get into and Bitcoin sort of led me straight to you guys". The representative did not dispute what Ms Elford told him. Indeed, he suggested that trading in Bitcoin was something she could "do right now" and suggested that "the performance of the Bitcoin according to Trading Central is really good". Ms Elford's evidence was that, even after depositing $500 into her trading account, she had no intention of doing anything else and that she thought that she would be just "learning about Bitcoin".
While Ms Elford had no recollection of the steps that she took in relation to the establishment of her EuropeFX account, the documentary evidence indicated that she either completed a questionnaire or otherwise provided EuropeFX with personal and financial information, including that her annual income was between $30,000 and $99,000, that her net worth was between $100,000 and $299,999, and that she had no trading experience in securities, options, commodities, futures, CFDs or "OTC forex exchange".
The documentary evidence in respect of the opening of Ms Elford's EuropeFX account indicated that a "yes" box had been ticked in the online questionnaire indicating that Ms Elford had acknowledged a warning that a CFD account may not be appropriate for her. The associated notice or disclaimer recorded that, based on Ms Elford's answers to the questionnaire, EuropeFX did not consider that a CFD account was appropriate for Ms Elford. Ms Elford's evidence was that she did not recall the steps that she took in respect of the opening of her EuropeFX trading account and did not recall reading the risk notice or disclaimer, or having it read to her in the context of the completion of a questionnaire. Similarly, the evidence concerning the completion of Ms Elford's questionnaire suggested that Ms Elford had acknowledged that she had read EuropeFX's Terms of Business and PDS, however Ms Elford had no recollection of receiving or reading either of those documents.
During one of her first telephone calls with a EuropeFX representative on 18 June 2019, Ms Elford told the representative that she had not traded before and that she was "unsure about it all … unsure how this all works". The representative replied: "This is why I'm here to teach you". In another early telephone conversation with a EuropeFX representative, the representative asked her why she had opened an account, what she was "looking to accomplish" and what she was "looking for". The representative also asked Ms Elford questions about her financial position, including whether she was in retirement, how much money she had in the bank, what she was "gaining" from that money in a bank account, what her "capital" was, and how much she would need or like to "withdraw" during her retirement. Another EuropeFX representative with whom Ms Elford dealt also asked her what her "goals" were in respect of her account.
Ms Elford told EuropeFX representatives that she had decided not to go ahead with trading on at least two occasions before she eventually opened her first position on 23 July 2019. In an email she sent to EuropeFX on 2 July 2019, she stated that she had "decided not to go ahead with learning on trading" and that she would be closing her account. In a telephone conversation with different account manager on 8 July 2019 she told him that it was "all too confusing", that she did not think she was going to "do anything with it", and that it was "all too much for me to be able to handle".
Despite those clear indications that Ms Elford did not wish to proceed, and did not understand what was involved in the sort of trading that EuropeFX offered, EuropeFX account managers continued to contact her.

[75]

Understanding of CFDs, Margin FX Contracts and trading risks

The evidence as a whole in my view clearly indicated that Ms Elford did not fully understand what CFDs or Margin FX Contracts were throughout the time she traded with EuropeFX. Nor did she have any real or sound understanding of the key concepts which were relevant to CFD and Margin FX Contracts, such as margin and leverage, or have any true appreciation of the nature and extent of the risks involved in trading in those securities. It may be accepted that at times during cross-examination, Ms Elford at times appeared willing to agree that she understood some of those concepts. It is, however, impossible to reconcile those concessions with the objective evidence of her discussions with the account managers, which overall tended to reveal that she had no sound understanding of CFDs or concepts such as leverage and margin, but was rather just blindly engaging in trades which her account managers told her to engage in. That appeared to be conceded by EuropeFX in its submissions, albeit in somewhat muted terms. In particular, EuropeFX accepted that "from time to time throughout the transcripts a reasonable inference is that Ms Elford did not have a good grasp of what was being discussed, and at times expressly said that she did not understand things". That is perhaps an understatement.
As has already been noted, when Ms Elford first came to engage with EuropeFX, she had no idea what a CFD or Margin FX Contract was and had no relevant trading experience. Her evidence, which I accept, was that she could not recall reading EuropeFX's PDS. I very much doubt that Ms Eldord did read the PDS having regard to the evidence, referred to earlier, that she had initially decided not to learn to trade because it was "all too confusing" and too much for her to handle. Without being disrespectful, having observed Ms Elford give evidence, I have some considerable doubt that she would have understood much of what was written in the PDS even if she had read it. In those circumstances, Ms Elford could only have come to understand and appreciate what CFDs were, and what concepts such as margin and leverage meant, if the EuropeFX account managers gave her comprehendible information and explanations about those things. The difficulty for EuropeFX is that the evidence indicates that they never did so. I was not taken to any recording or transcript in which a EuropeFX representative gave Ms Elford an adequate or understandable explanation of CFDs, Margin FX Contracts or concepts such as leverage, margin or hedging.
Ms Elford was given the following explanation of a CFD by a EuropeFX representative named Jay: JAY: Now let's - first of all, before we talk about the Japanese candlesticks and how everything works, let's understand what is the logic behind the online trading, what is actually happening. First of all, do you know what is a CFD? DEBBIE ELFORD: No. JAY: Never heard about it? DEBBIE ELFORD: Don't think so, no. JAY: No worries, no worries, no worries. CFD is a contract for difference. This is actually your online trading, okay? Contract for difference. What does that mean? That means something like this. Do you know that you're not actually buying an asset in EuropeFX? DEBBIE ELFORD: Oh, no. JAY: Okay. CFD is a contract for difference. As it sounds, that means that you are trading on the difference of the price. Okay? DEBBIE ELFORD: Mmm-hmm. JAY: It means that you can decide if you believe that a certain price will go up or will go down. Okay? Let's take an example. DEBBIE ELFORD: Mmm-hmm. JAY: Let's take an example. From two days ago, according to Trading Central and Investing.com, they - they had a belief that the NASDAQ had a chance to keep on going up. Have you seen it? I can see that you done it on the demo account. DEBBIE ELFORD: Yeah, yeah. JAY: Wonderful. So they believed that the price of this particular asset will keep on going up, and it went up. So they went on a buy position. Now, each and every dollar that the share went up, depends on how many shares you had, you made a profit. That's one example. For the past three days, NASDAQ went up by 200 points. Okay? If you had 100 shares, you could make $20,000. Okay? DEBBIE ELFORD: Yep. JAY: A CFD means that you're not actually buying an asset, you're not physically buying an asset. It's not like that you're going right now to a brokerage house, a physical one, saying, "Hi, guys, good morning. I would like to buy 100 shares of NASDAQ." Okay? And then you get to the idea that you own - you own 100 shares of NASDAQ that you've got to pay for, that you own them, and you're waiting for dividends and would like to sell them, and et cetera, et cetera. A little bit more - a little bit more complicated than that. Okay? DEBBIE ELFORD: Mmm. Mmm-hmm. JAY: Over here is that you see a price. Okay? If you believe the price will go down, you sell it. If you believe the price will go up, you buy. Okay? DEBBIE ELFORD: Mmm-hmm. JAY: Because you're not actually buying an asset, okay, that means that you can sell something even without owning it. The sell idea, okay, is that you can make money from a downturn. You don't need to wait until it will go down in order for you to buy it and sell it on the higher price. Is that clear? DEBBIE ELFORD: Yep. JAY: Sure? It sometimes is a little bit -- DEBBIE ELFORD: I think. JAY: Okay, it's a little bit confusing. DEBBIE ELFORD: Yeah.
The explanation continued, though it did not get any clearer. While Ms Elford was acknowledging what Jay was saying throughout that explanation, it must have been readily apparent to Jay that Ms Elford was not fully understanding, and was unlikely to fully comprehend, the overly simplistic explanation of CFDs that he was giving her, particularly in circumstances where Ms Elford had clearly indicated that she had never heard of a CFD before. It should also be noted that Jay's explanation of CFDs included an example based on "shares in NASDAQ". There is no indication that Ms Elford had any idea what the NASDAQ was, let alone what "shares in NASDAQ" might have meant. Jay's example of trading in CFDs involved a trade which resulted in a large profit. Nothing was said about the risk that the trade could produce an equally large loss if the market moved in the opposite direction.
Having observed Ms Elford as she gave evidence, I can confidently conclude that she did not have any real understanding of what a CFD was and was unlikely to have understood Jay's explanation.
Following Ms Elford's discussion with Jay, she exchanged text messages with another EuropeFX representative, Ben, who asked her whether her "session" with Jay had helped her. Ms Elford replied that it had helped her, but added that there was "so much to know". Ben's response was: "this is why you don't do it alone", a clear indication that EuropeFX was well aware that Ms Elford was ill-equipped to trade in CFDs without assistance from EuropeFX. It should be reiterated in that context that EuropeFX were not authorised to provide personal advice to Ms Elford, or anyone else, in respect of trading in CFDs.
It is also readily apparent from the communications between Ms Elford and EuropeFX representatives that the representatives knew or understood that Ms Elford had little or no understanding of the nature of the securities with which she was dealing, the concepts that she would need to understand in order to effectively trade in those securities, or the risks involved in such trading. It is true, as EuropeFX pointed out in its submissions, that EuropeFX representatives invariably read out a risk disclaimer during their telephone conversations with Ms Elford. The disclaimer included that "trading Forex and CFDs on margin carries a high level of risk to your capital" and that "the market is volatile and subject to risk". Ms Elford's evidence was that EuropeFX representatives often read the disclaimer "so quickly that [she] could not understand all the words that they said". She gave the same evidence when, during cross-examination, it was put to that she understood those words. Her evidence was: "it is easy to read them now that it's on print like that but at the time it's pretty fast". She also said that, while she understood the meaning of the words when they were read to her: "I didn't think that was the meaning because I trusted those people". She gave the following explanation of that answer in re-examination: Well, the high risk part is, like, well, I'm never going to put my money at high risk and these people are telling me that that - that they would make sure they looked after me, that they understood that I was a conservative person in doing this sort of thing, that I just wouldn't take any risks. So, yes, that's what I meant.
What Ms Elford appeared to be saying was that, while she may have understood the words, she did not believe or understand that the disclaimer applied in her circumstances given the particular context in which those words were spoken. Ms Elford also gave evidence to the effect that she did not believe or understand that all the money that she deposited in her trading account was at risk and that she therefore did not believe that there was a "high risk" that she would lose all her money.
It is also apparent that on some occasions, after quickly reading the risk disclaimer, EuropeFX account managers downplayed or even misrepresented the true import of the disclaimer. For example, on 18 June 2019, one of Ms Elford's account managers, Joey read the disclaimer to Ms Elford and then immediately said: Which means that, from now on, everything is going to came out of my mouth is based by truth and fact, okay, based on charts, listening to analysts say the same thing. I just the guy that's give you the information on a silver plate. You just need to grab it and turn it into a potential profit for your side. Okay?
It is little wonder that Ms Elford did not comprehend or appreciate the true import of the risk disclaimer that Joey had read out.
I accept Ms Elford's evidence that, despite the repeated reading of the disclaimers by EuropeFX representatives, she did not fully understand or appreciate that there was a high risk that she might lose all the money that she deposited in her EuropeFX trading account. Given her lack of any real understanding of CFDs, leverage and margin, her evidence in that regard is entirely plausible. It is also entirely plausible that she did not fully appreciate the risk involved in her trading in circumstances where, as is about to be discussed in more detail, she was led to believe that EuropeFX would look after her and ensure that she did not lose her money. EuropeFX's submission that Ms Elford knew that she was engaging in a "high-risk venture" is in my view unsustainable when consideration is given to the evidence as a whole.
It is also difficult to accept that the disclaimer that was read to Ms Elford could have meant much to her at the time in circumstances where she did not have any knowledge or understanding of CFDs and did not know what "margin" meant.

[76]

Communications with EuropeFX account managers and trading

Ms Elford engaged with various EuropeFX representatives over the telephone, including representatives named Jay, Joey, Ben, Alan and Steven. ASIC alleged that throughout the course of those communications, EuropeFX representatives made 67 personal advice statements. EuropeFX admitted that it made two personal advice statements and thereby contravened s 911A of the Corporations Act. ASIC also alleged that EuropeFX made 72 false or misleading representations, or engaged in 72 instances of misleading and deceptive conduct towards Ms Elford. EuropeFX admitted two contraventions arising from false or misleading representations.
The evidence in my view also clearly established that Ms Elford was almost entirely reliant on the EuropeFX representatives with whom she dealt when it came to her trading. I accept Ms Elford's evidence to that effect. Ms Elford's reliance was the product of several factors.
First, as discussed earlier, she had no trading experience and no knowledge or understanding of CFDs, Margin FX Contracts or the concepts that it would have been necessary for her to understand if she was to trade independently in any respect.
Second, EuropeFX representatives undoubtedly encouraged Ms Elford to rely on them by telling her that they would guide her trading. At the very outset, one of the EuropeFX representatives, Joey, told Ms Elford that his job was to "hold [her] hand and guide [her] through the process and to give [her] all the information that [she] need[ed] to know before … going to do a trade". Joey also told her that he would call her whenever "something strong happens in the market" and that he would then "explain … the opportunity" and how Ms Elford could profit from it.
Third, Joey and other EuropeFX account managers did just that. They not only repeatedly telephoned Ms Elford and recommended that she open or close positions, but also gave her precise directions about how to go about opening the positions on the EuropeFX platform in circumstances where they were able to see what was on her trading screen. As Ms Elford explained, while she was the one who "moved the mouse", she did so with the "complete direction of somebody else holding my hand".
Fourth, EuropeFX account managers repeatedly told Ms Elford that they were working for her and misleadingly told her that the more she earned, the more they would earn more in commission. For example, in a telephone conversation with an account manager, Alan, on 11 September 2019, the following exchange occurred: ALAN: Okay, thank you. I am working very hard for you or with you in other words. DEBBIE ELFORD: Thank you. ALAN: You are welcome. It is both for you and me dear. The more money you are making, you are going to open up more trades and are going to pay commission and I am going to enjoy for me too you know. That is the incentive here, okay? DEBBIE ELFORD: Okay, beautiful.
As discussed earlier, EuropeFX account managers earned commission which was based on the amount of money deposited by their customers, not the profits that the customers made. Perhaps more significantly, EuropeFX in fact profited from their customers' losses. Not surprisingly EuropeFX account managers did not tell Ms Elford, or any of the EFX30, that fact.
Ms Elford's complete reliance on EuropeFX was also demonstrated by the fact that she never opened or closed a single trade on her own. Every trade was effected while she was on the telephone with a EuropeFX representative, or on some occasions during the course of an exchange of text messages.
Without in any way intending to be critical or deprecating of Ms Elford, it is readily apparent from the evidence as a whole that she was, to say the very least, very naïve and gullible in her dealings with EuropeFX. It is even more apparent from the evidence that EuropeFX and its representatives exploited Ms Elford's naivety. Ms Elford was pressured to deposit funds and invest or open positions by EuropeFX representatives from the very outset. As noted earlier, before she commenced trading, she sent an email to EuropeFX advising that she did not want to go ahead and that "it [is] just not for me". Despite her obvious reluctance to proceed, a EuropeFX representative telephoned Ms Elford on a number of occasions and pressured her to trade by telling her, in effect, that he would talk her through a small trade to show "the potential" and that he would put in place measures that would mean that she would not need to "follow about your trade".
Between 12 July and 22 July 2019, EuropeFX representatives telephoned Ms Elford another eight times before she eventually relented and opened a position on 23 July 2019. On that day, the following exchange took place between a EuropeFX representative, Ben, and Ms Elford: MS ELFORD: I am. I think I'm probably - I'm probably (indistinct). I'm really not thinking I'm going to be able to - or I want to do this actually, so. BEN: Debbie. MS ELFORD: Yeah. Yeah. BEN: Look, my dear -- MS ELFORD: It's too much, (indistinct). BEN: Look, my dear Debbie, everything is fine. I think that you don't have enough trust, you know, of - you seem comfortable to do it right now because you don't actually take any trades. I feel you - like, you want to take the next step in the American market. Now I don't know if you follow about American market, but all what we talk almost happened on the last week on the Nasdaq. MS ELFORD: Yeah, I don't get -- BEN: Yeah. MS ELFORD: (Indistinct) I'm going to do that. Maybe next year when I've done a bit more homework and, you know, got into things more. BEN: Yeah, maybe. Maybe, but -- MS ELFORD: But not right -- BEN: (Indistinct). MS ELFORD: Yeah. BEN: Yeah, right -- MS ELFORD: But not right now. I'm interested, no. It's too - I can't do it right now. BEN: Not a problem, Debbie. MS ELFORD: So thank you for all your help, though. BEN: Yeah, you're welcome. My service, I just would like, Debbie, to take what we have, you know, have to open for you small trade that this money work for you until you feel comfortable to do something else. But in the meantime you already opened the account and you put some money so we can work with this money for now. MS ELFORD: Yeah, look, you've just got to open and buying and selling and watching things and, you know, I've got to suss that you know what you're doing and I don't really know who you are. There's no information and, you know, it's just all a bit - you know, it just doesn't sit with me really. BEN: It's not (indistinct). MS ELFORD: Yeah. BEN: But if we have - we have 5, 10 minutes with the computer? MS ELFORD: Yeah, no, look, I really don't think I will because there's too many questions that - things just don't add up to me. BEN: No, this is why - I don't want to ask more questions. I don't want to talk about the big stuff. We talk about the big stuff, you understand? Now I want you to open - with your small amount, to open this trade. Wait when it's closed and to continue to try to grow up this capital from now. MS ELFORD: Yeah. No, look, I - it's not my thing. This getting in and out of stuff, you know. I think I'm just a buy and leave person. I've worked that out by seeing this. BEN: All right. MS ELFORD: So that's a good thing. Some people can do that, but it's not my thing. BEN: I think - I think you don't know, but it's okay. All right. Debbie, you want us to help you to open something with your - what you have right now in the balance? MS ELFORD: Does that mean you buy and sell? BEN: Yeah. MS ELFORD: Yeah, I don't want to be buying and selling all the time. I don't know where that fits in with you down the track with all this stuff, bought and sold and how it all - you know, it gets all too messy and I don't understand it. BEN: Yeah (indistinct). MS ELFORD: (Indistinct) I've got stuff - I'll have stuff everywhere, you know. I own about six shares now and that's already too much. Like, you know, so to buy and sell, no, you've got all your paperwork now, like, that's got to be done. You know, it's (indistinct). BEN: You don't really buy - you don't really buy or sell something; you just open a trade with the way that you think that this will go (indistinct). So we talk about the big stuff. You can open this. You can open the safe stuff with very small amounts, yeah? If you talk about what -- MS ELFORD: You've still got to -- BEN: -- (indistinct) 0.1 or 0.01 if you want, you understand? MS ELFORD: So you still have to buy and sell and pay money and then when you sell it they give you money back? BEN: No, you don't buy and sell, my dear. It's all automatically. This is what you don't understand. You missed a couple of main points. This is why I just want, you know, open the first one and then you understand. It's all automatic for you with the take profit and the stop loss. We don't - you don't really need to log in to buy or log in to sell. Just open a trade and it's all automatically for you with the take profit. MS ELFORD: So you -- BEN: Right? MS ELFORD: So when do you ever sell it? BEN: You don't sell it. You don't really need to sell it. It's just before. What the point, what the price, is the price starts from some point, we choose before, when we open a trade. The trade is closed automatically with the take profit if it touches this price on the same way as the stop loss. That's all the trade was for you all the time. You don't need to actually to do something. You just need to open a trade, right? This is why - this is why I'm sure that you miss the main point, right? And, you know, maybe the talk about big money, you know, make you stressed and you feel not comfortable. This is why I just want to open, you know, to (indistinct) how much it's easy. We talk after a couple of days when you feel - and we work only when - with this balance. If you feel really okay, then I get it, we can continue. But that's - if not, everything is fine. We'll just try it, no?
The exchange continued in a similar vein. It is painfully obvious from the exchange that Ms Elford had next to no idea what was involved in trading CFDs and that was in part why she was so reluctant to proceed. Despite that, Ben's persistence and insistence was manifest. The pressure he imposed eventually bore fruit.
There are many other examples of EuropeFX representatives applying pressure on Ms Elford to deposit more funds and invest or trade in CFDs during the period she traded. It suffices to give one more example, which occurred much later in the period during which Ms Elford traded. On 11 September 2019, a EuropeFX representative named Steven recommended to Ms Elford that she open substantial positions in oil CFDs. That recommendation was supposedly based on information which Steven suggested indicated that "oil is going up" because "OPEC is cutting the production of oil". The following exchange then occurred: STEVEN: All right. So let's go, we will add the funds for the oil then I am going to help you open up the trade and then that is it. We are not going to be talking about deposits any more because you are going to have your NASDAQ trade, you are going to have your oil trade, you are going to be diversified and then you will have planted the seeds for an account that could potentially support that goal of your's. And, you know, you are going to decide when you want to withdraw those potential dividends. DEBBIE ELFORD: Okay, yep. STEVEN: Okay. So let's go to the dashboard to make the deposit. DEBBIE ELFORD: Where is that? STEVEN: So we are going to go to Firefox. We have to make the 50K deposit and then I am going to help you open up a trade. Now, go to the dashboard. DEBBIE ELFORD: Oh, no, no, I am not putting any more money in my thing. I have got - what I have got in there is what is in there. STEVEN: You don't want to trade on the oil? DEBBIE ELFORD: Yeah, but I can use the funds -- STEVEN: Yeah, but you are trading on NASDAQ right now and all your eggs are in one basket. DEBBIE ELFORD: Yeah, but can't I - I will use the funds that are already in there? STEVEN: But look you have a trade on NASDAQ. DEBBIE ELFORD: Well that is all right. That is okay, I understand what you are saying but STEVEN: Yeah. DEBBIE ELFORD: -- put more funds in there. STEVEN: You don't have to if you don't want. DEBBIE ELFORD: Yeah, no, I am interested to put more funds in just yet. If I see how it goes and then yeah -- STEVEN: No problem. DEBBIE ELFORD: -- (indistinct). STEVEN: No problem. Maybe you need a little more confidence. DEBBIE ELFORD: Yeah, that is exact, yeah, you are right. STEVEN: So maybe me and you will talk in a couple days and we will -- DEBBIE ELFORD: Yeah, no -- STEVEN: -- we will come back to the oil. Let me just write down what your goals are, 2.7 million you want to retire, okay, got you. So listen, it was a pleasure to speak with you. DEBBIE ELFORD: Yeah. STEVEN: Again, I am the commodities specialist, I deal with oil and gold and silver. I am going to pass you the phone back to - you know what, Alan just went to a meeting. We are going to talk soon, okay.
While on this occasion Ms Elford resisted the pressure that was being placed on her to deposit additional funds, the pressure was nonetheless manifest.
Other examples of pressure being placed upon Ms Elford to deposit further funds or carry out further trades are summarised in Annexure E.1 to the SOC, in particular at rows 152, 153, 154 and 160.
EuropeFX account managers also on occasion endeavoured to dissuade Ms Elford from withdrawing funds from her trading account, usually by suggesting that if she withdrew money from her account she would miss out on trading opportunities, or that if she delayed withdrawing funds, she could withdraw more funds later after she had made more money from trading. For example, on 19 September 2019, Ms Elford told an account manager, Steven, that she wanted to withdraw $5,000 from her trading account. Steven's response was: "[y]ou have to understand that if you're going to take the oil today like you did before, you're probably going to have the opportunity next week, if you want, from the available funds, to withdraw 50 or 100K, potentially".
EuropeFX account managers also dissuaded Ms Elford from withdrawing funds from her trading account by representing to her that she could access a "premium account" and "premium services" if she did not withdraw those funds, or if she deposited further funds into her trading account. In the same conversation with Steven to which reference has just been made, Steven told Ms Elford that if she "add[ed] 50K" that would "bring [her] to the premium account level". The exchange continued: STEVEN: Now that's going to bring you to the premium account level where you're going to get - sorry, if you did that, you're going to be able to potentially make 130K AUD, if it goes to 63. If you're going to go with 70K, you're going to be able to use 35, and you're going to be able to potentially make around 150K if oil reaches 63, and you're going to get to the premium account level where you get a 50 per cent discount on all trading commissions when you open a trade. Now, so far in your account you've paid, like, you know, a couple of thousand bucks on commissions because you've only been here for, like, a couple of days. DEBBIE ELFORD: Yeah. STEVEN: You know, we see potential in you to be a long-term trader and if you're going to be opening up a trade, a premium account holder gets 50 per cent discount. But anyway that really doesn't matter; the bottom line here is the potential profit that you already saw a couple of days ago, 43K. The report came out yesterday. The numbers are in, and oil's a million barrels down in the projection, meaning when it's down, the value goes up because people want it and there's less of it in the world. DEBBIE ELFORD: Yes. STEVEN: The thing is that you're in Australia and the Americans are still sleeping. So when their market opens is when the action is going to happen. DEBBIE ELFORD: Okay, yes. STEVEN: Okay? So you've -- DEBBIE ELFORD: Mmm-hmm. STEVEN: -- a choice between the same amount that you took last time. You can have 50 or you can take a little more at 70 and get to the premium account. It's really up to you, but like I said, if you want to get to that 2.7 million potentially in a couple of years, it's important to plant the seeds in the right place and only trade on big events. In November or December, there might not be a lot going on in the market. DEBBIE ELFORD: Okay, so to get up to the top, I need to put another 70 - 70,000? STEVEN: 70K would get you to the premium account where you're going to start getting our premium services. 60 per cent discount on all commissions, meaning every time you get into the market, it's more money in your pocket because you're not paying as much money. And you're going to be on our priority list for events, meaning when there's (indistinct) or Trump gets a (indistinct), you're going to be on the top people to call, because we can only call so many people at one time. DEBBIE ELFORD: Okay, then that sounds --
Ms Elford's evidence was that she agreed to make a deposit of $70,000 after this conversation "because I felt confident with Steven and had the impression that he knew what he was talking about" and that she also "liked the idea of being an important client, and understood that I would be treated as a VIP if I made the deposit" and she had the impression she would receive discounts on "trading fees" and "additional training and support".
EuropeFX representatives frequently recommended that Ms Elford deposit further funds, or open further trading positions, or adopt particular trading strategies, despite the fact that EuropeFX was not authorised to give personal advice. There could be little doubt that those recommendations were made so as to entice or encourage Ms Elford to engage in further trading, or deposit further funds. Some of those occasions are summarised in Annexure A.1 to the SOC, in particular at rows 234, 257, 258, 259, 260, 266, 273, 275 and 276. In the same vein, EuropeFX representatives often made representations to Ms Elford concerning the profits that she was likely to earn from trades that they recommended. Examples of such representations are summarised in Annexure C.1 to the SOC, in particular at rows 165, 173, 175 and 199.
Over the evening of 1 October and early morning of 2 October 2019, four of Ms Elford's positions closed automatically for a combined loss of $328,912. Despite that, she was contacted by EuropeFX representatives and encouraged, if not pressured, to deposit further money and engage in further trading as recommended by them. On 3 October 2019, Ms Elford was on holidays when an account manager at the time, Alan, contacted her and pressed her to open further positions. Ms Elford's evidence was that she found it "extremely stressful" to be contacted while she was on holidays but that she "didn't know how to say stop". When asked, about the conversation she had with Alan that preceded the opening of the new position, Ms Elford gave the following evidence: HIS HONOUR: That is, did you understand what Alan was - when you said, "Do it quick", did you understand what you were instructing him to do quick? [MS ELFORD]: Whatever he was going to do, whatever he was going to tell me, "Do it quickly, I've got to go." [HIS HONOUR]: Did you understand that what you were instructing him to do, "Do it quick", was opening a new trade? [MS ELFORD]: No. Because we hadn't started anything. [HIS HONOUR]: Because you will see in paragraph 356 [of Ms Elford's affidavit] that is what happened, that trade was open? [MS ELFORD]: That's correct. That's why it was very stressful at the time because once we got into it and started doing this, I'm, like, what's - I'm in my mind, "What's happening? We shouldn't be doing this. I don't know what's happening now." [HIS HONOUR]: That was in your mind. You've agreed with Ms Painter that you didn't say that to Alan that that's what you were thinking? [MS ELFORD]: Yes. I'm trying to do what he says on the thing and I still don't know why I'm doing it. Is it a part of that what I already had or is it - because there's so many margins and these pending things and you've got to put money against something else to stop something else. I was just making - I don't know if it was that what I was doing at the time. I just figured he wouldn't be doing this unless he knew it was important. Why would he open a new share. Like, I told him no.
The substance and effect of Ms Elford's evidence was that she effectively succumbed to Alan's pressure to open the position she opened and that she had no real idea what she was doing. I accept that evidence. As adverted to earlier, having observed Ms Elford give evidence, I considered her to be an honest witness who was doing her best to describe what she was thinking and how she felt at the time.
As noted earlier, Ms Elford ultimately lost $226,770.97 as a result of her trading with or through EuropeFX. When one considers her obvious ignorance and naivety in relation to trading in CFDs, the fact that she would lose the funds she deposited with EuropeFX was not just readily foreseeable - it was well-nigh inevitable.

[80]

Understanding of CFDs, Margin FX Contracts and trading risks

Ms Nikiforos was undoubtedly an intelligent, well-educated and articulate woman who, unlike the other EFX8, had at least some background and involvement in the financial services industry. She had even come across derivatives in the course of her studies. The overall effect of her evidence, however, was that she had a very limited understanding of CFDs, Margin FX Contracts and the risks associated in trading in those products during the period that she was engaged with EuropeFX. While she was aware that there were risks involved in trading generally, and accepted in cross-examination that she understood that trading with EuropeFX involved a higher level of risk than her investment in real-estate, she did not understand that CFDs were particularly risky products or that the risks involved in trading CFDs were greater than the risks involved in trading in other products such as equities. She also did not fully understand or appreciate important concepts that she would have needed to understand in order to understand the nature of CFDs and the risks involved in trading in them. In particular, she did not understand the meaning of the expressions "leveraged products" and "margined transaction" and did not understand the concept of margin more generally.
While Ms Nikiforos was cross-examined at length concerning her knowledge and understanding of CFDs and concepts such as margin, she maintained that her understanding of CFDs and concepts such as margin was very limited. Nothing emerged in cross-examination which caused me to doubt her evidence in that regard. I accept it. Importantly, Ms Nikiforos was not taken to any transcript or recording of any of her conversations with EuropeFX representatives during which she was given an adequate or comprehendible explanation of the financial products that she was trading or concepts such as leverage or margin. Nor was the Court taken to any such exchange in the course of EuropeFX's submissions.
The nature and quality of the explanations that EuropeFX typically gave to Ms Nikiforos may be illustrated by the following example of an exchange during which a EuropeFX representative named Johny (who is sometimes referred to in the call transcripts as "Johnny") purported to explain the concept of margin. The exchange must be read in the context of Ms Nikiforos' evidence that Johny frequently spoke to her very quickly and that she found it very hard to follow what he was saying. It should also be noted that it is readily apparent that, at the time Johny was giving the explanation, he was able to see Ms Nikiforos' trading screen and that his references to certain figures were the figures displayed on her screen. He had just not only recommended, but effectively directed, Ms Nikiforos to open a position in respect of a NASDAQ CFD. The following exchange then occurred: JOHNNY: Okay. Now you see the position's running, okay? JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: And you see the balance, 20,500, right? JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: You see the margin, the margin is on, let's say, 6,916. Right? JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: Okay. The margin is what you put in the markets right now. From 20,500, you put around 7,000 in the market. The margin is not moving. JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: That's what caused you the trade, okay? The trade, both of it. JENNIFER NIKIFOROS: Okay. JOHNNY: The free margin is what you have behind you. You see the free margin is 30,200? JENNIFER NIKIFOROS: Okay. Yeah. JOHNNY: That's what you have behind you to protect you. You see the margin level percentage? JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: The margin level percentage, Jennifer, represents how much your account takes. Okay? As long you trade around 150, 200, you amazing. You good. Okay?
Needless to say, Ms Nikiforos' evidence was that much of what Johny said to her during that exchange about the margin percentage did not make much sense to her. The main thing she took from it was that her margin of around $7,000 was "safe" because it was "not moving".
It is true that EuropeFX's PDS and Terms of Business included explanations of CFDs and concepts such as leverage and margin. It is equally true that, in the course of the onboarding process involving Ms Nikiforos, it would appear that a box in the online questionnaire was ticked to indicate that Ms Nikiforos had read those documents. Her evidence, however, was that she had no recollection of reading those documents and that, while ordinarily she would "open" those types of documents, she would not read them in full because she would "expect that they contain fairly standard terms". While EuropeFX was critical of Ms Nikiforos for not taking the time to read those documents, her evidence to the effect that she did not recall reading the documents, and was unlikely to have read them in full, was nonetheless plausible in all the circumstances.
Perhaps more importantly, it is open to infer that Ms Nikiforos may have been encouraged to tick the box on the online questionnaire indicating that she had read the documents even if she had not done so. As has already been noted, there was evidence which tended to suggest that the onboarding questionnaire in Ms Nikiforos' case was completed while she was on the telephone with a Global Win representative acting on EuropeFX's behalf. There was also evidence which indicated that Global Win representatives who conducted the onboarding process on behalf of EuropeFX would tended to tell prospective customers to tick the boxes which indicated that they had read risk disclosure notices and documents such as the PDS, even though it was apparent that they had not done so. The evidence in that regard will be addressed in more detail later in these reasons.
I am satisfied from the evidence as a whole that Ms Nikiforos had an inadequate understanding of CFD's and Margin FX Contracts and the concepts and risks involved in trading in those derivatives. Moreover, I am satisfied that Ms Nikiforos' inadequate understanding of those matters must have been readily apparent to the EuropeFX representatives with whom she dealt. Nothing that any of the EuropeFX representatives said or did remedied, or was capable of remedying, that inadequacy. The EuropeFX account managers failed to ensure that Ms Nikiforos had an adequate understanding of CFDs and Margin FX Contracts and the nature and extent of the risks involved in trading in them before actively encouraging her to trade.

[81]

Communications with EuropeFX account managers and trading

Ms Nikiforos primarily dealt with the EuropeFX representative Johny, though she also spoke with another representative named Steven. ASIC alleged that during her conversations with EuropeFX representatives, those representatives made 11 personal advice statements and 12 false or misleading representations. As discussed later, I have found that EuropeFX representatives made at least one personal advice statement to Ms Nikiforos.
The overall substance and effect of Ms Nikiforos' evidence was that she was almost entirely reliant on the EuropeFX representatives with whom she dealt when it came to trading. That was mainly because the representatives led her to believe that they knew what they were doing and she trusted them.
Ms Nikiforos' reliance was readily understandable given that she had no prior knowledge or experience in respect of trading derivatives and lacked any real understanding of the concepts EuropeFX representatives also frequently telephoned her, peppered her with recommendations and statements about the profits she was likely to make, and effectively directed her how to execute the trades, sometimes while sharing her trading screen. Ms Nikiforos' evidence was that she was "being directed".
Ms Nikiforos' evidence in that respect is corroborated by the recordings and transcripts of her exchanges with EuropeFX representatives. Following is a rather typical example of how Ms Nikiforos came to first open a position in NASDAQ CFDs and then, shortly thereafter, open a position in an oil CFD. After Johny told Ms Nikiforos that she should open a position in NASDAQ CFDs because she could buy it at its "cheapest price compare to the last week", the following exchange occurred: JOHNNY: Good. The quote is the market watch. That's all that. Let's add the NASDAQ. You see the plus on the right corner? JENNIFER NIKIFOROS: Yeah. JOHNNY: You see folders? Right now you have CFD1 folder. You see that? 4 JENNIFER NIKIFOROS: Yeah, yeah. Yeah. JOHNNY: Click on the CFD1 folder and tell me if you see NASDAQ over there, inside. JENNIFER NIKIFOROS: Yeah. JOHNNY: Click on the plus from the left and then click on - next to the NASDAQ. And then click on "done", on the right folder. JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: Now, it will take you back to the calls, right? JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: Good. Now you see the NASDAQ on the bottom? JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: Good. Now, click on the NASDAQ with your finger one time, Jennifer. And then trade. JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: Okay. Now, look, you have 20,500. 50 shares of NASDAQ like you wanted to take. By the way, if you took 50 shares two days ago, okay, let's say, and the NASDAQ increased 20 points, it's $1,000. Do you understand? It increased 50. JENNIFER NIKIFOROS: Mmm-hmm. JOHNNY: So you can say - I told you, 50 shares, it's around 10,000. And you will have 10,000 behind you. 10,000, actually 500. High margin level, high risk management. You want to do it like that you wanted to do or you want to do more or you want to do less? That's your decision, what you want to do.
The exchange continued with Johny effectively directing Ms Nikiforos to open a position in an oil CFD. Ms Nikiforos appeared to give no independent thought to the opening of those positions. Her evidence was that she opened the position on oil because "Johny was very confident, direct and seemed to know what he was taking about" and that she "thought that Johny would make a profit if [she] made a profit which increased [her] trust in him".
Ms Nikiforos also gave evidence that she felt that Johny was persistent and that she felt a "sense of pressure" arising from his calls, in particular pressure arising from Johny mentioning "missed trading opportunities and talking about how much money [she] would have made from that trade". Johny made her feel like she couldn't say no and that she had she had little time to think about it. Again, Ms Nikiforos' evidence to that effect is borne out by the recordings and transcripts of her telephone calls with Johny.
Johny also often pressured Ms Nikiforos into depositing more funds into her account. On 24 May 2019, Ms Nikiforos attempted to make a deposit while on the phone with Johny, but received an error message. Soon after the call, Ms Nikiforos deposited $20,000 into her account. Ms Nikiforos gave evidence that she did not really understand the reason she should deposit this amount of money, but she understood from her conversation with Johnny that it "might be more risky not to deposit more" and that she deposited more to alleviate the pressure Johnny placed on her. Several minutes after Ms Nikiforos made the deposit, Johnny called her to say "You can do 20 more." When Ms Nikiforos responded "Why don't we start with that", Johny continued "even if you put 20 more, you can use the stoploss and you can make much more because you will hold much more shares. You can make much more money, potentially".
As has already been noted, Ms Nikiforos also dealt with another EuropeFX representative, Steven, who was said to be in charge of EuropeFX's cryptocurrency department. Ms Nikiforos had a lengthy discussion with Steven on 30 May 2019, in which Steven recommended Bitcoin as a great "starter… like a little spark" to get her account started, and indicated that to open a position in Bitcoin, Ms Nikiforos would require $24,000 in her account to open 10 contracts. The explanation given by Steven included that: "[b]asically, its 12 K you're going to use to open up the trade … and, the other 12 K is going to be sitting in the free margin … [b]ecause we want to give the trade breathing room, in case it's going - it's going to go down a little". Ms Nikiforos queried whether, if she was investing $12,000 in "equity", she could lose $24,000. A somewhat confusing exchange followed: STEVEN: First of all, that's a good question. You're - you personally, you can lose -you can set what you want to lose from the beginning. So, something called a stop-loss. Okay. If you say, "I'm going to go - - - JENNIFER NIKIFOROS: Right. STEVEN: - - - into this trade and, even though I know I can make 16 or 30 K, I'm only prepared to lose one K or two K," so there's a thing - there's a place - - - JENNIFER NIKIFOROS: Right. STEVEN: - - - where you can put that in. That's first of all. But - but, if you're investing in something you - that you believe in, you want to give it room to breathe. JENNIFER NIKIFOROS: Right. STEVEN: Okay. That's it. That's it. Because, - - - JENNIFER NIKIFOROS: But, wouldn't - wouldn't your maximum loss be what you've invested, which is the 12,000? Like, you can't lose more than you've put in. STEVEN: No. JENNIFER NIKIFOROS: Like, - - - STEVEN: That's illegal. There's a law against that. You cannot lose - - - JENNIFER NIKIFOROS: Right. So, - - - STEVEN: - - - you can never owe us money. We can only owe you money. JENNIFER NIKIFOROS: So, if there's - if I - if there's 12,000, basically what we're saying is that, just so that there's still money in the account, so, like, if there's other trades, then I'm covered? STEVEN: Exactly. Because, you want - - - JENNIFER NIKIFOROS: Right? STEVEN: Exactly. JENNIFER NIKIFOROS: Right. STEVEN: Exactly. Exactly. Okay. You've got it. You're very smart.
Ms Nikiforos' evidence was that, following that exchange, she understood that any "additional margin" in her account, by which she meant "any amounts other than those invested on open trades", would not be subject to any risk and that, if she made an investment of $12,000, the maximum that she could theoretically lose was $12,000. Ms Nikiforos was cross-examined at some length about this exchange with Steven. That cross-examination demonstrated no more than that Ms Nikiforos did not understand the concept of margin and did not understand the extent of the risk involved in trading in CFDs.
Following the exchange with Steven to which reference has just been made, Ms Nikiforos deposited a further $20,000 into her trading account. Her evidence, which I accept, was that she did so "partly because Steven was so confident, but also because [she] felt pressured to follow his instructions". She maintained that she "did not feel that [she] had the time to stop and carefully consider the risks involved in trading Bitcoin". Not long after depositing those funds, Ms Nikiforos opened a buy position on a Margin FX Contract pair in respect of Bitcoin and the United States dollar. She did not put in place a stop loss. Her evidence, which I accept, is that she did so "relying on Steven's guidance … by typing in the numbers that he told [her] to". That was because she "could not navigate the EuropeFX trading site alone".
I would infer that every position that Ms Nikiforos opened and closed during the time she was trading with EuropeFX was opened or closed in relevantly the same manner and in relevantly the same circumstances. There is no indication that Ms Nikiforos ever opened or closed a position independently and while not on the telephone with a EuropeFX representative.
The following exchange between Ms Nikiforos and Johny on 4 June 2019 illustrates how little Ms Nikiforos understood about the trading that Johny was encouraging her to pursue and the extent of her reliance. Johny called Ms Nikiforos to advise her that her margin level was "really low", but she didn't "lost a penny right now." Johny advised Ms Nikiforos that she had three options: to deposit more money; hedge one of her positions by opening a position with the same volume in the other direction; or open a sell position on oil. The following exchange then occurred: JENNIFER NIKIFOROS: This is why I didn't want to put in all of that money in the beginning. But anyway, keep going. Let's -- JOHNY: But Jennifer, Jennifer, Jennifer. Don't judge. Listen. Don't judge, okay, this position or the trade in two days. Are you judging something in two days? Let me ask you question. When you made money at the beginning -- JENNIFER NIKIFOROS: All I know is that -- JOHNY: When you made money at the beginning, at the first position -- JENNIFER NIKIFOROS: Wait, wait, wait. Please don't - please don't -- JOHNY: You were happy, right? JENNIFER NIKIFOROS: Please don't. Hang on. Let's just speak at a normal level because my headphones are in and it's hurting my ears. So I just need to know that I haven't lost $40,000 or whatever it is in the space of two days. JOHNY: But right now you didn't lost a penny. Why are you keeping - JENNIFER NIKIFOROS: It's not about right now because I want to close oil. JOHNY: Okay. JENNIFER NIKIFOROS: Because I don't want to keep losing money. So if I'm losing oil, I lose - JOHNY: So you want to close - you want to take the 17,000 loss? JENNIFER NIKIFOROS: No, no, no. Wait, wait, wait. No, no, no, I don't want to do that. What I'm saying is what - the position that I'm in is if I've invested $3,000, how can I lose 17 if I've only put in 3,000? You can only lose what you put in. JOHNY: No, no, no. No, it's not right. I don't know who told you that. It's not right.
The conversation continued, with Ms Nikiforos ultimately conceding that she had no idea what she was doing: JENNIFER NIKIFOROS: Okay. What do I need to do? JOHNY: Okay? If you want to hedge the position - if you don't want to hedge, it's fine. JENNIFER NIKIFOROS: I just need to do something. I don't know what I'm doing, so I need to know.
Overall, I am comfortably satisfied from the evidence as a whole that Ms Nikiforos was almost entirely reliant on the advice, recommendations and directions of EuropeFX representatives. EuropeFX representatives were aware of and exploited that reliance. Both Johny and Steven recommended trades to Ms Nikiforos and effectively directed her how to place those trades. They also pressured Ms Nikiforos to deposit funds. It may readily be inferred that they did so in full knowledge that Ms Nikiforos had an inadequate understanding about the products that she was trading in and an inadequate appreciation of the risks involved.

[84]

Initial contact with EuropeFX and the opening of an account

Ms Sapor's evidence was that she first came to engage with EuropeFX after seeing an online article which reported that Nicole Kidman had invested in cryptocurrency through an automatic trading program called "Bitcoin Revolution". She provided her name, telephone number and email address and that evening received a telephone call and spoke with two men about opening an account. She was told that she had to fill out a form over the telephone and did so by answering questions that were put to her. She provided information concerning her finances and trading experience, including that she had one to five years trading experience in securities, options, commodities, futures and CFDs, but no experience trading in "OTC forex exchange". Ms Sapor's evidence, however, was to the effect that the information concerning her trading experience was not entirely correct. The problem she had in completing the form was that the only options open to her in completing the form concerning her trading experience were to record "none" or "1-5 years". Neither of those options reflected her actual circumstances.
It should be emphasised in this context that Ms Sapor's evidence about coming to engage with EuropeFX after responding to the online "Bitcoin Revolution" promotion was effectively corroborated by a recorded exchange she had with a EuropeFX representative. When Ms Sapor told the representative that she came upon EuropeFX in those circumstances, the representative did not dissociate EuropeFX from that promotion, but responded that "it is not just with cryptocurrencies that you can win and lose". It is equally clear from Ms Sapor's evidence that when she first came to engage with EuropeFX she was hoping and expecting to engage in automatic or automated trading which did not require her to do anything.
In one of her early conversations with a EuropeFX representative, the representative asked her about her objectives and financial situation, including: what she did for work; what her husband did for a living; and why she opened an account, including whether she needed a "secondary income" or had some other "goal". Ms Sapor's evidence was that she believed that by asking about her goals, the EuropeFX representative showed that he had an interest in her and her trading.
As was the case with some of the other EFX8, a EuropeFX representative told her that EuropeFX was "fully regulated by ASIC".

[85]

Understanding of CFDs, Margin FX Contracts and trading risks

Ms Sapor was a relatively intelligent and articulate woman. She also had some prior training and experience in respect of securities trading. Despite that, when the evidence is considered as a whole, it is abundantly clear that, throughout the entire period that she traded with EuropeFX, she had an inadequate and at best superficial understanding and appreciation of exactly what it was she was trading in, and an entirely inadequate understanding and appreciation of the concepts that were necessarily involved in trading leveraged derivatives. On my assessment of the evidence concerning Ms Sapor's engagement with EuropeFX, nothing that was said or done by any EuropeFX representative adequately filled the lacunae in her comprehension of those matters. Indeed, much of what was said to her about CFDs and concepts such as leverage and margin during the time she traded was more likely to obscure or mislead Ms Sapor, rather than illuminate her. Similarly, on my assessment of the evidence of and concerning Ms Sapor, while she may have had a general understanding that the trading that she engaged in involved risk, there could be little doubt that she did not fully appreciate the nature and scale of that risk, at least until the very end when it became apparent that she had lost most of what she had deposited.
Despite apparently having heard about CFDs during the training she had previously received when she opened accounts with Saxo Markets and IG Markets, Ms Sapor's evidence was that she did not have any understanding of what "CFD" meant, other than that it meant contract for difference. When she was asked in cross-examination whether she recalled from her prior training that "there was a discussion about that you might buy a contract in, for example, the NASDAQ at one price and sell it at another price, that you would bet on the difference between the price", her response was "[y]ou are giving me a lesson here". It was not put to her that her evidence in that regard was false, or that her apparent ignorance of what a CFD meant was feigned.
I was not taken to any recorded telephone call in which Ms Sapor was given a meaningful or comprehendible explanation of what a CFD was by any EuropeFX representative. Nor was I taken to any evidence which indicated that she had any real understanding or appreciation of what a CFD was. There was nothing in the evidence to which I was taken to suggest that Ms Sapor was aware that, when she opened a position or a trade, that she was not acquiring an asset of some sort. Rather, she appeared to be proceeding on the assumption that she was acquiring some kind of share when she opened a trade. That is perhaps not surprising in circumstances where EuropeFX representatives frequently indicated to Ms Sapor that she was in fact trading in shares or something similar. For example, when a EuropeFX representative named Steve purported to give Ms Sapor an explanation of leverage, the explanation involved an example which involved buying "shares of NASDAQ". Similarly, in an email sent to a EuropeFX representative on 5 July 2019, Ms Sapor wrote "I am wondering if it could be a good time to buy some more shares as it is lower?" There is no suggestion that any EuropeFX representative corrected Ms Sapor's misunderstanding in that regard. While EuropeFX representatives also at times referred to "contracts", I doubt that such references were sufficient to alert Ms Sapor to the fact that, when she opened a CFD trade, she was not acquiring the underlying asset.
It should also perhaps be noted in that context that most of Ms Sapor's trading, particularly during the early stages of her trading, was in NASDAQ CFDs. It would appear, however, that Ms Sapor did not even have a particularly sound appreciation of what NASDAQ was. During cross-examination, Ms Sapor was asked a series of questions about what was said to be a "general lesson" about NASDAQ that a EuropeFX representative had supposedly given her. Ms Sapor agreed that she "understood generally" what the representative had said. When asked what the NASDAQ was, however, her response was: "[d]ifferent companies of high big companies".
Ms Sapor's evidence was that she also had not heard of the expression "OTC forex exchange" when she first opened her account with EuropeFX. When asked whether she had heard of the expression "foreign exchange" in the context of currencies, she replied "[a]s a traveller, yes", but agreed that at the time she thought that she could be "trading in foreign currencies". On the whole, however, the evidence revealed that Ms Sapor's knowledge or understanding of Margin FX Contracts was at best rudimentary and superficial.
Ms Sapor's understanding of important concepts such as leverage and margin was little better. It was at best superficial, based as it most likely was on the overly simplistic and inadequate explanations given to her by EuropeFX representatives. In relation to leverage, Steve explained that "leverage is buying power" and gave the following example: STEVE: Let's make it more simple. Instead of paying - one share with the bank will cost you $ 7, 830, right? SANDRINE SAPOR: Yeah. STEVE: US dollars. Here with the same amount of money, with 7,830, you can buy 50 shares. SANDRINE SAPOR: Yes. Okay, yeah. STEVE: See this is the leverage, one to 50.
It may be noted that this rather simplistic explanation emphasised the advantages of leverage when it came to buying shares. It said nothing about the potential risks in the context of trading leveraged securities when the market turned against the trade. In a later telephone call, Steve did say that "it becomes risky when the leverage is too high" and that "[o]ne movement up, you can make a lot of money, but at the same time you can lose a lot of money". Regrettably, however, Steve qualified those statements by implying that the risk posed by leverage only arose when companies that were unregulated by ASIC used leverage of 1 to 500. Ms Sapor had previously been told, misleadingly, that EuropeFX was regulated by ASIC.
In any event, whatever may have been said to her concerning leverage, it was apparent that Ms Sapor did not relevantly connect it to her trading. After agreeing in cross-examination that, during or as a result of the conversation she had with Steve, she had a very broad or general understanding of leverage, Ms Sapor gave the following evidence: [MS PAINTER]: And did you understand, at the time of this conversation, 3 July, in a general sense, that it was connected with the way you were trading at EuropeFX? [MS SAPOR]:Yes. I guess, yes, with general. [MS PAINTER]: And did you understand that when you were trading with EuropeFX you would be using leverage in your trades? [MS SAPOR]: I don't know. [MS PAINTER]: Do you understand that you would be using leverage in your trades to enhance your buying power? [MS SAPOR]: I don't think so. I don't know. [MS PAINTER]:You don't know? [MS SAPOR]: I have a feeling no.
Ms Sapor's understanding of the concept of "margin" and "free margin" was little better. She understood or believed, based on what Steve told her, that "margin was like a safety net amount". Steve gave her the following explanation of free margin: STEVE: Now, what is free margin? Free margin is the most important thing in trading. Free margin -- SANDRINE SAPOR: Yeah. STEVE: -- your risk management. What does that mean? SANDRINE SAPOR: Yeah. STEVE: It means that if the market - you know the market - nothing goes straight up, it goes up and down, up and down, up and down, up and down. You -- SANDRINE SAPOR: Yeah. STEVE: -- want to be able to sustain each and every movement, to sustain the fluctuations of the market. SANDRINE SAPOR: Yeah. STEVE: Now, what is that mean? If the market, for example -- SANDRINE SAPOR: Yeah. STEVE: -- is going down before it's going up, potentially -- SANDRINE SAPOR: Yeah. STEVE: -- then what happens is that it takes off your free margin. Then your free margin is the most powerful tool that you can have in your account because with a big free margin you can sustain bigger movement.
When taken to this rather simplistic conversation in cross-examination, Ms Sapor agreed that she understood that free margin meant that she could sustain market fluctuations and sustain market volatility. Her evidence, however, was that while she understood that free margin was an "important thing", she did not "know how it was calculated or the figures what it means or how it is moving up and down". When asked whether she understood how free margin was said to allow her to sustain a bigger movement in the market, her evidence was: Well, I understand some figures but they said, "Okay. 100 per cent is safe. Okay." But how safe it is? I didn't know exactly and then I say was talking about 400. So I thought I better be on the 400 side than on 100 side. But I did - because I think there was, like, 20 per cent, then I would be cutting off, trying to closing off the account. So I - obviously I was scared of getting 10 lower than 100. But I didn't know if I had to put more money or if I was getting more profit, how it would affect that number quickly or not. I didn't - no idea.
The overall tenor of Ms Sapor's evidence was that she did not have any real understanding or appreciation of the concepts that Steve and other EuropeFX representatives told her about. That is, in any event, readily apparent from the recordings and transcripts of Ms Sapor's communications with EuropeFX representatives. That must also have been readily apparent to the EuropeFX representatives. It may be accepted that, as Ms Sapor's trading progressed, she became more familiar with the trading screen and came to appreciate, in a superficial way at least, the importance of the figures representing her free margin were to her trading. It does not follow, however, that she had any real understanding or appreciation of the concept itself.
It must again be acknowledged, in this context, that as part of the onboarding process, the box in the online questionnaire which indicated that Ms Sapor had read EuropeFX's PDS and Terms of Business was ticked. It may be accepted that if she had in fact read the PDS carefully, she may have gleaned some understanding and appreciation of, among other things, what a CFD was. Ms Sapor's evidence, however, was that she did not carefully read the documents and that she regarded the part of the questionnaire that referred to the PDS as "mandatory checkboxes that had to be selected to progress similar to when you have to agree to the terms and conditions before being allowed to buy something online for example".
It may perhaps be accepted that it was somewhat careless of Ms Sapor not to read the documents. That said, Ms Sapor's evidence was that the person who conducted the onboarding process with her remained on the telephone as she completed the questionnaire. It must have been obvious to that person, as well as to the EuropeFX representatives that Ms Sapor later dealt with, that Ms Sapor had neither read nor understood the documents. The representative was nevertheless content to complete the onboarding process. Indeed, as discussed later, the evidence concerning EuropeFX's onboarding procedures generally would tend to support the inference that Ms Sapor was most likely rushed through the questionnaire and not encouraged to read the documents. I would also infer that Steve and the other EuropeFX representatives with whom Ms Sapor dealt, either knew, or proceeded on the assumption, that Ms Sapor had not read the PDS or Terms of Business. That is readily apparent from the way they engaged with her.
As for Ms Sapor's knowledge and appreciation of the risks involved in trading in CFDs, it must of course be accepted that she knew that the trading that she was engaging in with EuropeFX involved some degree of risk. It must also be accepted that towards the beginning of most telephone conversations that Ms Sapor had with a EuropeFX representative, the representative read her a statement concerning risk. In one of her early conversations with Steve, for example, he said: STEVE: I'm going to read for you for 10 seconds, you know, because we are fully regulated by ASIC, the Australian Securities & Investments Commission -- SANDRINE SAPOR: Yes. STEVE: -- so I should let you know about the risk that's involved in trading. SANDRINE SAPOR: Yes. STEVE: So we have a small protocol, a short protocol that I need to read to you. SANDRINE SAPOR: Okay. STEVE: So: Trading forex and CFDs on margin carries a high level of risk to your capital. These products may not be suitable to investors. The markets are volatile and subject to risk. EuropeFX provides general advice only and that does not take into account an individual's financial situation, needs or investment objectives, and that advice may not be appropriate at the time of providing the advice. I will provide you with general market information according to third party sources. In addition, EuropeFX does not accept superannuation funds. Okay? SANDRINE SAPOR: Okay.
Several points can be made about this statement. First, it was preceded by the misleading representation that EuropeFX was "fully regulated by ASIC". The implication was that he was therefore required by ASIC to read what he referred to as the "small protocol". Second, by referring to the statement as a "small protocol", Steve tended to imply that the statement was a mere formality. Third, the statement concerning risk was unlikely to mean much to a person, like Ms Sapor, who had no real appreciation of what "forex" or "CFDs on margin" were. Fourth, the statement was also unlikely to have meant much in those circumstances given that it contained no explanation or elaboration about why trading in foreign exchanges and CFDs on margin carried a high level of risk, beyond the relatively facile statement that "markets are volatile". Fifth, as for the statement that EuropeFX would provide "general advice only", Ms Sapor's evidence was that she was confused by that statement because EuropeFX account managers, including Steve, had asked her about her financial situation and objectives. They had also told her that they were going to work on her goals. In other words, the statements and conduct of the account managers was inconsistent with what was said in the disclaimer about the limited advice that they could give.
It is perhaps not surprising, in those circumstances, that Ms Sapor's evidence concerning the statement read by Steve was as follows: I recall that most or every time that we spoke, my account managers said these words. I understood that by having the account managers say these words, EuropeFX was just trying to protect itself. My account managers always said these words so fast that I could not focus on them. I recall thinking that it was part of their procedure, and that I could trust them because they had procedures. I didn't understand lots of the terms. I didn't think that the products were very risky because I understood that the account managers would be there to support me.
Ms Sapor was cross-examined at length concerning that evidence. She maintained that she saw the "disclaimer" as a formality, particularly after it had been read to her a few times. She then gave the following evidence: [MS PAINTER]: And you saw it as a formality because, after the first few times it was read to you, you had a - you understood that there was risk in trading? [MS SAPOR]: No. [MS PAINTER]: No? [MS SAPOR]: No. Because they were actually giving me more advice than what it says on the disclaimer thing. So it's - I could see that they were giving more advice, more personal advice, because they said right from the start, "What is your goal? Let's work on your goal", and then I said, "Okay." So they are doing personal help here, personal advice, according to my needs, for the goal I want to go to. [MS PAINTER]: All right? [MS SAPOR]: So then it didn't for me as the person, they didn't admit anything for me because they had a personal project for my needs to join the trading company. That's why. … [MS PAINTER]: So if we accept, for the purposes of my question, that what you've just told his Honour is true, and you thought it was a formality because you didn't think that the account managers were abiding by - or that you didn't think the account managers were only giving you general advice, even if we accept that as true, the risk disclaimer talks primarily, doesn't it, about risk, and that's not a formality, is it? [MS SAPOR]: That's why I wanted to leave, quit, at the beginning. [MS PAINTER]: But you can't have thought it was a formality when it talked about risk because you knew that there was a risk at all times that you were trading with EFX? [MS SAPOR]: Yes. There was - they have brought into our relationship friendship, friendship. [MS PAINTER]: What has that got to do with the risk of trading? [MS SAPOR]: You trust the person. You trust someone that you feel like a friend and then - - - [MS PAINTER]: But what has that got to do with the risk of trading? [MS SAPOR]: Because I trust him. I felt safe. I didn't see any risk because I was in good hands with a good friends I can rely on.
I find it difficult to accept Ms Sapor's evidence that she did not understand that there was a risk in trading. I do, however, accept the general tenor of her evidence, which was that the reading of the disclaimer, and the reference in it to the "high degree of risk", did not resonate or mean much to her, particularly after it had been read a few times, and particularly given the nature of the relationship that the EuropeFX representatives had fostered with her. While the formal disclaimer said that the trading she was engaging in carried a high degree of risk, she did not think that the risk applied to her because she was "in good hands" and "felt safe". That evidence was entirely plausible in circumstances where many of the EuropeFX representatives with whom Ms Sapor dealt in fact repeatedly assured her that they were experienced and would ensure that her trading was not risky. For example, one of the representatives, David, assured Ms Sapor that he was "supercautious" and "superconservative". He also told her that he was "not a big fan of high risk" and that he would make sure that she was "doing that on the safest side".
Perhaps more significantly, it is highly unlikely that the bare statement that trading in CFDs "carries a high degree of risk" would have resonated or meant much to Ms Sapor in circumstances where, as discussed earlier, it was readily apparent that she had no real understanding or appreciation of what "CFDs on margin" were, or why they carried a high degree of risk. Moreover, putting to one side what was undoubtedly the formulaic reading of the general risk disclaimer, other statements made by EuropeFX representatives had the tendency to obscure or minimise the nature of the risk involved in trading CFDs. For example, in one of the early telephone calls between Ms Sapor and Steve, Ms Sapor indicated that while she had traded "a little bit before", she did not have support then and did not want to "do crazy things" or take a risk. Steve responded in the following terms: STEVE: So I will explain to you what is the real risk. The real risk -- SANDRINE SAPOR: Yeah. STEVE: -- is not to understand what is the - what is the risk itself. And that means that people tends to think that the more money that they have in the account, so they are risking more, which is exactly the opposite from the truth. The truth is if you have, for example - let's assume, okay, that you have $1 million in your account, for example, okay? SANDRINE SAPOR: Yeah. STEVE: And you trade only with a hundred thousand, then it's better than just have a hundred thousand and trading with a hundred thousand, right, because -- SANDRINE SAPOR: Yeah. STEVE: -- if you have a hundred thousand and trading with a hundred thousand, then you are trading with a hundred per cent of your money. SANDRINE SAPOR: And then you are taking a lot of risk. STEVE: Exactly, and - SANDRINE SAPOR: And you don't have much, no. STEVE: Exactly, and you don't have free margin to manoeuvre. I mean, you don't have any room for mistakes. SANDRINE SAPOR: Yes.
Steve's explanation of the "real risk" plainly did not adequately address the circumstances that made trading in CFDs particularly risky. The suggestion appeared to be that the "real risk" only arose if a customer did not have sufficient funds in their trading account. Indeed, the implication appeared to be that the more a customer deposited, the less the risk.
In summary, while Ms Sapor plainly understood that trading was, in general terms, risky, and perhaps at times highly risky, I am not persuaded that she had a sound or adequate understanding or appreciation of why trading in CFDs was particularly risky and did not fully appreciate why her trading was high risk. Perhaps more importantly, I am not persuaded that EuropeFX ever gave Ms Sapor an adequate explanation of why CFD trading was particularly risky and did not adequately arm Ms Sapor with information which would enable her to fully appreciate the risk. Moreover, as has already been noted, EuropeFX account managers in effect undermined or obscured Ms Sapor's appreciation of the risk to which she was exposed by reassuring her that she was not alone and that, because they were professionals and experts, she had nothing to worry about if she relied on them and followed their recommendations. They also assured her, in that context, that they were taking a conservative, or even "superconservative" approach. I am not persuaded that Ms Sapor fully appreciated that she could lose all the money in her account until towards the end of her trading when it was, in effect, too late.

[86]

Communications with EuropeFX account managers and trading

Ms Sapor mainly spoke with three EuropeFX representatives over the telephone. Their names were Steve, David and Emri. ASIC alleged that during those telephone conversations, the EuropeFX representatives made 270 personal advice statements. EuropeFX admitted that it gave personal advice to Ms Sapor on five occasions. ASIC also alleged that EuropeFX made 108 false and misleading representations to Ms Sapor. EuropeFX admitted that false or misleading representations were made on three occasions.
Ms Sapor's trading with EuropeFX occurred over a fairly lengthy period. She had many conversations with EuropeFX representatives. Ms Sapor's affidavit was very lengthy and the volume of the documentary evidence concerning her engagement with EuropeFX, in particular the recordings and transcripts of her telephone conversations with EuropeFX representatives, was enormous. As has already been indicated, Ms Sapor was also extensively cross-examined. It is simply not possible in those circumstances to give a comprehensive account of the evidence of and relating to Ms Sapor. It suffices at this point to record some more general findings that flow from my consideration of the evidence as a whole.
It is in my view readily apparent from the evidence as a whole that Ms Sapor was heavily reliant on the recommendations, advice and directions that she received from the EuropeFX representatives with whom she dealt. That was particularly the case in the early days and weeks of her trading, but it remained the case until the very end, at least until the time that she decided, on the basis of independent advice, to close all her open positions and crystallise her significant losses.
The overall tenor of Ms Sapor's affidavit and oral evidence was that she heavily relied on her EuropeFX account managers when it came to trading. That must also have been apparent to the EuropeFX account managers. Indeed, it may readily be inferred that they fostered that reliance. The recordings and transcripts of Ms Sapor's early dealings with her EuropeFX account managers revealed that they effectively told her what trades she should place, and told her exactly how she should execute those trades on the trading platform. The account managers were able to see what was on Ms Sapor's screen and were therefore able to tell her what she should click on, and what data she should enter, to effect the trade. Ms Sapor gave the following evidence in the context of one telephone call she had with a EuropeFX account manager named Steve on 3 July 2019: I didn't know what I was doing and was reliant on Steve to tell me. Steve often said things like "You are a fast learner". It made me feel confident and reassured me that l was doing the right thing. When Steve gave me various options for numbers, like he did in the above extract, I would just pick one. I figured he would lead me to the right numbers to pick.
She added that Steve seemed to her to be very experienced and that she felt that she should listen and follow everything that he said.
Ms Sapor's reliance was in any event obvious from many of her exchanges with her account managers. The following exchange is fairly typical. It occurred during a telephone call between Ms Sapor and Steve on 8 July 2019. Steve told Ms Sapor what her free margin was and then discussed the benefit of her being able to buy more CFDs when the price went down. The following exchange then occurred: STEVE: Yes, so exactly. Now, first of all, if you want, you can - you can add the funds to your free margin, then we will just sit together and I will show you how to do the pending order and how we can - how we can actually calculate how many points we want that it will go down before it will potentially go up, where you want to buy? SANDRINE SAPOR: Yes, yes, okay. Okay, okay, okay. So a pending order. There is "New order". Oh. STEVE: No, just a second, but you don't want to harm - you don't - you don't want to harm the risk management plan, right? SANDRINE SAPOR: Oh, so you want me to do first the transfer? STEVE: Yeah, that you'll not click by mistake or something on the - you know. SANDRINE SAPOR: Okay. STEVE: I don't - I don't like to -- SANDRINE SAPOR: Yeah, but I have to stop putting money in it. I need to stop putting money in it soon anyway.
Ms Sapor deposited an additional $5,000 as a result of Steve's advice, taking her total deposits at the time to $56,500. Ms Sapor's evidence concerning the exchange was that she was "feeling supported" and that she felt relieved knowing that she was "not alone and that Steve was going to show [her] how to place a pending order".
It is equally clear from the evidence that the EuropeFX account managers fostered and encouraged Ms Sapor's reliance. The following example highlights the tactics and techniques that the account managers utilised in that regard. Ms Sapor's evidence was that in July 2019, her husband had told her to stop trading after she showed him the outcome of her trades. On 18 July 2019, she sent an email to the account managers Steve and David in which she said that she and her husband were stressed and that she was "planning to stop". Steve subsequently telephoned her and told her that there was no reason for her to be stressed and that, because she had a margin of almost 400 per cent, the "minus" she was seeing on her screen was "meaningless and irrelevant".
Shortly thereafter she was contacted by David during which the following exchange occurred: DAVID: …I heard from Steve that you are panicking a little bit, so the purpose of that phone call is just to organise the picture in a better way to prevent any kind of the future mistakes that will -- SANDRINE SAPOR: Yes. DAVID: -- damage your account. I will tell you in advance, first thing, take a big - a big breath, okay? Whatever you will do, we will respect it, okay? SANDRINE SAPOR: Okay. DAVID: No-one will try to convince you to do something against your own will, but from time to time, you don't even know what is your will, because as a result of fear, panic and stress, you are being emotional, and when you are being emotional, you are being irrational, and this emotion comes from the unknown. Makes sense? SANDRINE SAPOR: Yes, yes. DAVID: Now, how we -- SANDRINE SAPOR: Which is also from my husband, too, and the - the funds that I have put in there, it's my husband's money, more - more - more than mine. DAVID: I respect it, I understand it. Keep in your mind, I'm not disrespecting your husband, but I'm not going - I'm not going to ask my wife how to park my own car if she doesn't have a driving licence. Make sense? And that's the reality. Now, I understand that he is willing to protect both of you. If you want, I can talk to your husband as well and I can explain him everything from A to Z. Doesn't matter how tough man he can be, I'm going to make sure that he will understand what is right compared to what is wrong. But I will start with you as the account holder. Okay?
The conversation continued in that vein for some time. The general tenor of what David told Ms Sapor was that he was an expert and that she should listen to him, not her husband, because her husband "don't even know what is it all about". David then arranged for Ms Sapor to allow him to access her computer and trading screen. He pointed out what he said were various mistakes she had made in her trading and told her that it was "because you don't have enough experience or knowledge in terms of training to have the basic understanding of what is right and what is wrong". Towards the end of the conversation, David returned to the topic of why Ms Sapor should listen to him, not her husband, and the following exchange occurred: DAVID: Does that make sense? Now, my job is to organise the picture, while so far, your husband is trying to - he's not doing that in purpose. I'm not blaming him and I'm definitely not judging. He is trying to protect you, because he loves you. Now, we love you as well. Maybe it's a different love, okay, but, bottom line, all of us, we have a mutual interest; right? And that's a fact. If I want just to gain commissions from your trading account, or Steve want to do so, so we'll just trade with you more aggressively, and he's not doing so. Now ….
David then proceeded to give Ms Sapor some general market or trading advice and said: DAVID: You will always have these thoughts of, "What will happen if and if and if and if", and "I should do that and I should do that and I should do that." Keep in your mind that in life, you don't get what you want, you get what you have to have, and you don't work with "should", you work with "must". Make a decision: "Am I going to do what needs to be done in order to fight back? David and Steven, EuropeFX, they are fully with me, on the same way that I am being fully with them. I applied for a discount, David gave me a discount of 50 per cent on swaps, while clients are putting $2 million in order to achieve it." You follow me? SANDRINE SAPOR: Yes.
It is little wonder that Ms Sapor continued to rely on her EuropeFX account managers and do what they told her to do.
Ms Sapor's reliance on the EuropeFX representatives was apparent even towards the very end of the period during which she traded. On 3 September 2019, Ms Sapor opened a sell position because a EuropeFX account manager named Emri had told her there was a "strong signal" on "CHF/JPY" based on information on Trading Central. Ms Sapor's evidence was that she felt very stressed at the time because she felt that Emri had pushed her into opening the position but would not continue to be available to advise her. It is readily apparent that Ms Sapor was concerned because the price was fluctuating and she did not know what to do. Emri indicated that he would like to stay on the line, but that he had to go. The following exchange then occurred: EMRI: Okay. Okay. They really push me to go, but please -- SANDRINE SAPOR: Oh. EMRI: -- keep watching it, okay? They give strong sell signal still. Okay, watch it, okay? SANDRINE SAPOR: So you have to go? EMRI: I have to go. They tell -- SANDRINE SAPOR: Who is telling you to go? EMRI: The office. There are other things, because they are closing. I need to go, okay? But -- SANDRINE SAPOR: Oh, no. EMRI: -- I will give one more, two more minutes, just a second. SANDRINE SAPOR: The thing is, what is supposed to be the - the - the - when should I - where should I sell it? Where should I stop the sell? EMRI: You can sell anything when you see a little bit potential profit, or any time you will start to see around the level, according to TradingView, okay, that level. SANDRINE SAPOR: Yeah. EMRI: You can directly close the - okay? With the potential profit -- SANDRINE SAPOR: (Indistinct). EMRI: -- small profit. SANDRINE SAPOR: (Indistinct). EMRI: According - yeah, look, the small take profits, they give some different levels, okay. You can close -- SANDRINE SAPOR: Yes. EMRI: -- with a small take profits there is the resistance, there is the support, there is the support. So they think that you might - you can close if you want, with the - even the small take profits, okay? SANDRINE SAPOR: Yes. EMRI: So I am - but please give me information. Doesn't - do not feel bad, because they give, okay, strong sell. Strong sell still. The signal's strong sell, okay? So -- SANDRINE SAPOR: Okay. EMRI: -- please take care, have an amazing day, and hopefully tomorrow -- SANDRINE SAPOR: Tonight? EMRI: -- first thing in the morning, I will come, I will - I will call you, okay? SANDRINE SAPOR: Okay.
The extent to which Ms Sapor relied on Emri is obvious from that exchange. Her evidence, which I accept, was that she felt "abandoned" at that point, that she did not feel that she could trade on her own, and that she "needed someone to help [her] on the phone".
EuropeFX maintained that Ms Sapor did not rely on her account managers. It submitted that she was an "engaged trader" who traded independently by exercising her own judgment. I reject that submission. As I have already indicated, the recordings and transcripts of Ms Sapor's engagement with her account managers reveal, on the whole, that she was clearly reliant on the recommendations, advice and directions of the account managers. As for trading independently, EuropeFX again relied on a schedule which it claimed listed all the trades that Ms Sapor executed when she was not on the telephone with a EuropeFX representative. That schedule is worthy of little weight. It may be accepted that Ms Sapor was ultimately able to use EuropeFX's trading platform and execute trades while not on the telephone with an account manager. She conceded that "little by little" she was "[t]rying to prove that [she] could do a little bit on [her] own". It does not follow that those trades were executed independently. Rather, it is apparent that many, if not most, of the trades that Ms Sapor executed while not on the telephone with an account manager were trades that she executed as a direct result of contemporaneous recommendations, advice or directions given by an account manager. It suffices to give one example to illustrate this point.
On 7 August 2019, Emri, who was one of the account managers with whom Ms Sapor engaged in the later period of her trading, gave Ms Sapor advice and recommendations concerning a trading strategy called double direction trading, which basically involved opening multiple buy and sell positions in the same CFD or Margin FX Contract. While Ms Sapor's evidence was that the strategy did not make much sense to her, she nonetheless relied on Emri. Based on Emri's advice about the strategy and a supposed "signal" on Trading Central that Emri told her about, Ms Sapor opened a large number of double direction positions in USD/CHF Margin FX Contracts, including some very shortly after her conversation with Emri. Ms Sapor's evidence was that she would not have opened any of those positions without Emri's advice. Indeed, she had never before opened any Margin FX contract positions before. Those double direction trading positions were included in EuropeFX's independent trading schedule, despite the fact that they were obviously not independent trades. They were the direct result of recommendations and directions by a EuropeFX representative.
Ms Sapor's evidence was also that she was unsure how to withdraw money from her trading account. On 1 August 2019, Ms Sapor asked Steve "How do I actually withdraw money?" and "How does it work?". Steve told Ms Sapor: STEVE: By going to the withdraw section, and you will see that all your free margin is available for you. So, like I said, if you are putting more money in, it doesn't mean that you cannot take more - that you cannot take money out because your free margin is fully available for you and you have full access to your free margin. So, as long as the Nasdaq will go up even couple of points, that your account will not be in such a high risk, then you'll be able to cash out what you put in. Very simple. SANDRINE: Okay. So, that will be the way I can do it, right, later on? STEVE: In order - yeah, in order to take money - exactly. So, just put in the amount of money that you will like to take and SANDRINE: And, is there a limit? STEVE: What? SANDRINE: Limit is only what the STEVE: What - you can take out all your available funds. It's fully access for you. Now, if you need something for me - if you are being brave enough today and you need something for me in the future that I will expedite the approval of the withdrawal for you, I will do it. I will do whatever you need me to do in order to support you. I'm here for you. You are not alone. Me here. I'm here. David here. And, you have a fully company that's standing behind you in order to support you.
Ms Sapor gave evidence that she had asked Steve "how to withdraw money, because [she] was very stressed at this point" and had "put in a lot of money". Ms Sapor did not make a withdrawal following this call. Her understanding was that she would make a "profit on the NASDAQ" and then "withdraw that profit" so that she could "recover what [she] had put in in the first place". However, later on the same day, Ms Sapor deposited a further $18,000 because she was worried that "the NASDAQ was going down" and that could cause her to "lose all the money in [her] trading account".
It is tolerably clear from this exchange that Ms Sapor was discouraged from withdrawing funds from her account because it would place her account in a "high risk" position. It is also notable in that context that Steve suggested that her account would be less at risk if she waited for NASDAQ to "go up" and that he would "expedite" the approval of the withdrawal.
Throughout the period that she engaged with EuropeFX, EuropeFX account managers gave Ms Sapor advice, recommendations and directions about depositing more funds and opening further trading positions, despite the fact that EuropeFX was not authorised to give personal advice. Those occasions are summarised in Annexure A.1 to the SOC, in particular at rows 400, 405, 432, 434, 469, 601 and 647. EuropeFX representatives also often made representations to Ms Sapor concerning the profits that she was likely to earn from trades that they recommended. Examples of such representations are summarised in Annexure C.1 to the SOC, in particular at rows 313, 314, 319, 328, 362, 365, 367, 370, 381, 390, 391, 402 and 406.
On a number of occasions, the recommendations or advice thrust upon Ms Sapor by the account managers amounted to undue pressure to invest or deposit.
On at least one occasion, Ms Sapor was encouraged to deposit further funds by reference to "VIP" services that she was told she could access if she deposited those funds. In one of Ms Sapor's early calls with Steve on 3 July 2019, after purporting to give Ms Sapor an explanation of the risks, Steve directed Ms Sapor to her account and explained that she did not have "VIP services." Steve then explained that "VIP services means that, first of all, you know, it's like when we have a big event, so you will be one of the first clients to know about it, because a very important thing in trading, maybe the most important thing, is the timing". Steve also explained that "platinum" or "premium" accounts received different discounts on commissions. The following exchange then took place: STEVE: Now, the beauty about the account, that you don't have to trade with all the money that you have in the account. For example - let's scroll up - if you have a premium account and you have a hundred thousand in your account, you don't have to trade with that - with a hundred thousand. You can trade, for example, with just 30 per cent, 20 per cent, depends on you. SANDRINE SAPOR: Yeah. STEVE: Got it? SANDRINE SAPOR: Of course, yes, I got it. The thing is I cannot do a hundred because we are doing - we are about to do a renovation and we need the money cash. STEVE: Mmm-hmm, okay. SANDRINE SAPOR: So 50, I - I probably can, but - but one hundred is - no, because we'd have to pay 350,000 by the end of this year, and I need to have the cash and we don't have the cash yet. SANDRINE SAPOR: Yes. STEVE: Okay, so it's - but by the way, at the same way that you can put money in, you can take money out. So even if you have a hundred, 70 is free, because you are not using all the investment (indistinct). SANDRINE SAPOR: Okay, the thing is also - okay, there's another thing is that from the bank, my - my account, because I have a mortgage for the house, the more I have money in my account, less I'm paying fees. So, you know, it probably doesn't make sense to you in some ways because you are in the trading bit, and I, yeah, probably - but I think it's all about averaged at the moment, and I think I could go with the a 50, but not with a hundred yet. STEVE: No, that's fine. I'll tell you what - I'll tell you what, first of all, the calculation that you should do is like this: the potential here - if the potential here is bigger than the -- SANDRINE SAPOR: Than what I'm losing on the -- STEVE: Yeah. SANDRINE SAPOR: -- on the fees? STEVE: Yeah, on the fees, then it's worth - then probably it's worth doing - no? SANDRINE SAPOR: Maybe, but my husband would be very genuinely worried. 50, it will be - he will be - will care, but then if I (indistinct) result pretty nicely, then he will be okay. So, it's not only me, it's also my husband, and -- STEVE: Of course, yeah. SANDRINE SAPOR: -- like, already he said 30 is already a lot on (indistinct). So by then I'll have a point here by saying 50, I can go - by 50 and then I get some more
Steve then remained on the phone with Ms Sapor as she deposited funds into her account. Ms Sapor gave the following evidence about that exchange: The transcript records that Steve then showed me different accounts which required different amounts of money. He told me that if I deposited $50,000 I would gain access to VIP services including the closed group and a discount on commission, I told my husband about this. He thought it sounded good and I trust my husband's judgment. When I opened my trading account, I hadn't anticipated depositing $50,000 but I thought that it would be quicker to build up my account balance by accessing the VIP services, including the discount on commission. My trading statement shows that on Thursday, 4 July 2019, at around 9.08 am, deposited $10,000 into my trading account. I transferred the $10,000 from my mortgage offset account. As best I recall, I had a daily transaction limit of $10,000 when transferring money from my mortgage offset account. (Internal reference IDs omitted)
As is apparent from the exchange, Ms Sapor deposited more money into her account at least in part because of Steve's promises that this would enable her to access "VIP services." It is also significant, in this regard, that Steve represented to Ms Sapor that she had the option of not trading with the entirety of the funds in her account.
The objective evidence clearly indicated that EuropeFX account managers frequently pressured Ms Sapor to deposit further money into her trading account. For example, on 10 July 2019, one of Ms Sapor's account managers, Steve, suggested that Ms Sapor should increase her free margin as a means of risk management. Ms Sapor baulked at that suggestion, as she took it to mean that Steven was suggesting that she deposit more money. The following exchange occurred: SANDRINE SAPOR: I know there's one thing you want me to do, but I cannot do that. STEVE: Okay. You know, first of all, "I can't" is not an answer. You can - you know that you can do whatever you want, in the end of the day. You are the boss, so - SANDRINE SAPOR: Right, yeah, but I've got to be reasonable. STEVE: Yes, (indistinct). You tell me what - what does not make sense for you and I'll solve for you the problem. If it's not reasonable, then what is reasonable? What is more reasonable than having - than having a very big free margin in order to feel more safe while you're trading?
Ms Sapor was also pressured to trade, even when she was obviously reluctant to do so. On 5 September 2019, for example, another account manager, David, recommended that Ms Sapor open a position on a NASDAQ CFD. Ms Sapor expressed reservations, saying that it was "scary" and that she was "tired". David's response was as follows: DAVID: I understand, but in life it's better to face the fear and not to run from it, not to be the - what is the meaning of leaving? If you will let your fear make a decision for you, will the - not only that you will live an unfulfilling life; you will go nowhere. You're going to face depression. What will you say to your kid if you have something that you're facing and is being scared of? SANDRINE SAPOR: Yeah, right. Yeah, okay. Yeah, I know. DAVID: Wonderful. Now, you don't understand that if you put it on hold while there is no information out there, and on the - on the NASDAQ, you do have information that's more safe, what is the point by what you're doing right now? You don't even know. If you could tell me, "Look, I have a plan. I have a vision. I know what I'm doing. I have information, I have technical indicators. I have that", I will tell you, "Okay, you are good to go. Amazing. Go - go work with him. They all good." But you don't have this. You don't even know which direction it will go. You just say, "I wanted that it will go up." If it's going up, it's hurting your account.
Ms Sapor confirmed in the course of cross-examination that she felt that she was pressured or "pushed" by her EuropeFX account managers to deposit more money and trade more. While, perhaps not surprisingly in the circumstances, she struggled to recall, articulate or identify specific instances, she referred to a pattern of conduct whereby she was advised to put in more money to "rebuild" her account. I accept her evidence in that regard. The pressure is, in any event, manifest in many of the recorded exchanges between the EuropeFX account managers and Ms Sapor.

[89]

Ms Boden's credibility and reliability

Before summarising the evidence concerning Ms Boden's dealings with EuropeFX, it is necessary to briefly address the question whether Ms Boden was a credible witness who gave reliable evidence. As noted earlier, unlike most of the other EFX8 witnesses, there was at least some cause for concern in relation to Ms Boden's credibility and the reliability of her evidence generally.
EuropeFX submitted that Ms Boden was a "practiced liar" and that her evidence should not be accepted without independent corroboration". That submission was primarily based on three aspects of Ms Boden's evidence.
First, in her affidavit, Ms Boden referred to the fact that after her father died, she sold the house that they jointly owned and received the proceeds of that sale of $300,000. She said that in 2018, she invested $300,000 with a trading company called ForexCT. In the course of cross-examination, however, Ms Boden agreed that, between the time she received $300,000 from the sale of the house that she had jointly owned with her father, and the time she invested money with ForexCT, she had in fact bought and sold another property. EuropeFX submitted that Ms Boden omitted that "significant detail" from the details of her financial situation.
Second, in her affidavit, Ms Boden candidly admitted that she had on occasion lied to EuropeFX account managers about her financial position. In particular, she had on several occasions told account managers that she needed money for an operation in circumstances where, while it was true that she needed an operation, it was not true that she needed money for that operation. Ms Boden's evidence was that she told the account managers that she need money for the operations so they would show her empathy and would either stop asking her to deposit more money into her trading account, or would allow her to withdraw money from her trading account. On another occasion, she told an account manager that her savings were in a fixed term bank account when that was in fact not the case. Her evidence was that she told that falsehood in an endeavour to stop the account manager from asking her to deposit more money into her trading account. EuropeFX also contended that Ms Boden repeated her lie about needing money for surgery in her later complaint to AFCA.
Third, as has already been noted, Ms Boden eventually lodged a complaint concerning EuropeFX with AFCA. She confirmed in her evidence that she had previously lodged complaints in respect of her trading with ForexCT and with another company called BormaCorp. Ms Boden traded with or through ForexCT before she traded with EuropeFX. She traded with or through BormaCorp after she traded with EuropeFX. EuropeFX submitted that Ms Boden's "history of making complaints about different trading companies" supported the conclusion that she was a practiced liar.
While I would accept that Ms Boden was not a particularly impressive witness, I do not accept that she was a "practiced liar", or that she was not a credible witness, or that her evidence as a whole was not reliable. The fact that the money she invested with ForexCT was only indirectly the proceeds of the sale of the house she owned with her father, given the intervening purchase and sale (at a loss) of another property, was hardly a material or important fact in the circumstances. While Ms Boden's evidence concerning that matter in cross-examination was not particularly impressive, I do not accept that she deliberately omitted to mention the intervening property transaction.
As for the falsehoods that Ms Boden candidly admitted telling the EuropeFX account managers, I accept her evidence that she told those lies in an endeavour to either put a stop to the repeated requests for her to deposit further funds into her trading account, or to facilitate her attempts to withdraw funds from that account. While that may not entirely excuse or justify her lies, it provides a plausible and understandable explanation for them in all the circumstances. I reject EuropeFX's submission that Ms Boden told the lies in order to manipulate the account managers or "curry favour". As discussed later, if anything it was the account managers who manipulated Ms Bode. I am also far from convinced that Ms Boden told the same lie about needing money for surgery in her complaint to AFCA. It is open to read the statement in the AFCA complaint about Ms Boden telling EuropeFX that she needed to withdraw money from her account to pay for her surgery as simply being a recitation by Ms Boden of what she told the account manager at the time.
As for the fact that Ms Boden made other complaints about the activities of ForexCT and BormaCorp, as unusual or surprising as it may be that Ms Boden engaged in unsuccessful derivatives trading with three successive companies, and subsequently lodged complaints about her experiences with those companies, I fail to see how that supports the inference that she was a practiced liar. As discussed in more detail later, it may reveal little more than that Ms Boden was naïve and vulnerable when it came to engaging with the sort of companies that operated in this particular sector of the financial services industry at the time.
As I have already noted, I accept that Ms Boden was not an entirely impressive witness. I will accordingly approach some of her evidence with caution, particularly when it is not corroborated or supported in some way by independent or objective evidence. As will be seen, however, I consider that for the most part Ms Boden's evidence was supported by what was recorded as having been said during her many conversations with EuropeFX representatives.

[90]

Initial contact with EuropeFX and the opening of an account

Ms Boden came to open a trading account with EuropeFX because she clicked on an online advertisement that mentioned trading and offered training and education in that regard. Her recollection, however, was that the advertisement referred to another company and did not mention EuropeFX. She clicked on the link and provided her contact details. She subsequently received two telephone calls, first from a company that was not EuropeFX, and then from a representative of EuropeFX.
Ms Boden had very little recollection of the procedure involved in opening her account with EuropeFX. The evidence would suggest that she completed, or provided information that enabled the completion of, an online questionnaire. The information recorded in the questionnaire included that Ms Boden was unemployed, that her income was under US$10,000, and that her liquid net worth was between US$30,000 and US$99,999. The questionnaire also recorded that Ms Boden had no trading experience in respect of options, commodities, futures, CFDs or "OTC forex exchange". Ms Boden's evidence concerning her trading experience is addressed in more detail later.
While the questionnaire recorded that Ms Boden had read and understood EuropeFX's PDS, Terms of Business and the Financial Services Guide, her evidence was that she could not recall having done so. Similarly, while the questionnaire acknowledged that Ms Boden had read the risk disclosure notice in the questionnaire, Ms Boden's evidence was that she did not recall acknowledging the risk disclosure notice. Nor did she recall anyone from EuropeFX ever telling her that a CFD account was not appropriate for her.
During one of her very first conversations with a EuropeFX representative, the representative, Jovanni, told Ms Boden that he was going to work with her "as a team". He then asked Ms Boden a series of questions about herself, including why she had opened an account with EuropeFX, whether she had any "experience in the market", what her "target" was, and what she wanted to achieve. Ms Boden's response was that she opened an account with EuropeFX because she "want[ed] to learn" and that while she knew a "little bit on currencies", she didn't "know anything on anything else". She also told Jovanni that she had lost over $100,000 as a result of her previous trading. Ms Boden's evidence was that she understood that Jovanni had asked her questions about her experience and objectives because he was there to help her and give her the support and trading guidance that she needed.

[91]

Understanding of CFDs, Margin FX Contracts and trading risks

As has already been noted, unlike virtually all of the other EFX8, Ms Boden had some, albeit very limited, trading experience, having traded currencies with a company called "ForexCT". Shortly before opening her account with EuropeFX, Ms Boden had also transferred funds to an entity, or perhaps two entities, called Learn to Trade and Finsa. Her evidence was that she transferred that money because she wanted to attend seminars and learning how to trade with Finsa, including in currency exchange and CFDs. It was, however, at best unclear whether Ms Boden in fact engaged in any trading with Finsa before she commenced trading with EuropeFX.
Despite her previous trading experience and her obvious desire to learn more about trading, including in derivatives and CFDs, the evidence as a whole indicated that Ms Boden's understanding of CFDs and trading concepts such as leverage and margin, was at best superficial and inadequate. For example, in her affidavit, Ms Boden gave the following explanation of leverage: I understood what leverage was from my experience trading with ForexCT. At the time I understood that leverage meant that you could trade at a higher value than the amount that you had in your account. It was like you had more money in your account than you actually did. I also understood that you could put stop losses in place to limit the amount of money you would lose.
She also appeared to think that leverage had something to do with the amount of money in her trading account. In her affidavit, she explained her apparent reluctance at one point to withdraw money from her trading account on the following basis: I wanted to leave the money in my trading account because I thought it would make it stronger. I understood that leverage makes the account stronger. If the trades are going in the opposite direction, it helps to strengthen the account. The more I had in my trading account, the better off I was.
Ms Boden agreed in cross-examination that she understood that the term "leverage" meant that she could "trade at a higher value that [the] amount that [she] had, in fact, deposited into [her] account". When asked to explain her understanding of the term, however, it was readily apparent that he understanding was at best superficial and simplistic. She gave the following evidence in re-examination about her understanding of the concept of leverage: [MR LIVINGSTON:] On 26 October 2018, what was your understanding of leverage?- [MS BODEN:] It showed a high volume, a higher amount. [MR LIVINGSTON:] What do you mean by that? HIS HONOUR: If it helps, you can try and give an example to explain what you understood to mean by it? [MS BODEN:] It was like there's more money in your account than what you actually really had. MR LIVINGSTON: And how could that be to your understanding? [MS BODEN]: No. I don't know how to explain.
It is readily apparent that Ms Boden's understanding of the concept of leverage was inadequate. In particular, it appears that she had some appreciation that leverage allowed her to trade more, but had no real understanding of the risks inherent in trading in highly leveraged derivatives. I do not consider that Ms Boden's inability to properly explain the concept of leverage was feigned.
In the questionnaire that was completed when Ms Boden opened her account, Ms Boden responded "yes" to the question whether she understood the "nature and risk of margined transactions". In cross-examination, Ms Boden asserted that her answer was true. She was not asked in cross-examination what her understanding in that regard was. When asked that question in re-examination, her answer was "I didn't understand. I didn't know any of that." Having seen and heard Ms Boden give evidence, I again do not consider that her evidence that she did not have any actual understanding of the nature and risk of margined transactions was feigned or disingenuous. Indeed, it is consistent with her evidence in cross-examination that she did not "understand anything about the margins".
I should note, in that context, that after trading with EuropeFX for a short period, Ms Boden was able to identify the figure for margin on her trading screen. It does not follow, however, that she had any adequate understanding about margin. She also agreed in cross-examination that she eventually came to understand that "if the margin became too small then there was a chance that her profits would have been eaten into". That again hardly reveals any sound understanding of the concept of margin, let alone the risk of margined transactions.
It may be readily accepted that Ms Boden was aware that trading generally was risky and that she might lose money. She acknowledged as much in her evidence. She had, after all, lost a significant amount of money trading with ForexCT. Given her lack of understanding of the basic concepts that underlie trading in securities like CFDs, however, it is difficult to accept that she had any real appreciation of the nature and extent of the risks inherent in trading in CFDs. More significantly, while Ms Boden may have had a general understanding that trading in CFDs was risky, EuropeFX account managers tended to undermine that understanding and minimise or trivialise the extent of the risk to which Ms Boden was exposed. In particular, Ms Boden was constantly assured by EuropeFX account managers that they would look after her and minimise the risks involved in her trading. In one of her very first discussions with an account manager on 29 October 2019, the account manager, Jovanni, told Ms Boden that she was "never alone" and that EuropeFX was "fully regulated by the Australian Government, ASIC". The following exchange then occurred: JOVANNI: Lovely. Lovely. So, look, you have experience on currency, you told me by yourself. Currencies, okay, is volatile market, as you know already. Is everything about the timing, because if you are getting right now to any financial website - Bloomberg, Investing.com -(coughs) sorry about it - any financial site, and you will be able to see the chart of the currencies, you can see by yourself that the chart is very, very volatile. It looks like a rollercoaster; up and down, up and down, you know, crazy movement. I want to minimise your risk in order to maximise your potential profit. Why? Because I want that you will go to sleep in the night with the knowledge that you know exactly what you are putting as a risk but keep on your mind exactly what is the potential of the profit. Simple as that. JULIE BODEN: Yeah. JOVANNI: Because I want that you will be able to sleep at night like a baby, okay, with the knowledge that you put your funds in the proper investment and not in any risky one. Because you are not here to seek an adventure. You are invested. You are not a gambler. Right? JULIE BODEN: Yeah. JOVANNI: Lovely. Lovely. Really, I'm very happy to hear that. Look, dear, look, we're working so hard, seven hours a day, five-six days in the week, four weeks in the month, 12 months in the year. Basically we want to finish the month okay with - with dignity, with the respect, with an honour….
A few days later, on 1 November 2018, the following exchange occurred between Ms Boden and the same account manager: JOVANNI: I am very conservative in the market. I am not taking the market at any given time. I am never going to put my client in a risky site because I believe on approach of hit and run, hit and run. Open one-two-three positions, collect how much potential profit that you can get and boom, get out and come back to the safe side. JULIE BODEN: Yes. JOVANNI: Good. I don't -- JULIE BODEN: Yes. JOVANNI: Agree? Amazing, lovely. JULIE BODEN: Agreed. JOVANNI: Amazing. I'm very, very happy. So approximately, we are sticking about the potential profit of 310, of 10 per cent. 10 per cent from the 1,000 Aussie that you have, it's like 100 Aussie, with the proper risk management, with the low risk. Okay? In order to cover that 150k with every month to generate something like 100, 200 Aussie, you're going to be painful and very not good, okay? What you need to understand, okay, is everything about the timing. If you have right now, you can open the position on the NASDAQ right now, catch the movement one second before it happens, and if - I'm going to tell you right now that you can decide what is the level of the risk because as you know already, we are a regulated company. And you have the power in your hands to choose exactly what is the amount of money that you are willing to expose to the market, which means you can leave --
Similar meaningless statements concerning risk were made by account managers throughout the time that Ms Boden engaged with EuropeFX. The emphasis was usually on the potential to profit and rarely on the risk of loss.
I should also add in this context that it is not even clear that Ms Boden had any sound understanding of what it was that she was investing in, or what a CFD actually was. Indeed, I was not taken to a single conversation between Ms Boden and a EuropeFX representative in which Ms Boden was given a sensible or comprehendible explanation of a CFD. On the other hand, there were multiple occasions when EuropeFX representatives intimated that Ms Boden was investing in assets. For example, during the conversation between Ms Boden and Jovanni on 1 November 2018, Jovanni suggested that trading in currencies was risky, whereas trading in contracts on NASDAQ, S&P 500 or the Dow Jones was safer because Ms Boden would be putting her funds in a "proper asset". JOVANNI: I mean, if you want to compare one lot, one contract on currency - it doesn't matter which one - or one contract on, let's say, NASDAQ or S&P 500 or the Dow Jones, it's cheaper. An asset that is so cheap, which mean a little bit risky. A little bit volatile. Why? Because a lot of people around the world can afford themselves to open and close position on the currencies. When a lot of people around the world do the same thing almost the same time, open, close, buy and sell, buy and sell, buy and sell, this is one of the reasons that we are seeing the currency charts very volatile. Up and down, up and down like a roller coaster. Very frightening. And I don't want that you will put your funds there, okay, and you will go to sleep in the night with a lot of fear. On the other hand, I want that you will go to sleep in the night like a baby with the knowledge that you put your funds in a proper asset, in a safe investment that's going up in value more than 10 years in a row. This is number one. So far so good? JULIE BODEN: Yeah. But then you're owning the asset, aren't you? JOVANNI: Sorry? JULIE BODEN: And if it does go down, you - but with the assets, you're owning it. JOVANNI: The asset that I'm talking about? This is what you asked me? JULIE BODEN: Yes. JOVANNI: I'm talking about the perfect combination. The perfect combination of the American index. JULIE BODEN: Okay. JOVANNI: The American increased compliance by the NASDAQ 500, the S&P 500 and the Dow Jones 30. JULIE BODEN: Yeah. JOVANNI: Okay? This is the American index. Those index - those assets, in their movement of growth more than 10 years in a row, okay? …
It can be noted that Jovanni did not disabuse Ms Boden's apparent understanding that when she invested in CFDs she would own the underlying asset.
Ms Boden's evidence was that during her telephone calls with Jovanni she tried to follow what he was saying, but did not really understand much of what he said because it was "way over [her] head". During cross-examination she agreed that she often said "yeah" or "yes" as Jovanni explained things to her. Her evidence was, however, that while that may have sounded like she was agreeing, she was not really understanding what he was saying. I accept her evidence in that regard. It is, in any event, readily apparent from the recordings of the conversations that were played in Court. The recordings also support Ms Boden's evidence that Jovanni often spoke very quickly and was difficult to understand.
As I have already noted, while Ms Boden had some prior trading experience and had even endeavoured to obtain some training, I find that she had no more than a superficial and inadequate understanding of the nature of the derivatives that she was trading in during the period that she traded with EuropeFX. She had an equally superficial and inadequate understanding of important trading concepts and did not fully appreciate the risks involved in trading in leveraged securities. Moreover, the EuropeFX representatives with whom she dealt did little if anything to properly inform and educate her in respect of the nature of CFDs, trading concepts such as leverage and margin and the risks involved in trading in CFDs. Indeed, if anything they made matters worse by giving Ms Boden overly simplistic and superficial explanations and generally emphasising the potential for profit, rather than the real risk of loss.

[92]

Communications with EuropeFX account managers and trading

Given the lengthy period during which Ms Boden engaged with EuropeFX representatives, the large volume of documentary evidence and the extensive cross-examination of Ms Boden, it is again simply not possible to provide a comprehensive summary of all the evidence concerning Ms Boden's communications and trading with EuropeFX. What follows is a summary of the main findings that I have made based on a consideration of the evidence as a whole.
During the seven week period that she traded with EuropeFX, Ms Boden mainly spoke with Jovanni, to whom reference has already be made. She also dealt with a EuropeFX representative named David. She had many telephone calls with Jovanni and David. ASIC alleged that during those telephone calls, Jovanni and David together made 297 personal advice statements. As discussed later, I have found that EuropeFX representatives made at least five personal advice statements to Ms Boden. ASIC also alleged that EuropeFX account managers made 126 false or misleading representations to Ms Boden. EuropeFX admitted that Jovanni made two false or misleading representations and that David also made two false or misleading representations. I have also found that EuropeFX account managers made another four false or misleading representations to Ms Boden.
It is clear from the evidence as a whole that Ms Boden relied heavily on the EuropeFX account managers when it came to her trading. Ms Boden's reliance was, it may be inferred, readily apparent to the EuropeFX representatives. Indeed, the evidence indicated that the representatives fostered and encouraged Ms Boden's reliance.
Reference has already been made to the telephone call during which Jovanni told Ms Boden that they were going to be a "team". The other representative with whom she frequently dealt, David, also told Ms Boden that they would work as a team. Ms Boden's evidence was that she came to trust Jovanni and David and that, unlike her previous experience with ForexCT, the account managers spoke to her like they were her friend. Indeed, Ms Boden went so far as to say that Jovanni spoke to her in a way which made her feel like she was having an "online relationship" with him. While at first blush that might sound slightly odd, if not bizarre, it is entirely understandable when regard is had to what Jovanni actually said to Ms Boden in some of the telephone conversations. Following are some examples.
In a conversation between Ms Boden and Jovanni on 5 November 2018, the following exchange occurred in the context of banter between the pair about difficulties that Ms Boden was having logging into the EuropeFX dashboard: JULIE BODEN: Just be my friend, just help me, please. JOVANNI: Dear, we're going to be best friends online. JULIE BODEN: Yeah, yeah, you're going to be my friend, aren't you? JOVANNI: Simple as that. As we discussed about it -- JULIE BODEN: Excellent. JOVANNI: -- trust, trust, trust. JULIE BODEN: Okay. JOVANNI: Friendship, and then - then you go to (indistinct).
Jovanni, who regularly called Ms Boden "dear", had earlier told Ms Boden that he "really want[ed] to build with you the trust". In another telephone conversation later that evening, the following exchange occurred: JOVANNI: Hopefully, tomorrow morning you will be able to open the internet and we can connect with each other with the TeamViewer and then we are going to speak about everything together. Every, everything in time together, together, together. This is the key word. Okay? And by the way -- JULIE BODEN: Yes? Yes? JOVANNI: As you noticed, I don't know what happened, but you touched my heart with the story and with the information that you give me. So it's real. It's really real for the people, because trust, honest, you know? Friendship. JULIE BODEN: Yeah.
Jovanni's reference to "the story" would appear to have been a reference to what Ms Boden had earlier told Jovanni about her unfortunate personal circumstances.
On the following day, in the context of Jovanni recommending that Ms Boden deposit a further $10,000 so she could get the "VIP" or "gold" treatment, the following exchange occurred: JOVANNI: In - in other words, you can put 10 and you can save five, you can save seven, because of the huge discount on the swap and commission. This is just for the discount. But keep in your mind, "Oh my God, I can put 10, so I will get the information right away; I can convert the information to money and to the potential profits. So I can put 10, but because of the information that I'm getting, or the right timing, I can finish the six - those six months with almost", as I said, 100Ks, if things will go with us, with the proper risk, and you will not be too greedy. I just - I just - I'm just kidding. I'm just kidding. Simple as that, my dear. JULIE BODEN: Yeah. JOVANNI: Promise you, just the best treatment, and I'm a man of my word. JULIE BODEN: Yep. Okay. So you're not going to stop the phone calls or anything, and the information? JOVANNI: Of course not. I'm here with you. You will get everything first away. My dear, you - you need to understand it -- JULIE BODEN: And for how - and how long? JOVANNI: -- you're going to be my top of my priorities. For how much you want. This is what the beauty -- JULIE BODEN: Yeah, for how long? JOVANNI: For how much time you want, until you will tell me, "Jovanni -- JULIE BODEN: Okay. JOVANNI: -- I had enough of you. Stop calling me."
This exchange occurred in circumstances where EuropeFX, and therefore Jovanni, was not permitted to give Ms Boden personal advice.
Some of the exchanges between Ms Boden and David were even more extraordinary. In a conversation between Jovanni and Ms Boden on 12 November 2018, Jovanni introduced David to Ms Boden as being his "teacher" and a "genius" and that together they would double Ms Boden's account in less than two weeks. David telephoned Ms Boden on several occasions the next day. Ms Boden's evidence was that she became upset during one of the conversations because David was pressuring her to deposit further money. She told David about her unfortunate personal circumstances in that conversation so that he would show her some empathy and stop "hounding" her for money. She was crying at the time. David responded in the following terms: DAVID B SHMUELI: I'm so sorry to hear that. Julie, I'm going to cry because of you. Do you have - do you have a partner? A husband? JULIE BODEN: No. DAVID B SHMUELI: No. So me and Jovanni, we're going to be - we're going to be your family online. Okay. Jovanni really love you, and I'm falling in love as well. So you have the charm. You have the magic. Try to relax. Okay. First thing to cry, sometimes it's good to release the pain. Okay. I don't want you to do the things because you feel that you have to. Absolutely no. I want you to have the basic understanding that we are fully with you, regardless to the amount of money that you do have or you don't have in the account. We become who we are because we believe in a very good service. There is a - there is a correlation between the performance in the account to the quality of the service that you are getting from the company side. Don't put more money in the account. I will not let you, even if you want to. Don't cry. That's the most important thing. And let me help you as much as I can with the best terms and conditions and the best information how that is possible. Okay? JULIE BODEN: Okay. DAVID B SHMUELI: But you've got to promise me that right now you're changing that kind of a sad face to a smile face. Okay. JULIE BODEN: Yeah.
Despite Ms Boden's obvious distress, David recommended Ms Boden to open a position in NASDAQ CFD and directed her how to do so. In a later conversation, David referred to Ms Boden as being his "wife online". On 27 November 2018, the following exchange occurred between David and Ms Boden in the context of David pressuring Ms Boden to deposit further money into her trading account, including by encouraging her to borrow money from her mother: DAVID SHMUELI: Actually, you are single, right? I'm 38. So maybe if I will divorce from my wife in the short, medium or long future because she's a big spender, I'm going to go to Australia, and then maybe we're going to drink together, how would that sound, with the Lamborghini? JULIE BODEN: Yep. Yeah, yeah. DAVID SHMUELI: Sounds good, good. JULIE BODEN: Yeah. DAVID SHMUELI: What is the colour of your eyes - blue or green? JULIE BODEN: Brown. DAVID SHMUELI: Brown, like a chocolate. Okay. I have blue eyes, just for you to be aware. Cool. JULIE BODEN: Okay. DAVID SHMUELI: Tomorrow I'm going to ask you what is the colour of your hair. Don't tell me today. Okay? JULIE BODEN: Okay. DAVID SHMUELI: Wonderful. So, listen, do the best that you can do in the next 24 hours to put your hands on 5,000. It's really important for the trading account, for the terms and conditions and for the safety. Okay, love?
On 28 November 2018, David again pressured Ms Boden to deposit $5,000 to "stabilise her account" including by encouraging her to obtain a loan from her daughter. It is readily apparent that throughout the course of the conversation David was acutely aware of Ms Boden's vulnerable state. In particular, he acknowledged that Ms Boden "was struggling financially", that she wanted to own her own house, that she wanted to financially support her mother and that she was attempting to obtain medical treatment for her leg. It is equally apparent that David exploited Ms Boden's emotional state and the personal relationship he had fostered with her. He even invited Ms Boden to visit him and Jovanni overseas, saying: DAVID SHMUELI: Okay. So as long as that we will stabilise the account and we will take the account back on its feet again and you would like to meet me and Jovanni, we're going to go, all of us, to a big game. Do you drink? You mentioned that you don't drink, but we're going to force you to drink a bottle of champagne. Sounds good?
Ms Boden's evidence, which was corroborated by the record of telephone calls, was that she would speak with either Jovanni or David on a daily or almost daily basis. On many days, either Jovanni or David would call Ms Boden many times a day. During those telephone calls, Jovanni and David frequently made extravagant statements about the amount of money that Ms Boden could make from her trading. They also almost invariably told Ms Boden what she should do in terms of trading, to the point where, having access to her trading screen, they told her exactly where to click and what figures to enter on the trading screen. Ms Boden's evidence was in effect that she opened or closed positions while she was on the telephone with either Jovanni or David, or that she opened or closed positions after the telephone call ended, based on what she understood were the directions or recommendations made by Jovanni or David.
As with some of the other EFX8, EuropeFX submitted that Ms Boden was able to and did execute "independent" trades, by which it meant that on occasion she opened or closed positions while she was not on the telephone with either Jovanni and David. It relied on a schedule which recorded various trades that were said to be executed at times when Ms Boden was not on the telephone with a EuropeFX account manager. It is unnecessary to consider the detail or accuracy of that schedule. It may readily be accepted that Ms Boden was ultimately able to use the trading platform herself and that on occasion she did open and close positions while she was not on the telephone with one of the account managers. It does not follow that Ms Boden traded independently in any meaningful sense, or that she was not heavily reliant or dependent on the account managers. It is clear that many of the trades or transactions that are recorded in EuropeFX's schedule occurred in close proximity to telephone calls between Ms Boden and an account manager, or were transactions which Ms Boden executed in direct or indirect reliance on advice or recommendations given by one of the account managers.
It is sufficient to give one example to illustrate that point. In a conversation between Ms Boden and Jovanni on 20 November 2018, Jovanni told Ms Boden that he was about to leave the office. Ms Boden asked him what she should do in respect of an open position she had on US30 CFDs. Jovanni told Ms Boden that she could close that position and reopen it again in the same direction. About an hour after the call ended, Ms Boden did just that. That trade was was included in EuropeFX's schedule. It could hardly be said to be a truly independent trade.
The evidence clearly established that, throughout the period that she engaged with EuropeFX, account managers repeatedly gave Ms Boden advice, recommendations and directions about trading strategies that she should adopt, the depositing of more funds and the opening further trading positions. That was even though EuropeFX was not authorised to give personal advice. Those occasions are summarised in Annexure A.1 to the SOC, in particular at rows 659, 687, 689, 697, 709, 725, 726, 729, 730, 734, 736, 742, 805, 836, 838, 841, 845, 848, 849, 850, 864, 866, 867, 883, 915, 932, 946. EuropeFX representatives also often made representations to Ms Boden concerning the profits that she was likely to earn from trades that they recommended. Examples of such representations are summarised in Annexure C.1 to the SOC, in particular at rows 412, 417, 419, 423, 426, 432, 437, 441, 443, 446, 465, 470, 473, 478, 499, 509, 515, 516 and 526. The issue as to whether those representations were false or misleading is discussed later.
On some occasions, the recommendations or advice amounted to undue pressure. Some examples of the pressure exerted on Ms Boden were referred to earlier. It suffices to give one further example. On 27 November 2018, Ms Boden was put under sustained pressure by David to deposit a further $12,237 into her trading account so as to increase her margin and, so it was said, save her account. Among other things, David offered Ms Boden the inducement of receiving from EuropeFX a 50% discount on swaps and commission. The exchanges between David and Ms Boden included the following: DAVID B SHMUELI: So I want you to take a pen and a paper and write it down. JULIE BODEN: Yeah. DAVID B SHMUELI: "12,237" - "AUD$12,237". JULIE BODEN: Yeah. DAVID B SHMUELI: Will give you the benefit of getting the discount of 15 per cent of swap and commission. Now, keep in your mind that in order to get or to be able to receive those terms and condition you need to have an equity of on 2 million dollar. You are not even close to be there, and you will not be there soon. And that's perfectly fine. But, the company willing to back you up mostly when you are going through a rainy day, and that what makes us as a great company, EuropeFX, that's running with our clients for the very long line. You follow me? Now, you have to understand -- JULIE BODEN: Mmm-hmm. DAVID B SHMUELI: -- you can tell me, "I don't have the money". You can tell me, "I put more than enough". You can tell me, "The dog ate my book". I don't know. It doesn't really matter. What is do matter that we're going to save it. Now, as long as that we save it, and as long as that we take the account back on its feet again - and I'm taking you under of my wing personally, which mean you will be on the top of my priority. If I need to call you every 15 minutes I'm going to call you every 15 minutes in order to tell you, which mean I'm going to be your guardian angel in the next few days. We can take the deposit back and those terms and conditions will still remain in your trading account. Now, why do you want to have those terms and condition? When you are getting 50 per cent discount on swaps and commission, you are saving money, firstly. And, in addition to that, some of the positions that we have, for example the US30, the Dow Jones, that you have on a buy one, okay, that right now causing you major losses in the account. The Dow Jones going up consistently since 2008 up to 2018, for 10 years in a row. You follow me? Right now it's in a big - JULIE BODEN: Yeah. DAVID B SHMUELI: -- minus. Experts are saying that in a few weeks from now market is about to flip direction. There is a strong momentum. As long as the markets will go back up in value the minus will be less and your account will be safe again. You follow me? JULIE BODEN: Yeah. DAVID B SHMUELI: Whatever you decide, I will respect it. You already know that I'm going to go all in with you. But, you know, I don't want to send you to a war with a toothpick. If I'm going to send you to a war with a toothpick probably you will die. You follow me? JULIE BODEN: Yeah, yeah. DAVID B SHMUELI: Good. So here is the thing. What we want to do, if you can, or if you want, is to transfer the AUD$12,237 somehow to your account. Let me implement, as we speak, 50 per cent discount on swap and commission. We're going to hedge some of the position to increase your margin level in percent. Okay. Because right now it's 57. You follow me? We need to take it above hundred. And then what I'm going to do, you will be my wife online. Which mean I'm going to call you probably every 20 minutes to tell you what need to be closed, what need to - what need to be open. ….. DAVID B SHMUELI: Now, normally - I know your story and I remember you very well, even though that you are - we are not talking every 10 minutes, and I know that you are not a rich lady, and I know that you don't have tonnes of money, and I know that you are not a millionaire, and I know that you just bought a car. And I know that you - you had a very hard lifetime experience that helped you to become who you are. Okay. And that's fine. JULIE BODEN: Mmm. DAVID B SHMUELI: Now, being a challenge, it's a part of where we go. I'm not willing to give up on you, so don't give up on your - don't give up on yourself. And, you know, losing money is not in our DNA. We always fight back. JULIE BODEN: Yeah. DAVID B SHMUELI: Does that make sense? JULIE BODEN: Mmm-hmm. DAVID B SHMUELI: So by transferring AUD$12,237 to your trading account, the benefit will be that you are getting discount on swaps and on commission 50 per cent. In addition to that I'm going to hedge with you some of the positions as we speak right now, just to increase the safety in the account. And the name of the game from now on on is not to trade more in order to gain more, it's to close some of the running trades that you have in the account on a zero level because you already have a massive return. JULIE BODEN: Yeah. But I don't have $12,000. DAVID B SHMUELI: Look, I believe that in life everything is a matter of creativity and everything is a matter of trust, confidence and a belief. If you really want it -- JULIE BODEN: Yeah. DAVID B SHMUELI: -- you can get it. But it's up to you. I'm not allowed to force you. I'm not allowed to tell you what you can do; you - what you can do and what you cannot do. You are the decision-maker. Now keep in your mind you need to make a decision when it's about your trading account that will be for your own best interest. So the first thing, before we go any further, do you understand the benefit by getting those discounts of 50 per cent, why you are actually saving money from first place? JULIE BODEN: Yeah, I thought that was -- DAVID B SHMUELI: Good. Good.
While David told Ms Boden that he was not allowed to "force" her to make the deposit, and that he would "respect" her decision, the pressure he placed on her is palpable. David simply did not let up. While Ms Boden made it clear that she did not have the money, David implored her to "take the impossible and do it possible today", and even hinted that Ms Boden could use a credit card.
Ms Boden also encountered difficulties withdrawing funds from her trading account. When she did request or attempt to withdraw money, EuropeFX account managers would frequently endeavour to dissuade her from doing so, usually by suggesting that she would miss out on further trading opportunities and profits if she did so. For example, in mid-December 2018, Ms Boden told Jovanni that she wanted to withdraw $20,000. Shortly thereafter, she received a telephone call from David, who told her about three "live events in the market" and then said: DAVID SHMUELI: And we have earnings - earnings season that is about to start, which means we are expecting to see very big movements in a very short period of time, exactly like you've seen before, on the pound versus the dollar, which means there is a big potential of profit on the line. So what is actually recommended and what many of - many of our clients actually do, they delay withdrawals to the new year, to 2019, to the 1st. Why is that? The potential of the profit from those announcements and those events with the right strategy and the right trading tools can be so big that you can even target to withdraw even more. What does that mean? I heard from Jovanni that you are willing to cash out, give or take, 20,000. Is that correct? JULIE BODEN: Yeah. DAVID SHMUELI: Good. So if you want to be a part those events with the right guidance, exactly like what we did on the pound versus the dollar last time, we can target to draw 40K, okay, on the 1st. JULIE BODEN: Yeah. DAVID SHMUELI: What is the reason for that? The potential of the profit is so big from those events, because it's easy to understand it and it's truly simple to execute, and I'm going to guide you how to do this one on one, if you want, that you will be able to stabilise the account a bit more, and the most important thing for me in the personal level is that when you are cashing money out of the account, it will not hurt your free margin, because the free margin, it's the bullet that you have in your gun, and as much more - as much more bullets that you will have, as much more that you will be able to shoot, as better the chances that you will go out of the war alive. Does that make sense? But that's up to you. JULIE BODEN: You love your stories, don't ya? Yeah, yeah.
Another example of the difficulties encountered by Ms Boden when she wanted to withdraw funds from her trading account occurred in mid-December 2018. On 19 December 2018, Ms Boden made a request to withdraw $100,000 from her trading account. The next day, she spoke to Jovanni on the phone, who tried to persuade her not to withdraw money from her account by telling her about new profit opportunities. He said, among other things:: First of all, I want it tell you that I totally understand you. I totally respect your decision, okay? I can't tell you what you do. I can't tell you any personal advice. But what I can tell you that today, according to Investing.com and Trading Central, you have (indistinct) - I mean, the American market is not finished yet, okay? And you are in a position to generate in less than one day something like 80,000 USD. But as always, it's up to you. Everything is up to you.
The conversation continued with Jovanni saying: You can close the account if you want. I'm going to be - I'm going to cry. Literally I'm going to cry because I love you and I miss you.
Ms Boden responded that she did not wish to close the account, but that she "couldn't even sleep the last two nights", to which Jovanni responded: I know, dear. I know, my love. I know. I want to tell you something that my mum taught me. When we are becoming emotional we are becoming irrational, and when we are becoming irrational we are taking the wrong decisions. And it's not an assumption; it's a fact. Another fact: if you opened yesterday a position on the NASDAQ today you could withdraw 100K and then you've got another 100K. It's not a dream; it's reality and it's here.
Ms Boden ultimately cancelled her withdrawal request. Her evidence, which I accept, is that she did that because she was sick of the account managers "hassling" her.
Another example of EuropeFX account managers effectively impeding Ms Boden's withdrawal of funds is given later in these reasons.
The overall effect of Ms Boden's affidavit and oral evidence was that she was constantly pressured by Jovanni and David to open and close positions, deposit further funds into her trading account and not withdraw funds from her account. I accept that evidence. It is corroborated by the exchanges in many of the telephone calls.

[95]

Initial contact with EuropeFX and the opening of an account

Ms Kuhn came to open an account with EuropeFX as a result of her and her husband seeing a promotional video on Facebook which mentioned EuropeFX. Her husband suggested that she get involved and sent her a link on Facebook. When she clicked on the link, it took her to EuropeFX's website.
While Ms Kuhn had little recollection of the account opening procedure, as was the case with the other EFX8, the evidence indicated that she was required to answer some questions and provide some personal and financial details, including in respect of her income, financial position and trading experience. As for trading experience, she confirmed that she had no trading experience in securities, options, commodities, futures, CFDs or foreign exchange. While the record of the information that was said to have been provided by Ms Kuhn suggested that Ms Kuhn had ticked a box to indicate that she understood the nature and risk of margined transactions, she did not recall providing that response. Moreover, her evidence, which I accept, was that she did not know what a "margined transaction" was at that time. Ms Kuhn also could not recall reading any risk disclaimer notice or acknowledging a declaration that stated that a CFD account may not have been suitable for her.
Ms Kuhn deposited $250 into her trading account on 27 August 2018. She recalled placing some trades on a "demo" account and "fiddling with the system and trying to understand how it worked" before anyone from EuropeFX contacted her. Her trading statement recorded that she opened some small positions on 28 and 29 August 2018. She was first contacted by a EuropeFX representative, Steven, on 29 August 2018.
In her conversation with Steven on 29 August 2018, Ms Kuhn told him that she had "absolutely no idea what [she was] doing". Steven then asked her whether she wanted to learn how to trade and how much she was "looking to make potentially". Ms Kuhn replied that it would be "awesome" if she made "a hundred bucks a week" and Steven replied: "[a]ll right, so let me put this information in". Ms Kuhn also received a telephone call from a EuropeFX representative named Robbie on 29 August 2018. She also told Robbie that she had no idea what she was doing. Robbie asked Ms Kuhn why she had opened the account, what she was looking to achieve by trading, what her goals were, what she did for a living, and what her income was. Ms Kuhn confirmed to Robbie that her income comprised a Centrelink payment, and that she had no trading experience and no knowledge of financial markets. As will be seen, Robbie was the account manager with whom Ms Kuhn primarily communicated during the period of time she traded with EuropeFX.
Having obtained basic information from Ms Kuhn about her financial situation and objectives, Robbie told Ms Kuhn that if she was looking to make money out of the market, he could show her the "right way". He then almost immediately told her about "two amazing opportunities", one of them being "the NASDAQ" and the other being "oil". Despite the fact that Ms Kuhn had made it plain that she had no trading experience and no knowledge about financial markets, Robbie made no attempt to give Ms Kuhn any explanation about what a CFD was and said nothing about the risks inherent in trading in leveraged derivatives. He did, however, almost immediately suggest to Ms Kuhn that to benefit from the opportunities that he had drawn to her attention, Ms Kuhn should consider depositing more funds into her trading account.

[96]

Understanding of CFDs, Margin FX Contracts and trading risks

It is readily apparent from the evidence that Ms Kuhn had little, if any, real knowledge or understanding about the financial products in which she was trading, or the inherent risks in trading in those products. As has just been noted, Ms Kuhn made it abundantly clear to both Steven and Robbie at the outset that she had no trading experience and had no idea what she was doing. That was also apparent from the information that was provided when Ms Kuhn opened her EuropeFX account. Yet Robbie made no attempt to provide any sensible or comprehendible explanation about CFDs before telling Ms Kuhn that she could "open a trade" in NASDAQ or oil. Ms Kuhn gave the following evidence about her state of knowledge at the time she had that conversation with Robbie: I had heard of the NASDAQ before on the news, but did not really know what it was and still do not. I ended up choosing oil because it is tangible and at least I knew what it was: our family business is a workshop for high performance cars and oil is part of that business. I understood that you could buy oil at a certain price, and when the prices go up, you can sell it and make money. I did not know that you could start by selling instead of buying. It still bamboozles me that you can sell something you have not yet bought. I recall thinking that I was actually buying and selling oil. I still do not understand exactly what I was doing but I do realise now that I was not actually buying and selling oil.
That evidence was not tested or challenged in cross-examination. It was never put to Ms Kuhn that she had any knowledge about CFDs or Margin FX Contracts, or that she knew what she was doing, or acquiring, when she opened a trade. It was never clearly put to Ms Kuhn that any EuropeFX representative gave her a sensible or comprehensible explanation of the nature or qualities of those securities. Nor was the Court taken to any recording or transcript of a communication between Ms Kuhn and a EuropeFX representative during which any such explanation was given. Such explanations as were given were at best overly simplistic and superficial and at worse bordering on nonsensical.
EuropeFX submitted that it could be inferred that Ms Kuhn understood Robbie's explanations about trading because she frequently said "yeah" or "Mmm-hmmm" as those explanations were given. Even if that inference could be drawn, it does not greatly assist EuropeFX given the highly superficial and inadequate nature of the explanations. In any event, in cross-examination Ms Kuhn said that in responding in the way she did, she was simply indicating that she had heard what Robbie said, not that she understood all that he was saying. I accept that evidence. I also reject EuropeFX's general submission that Ms Kuhn's responses would have conveyed to Robbie that Ms Kuhn understood the explanations he was purporting to give her.
As for Ms Kuhn's knowledge or appreciation of the risks inherent in trading in leveraged derivatives like CFDs and Margin FX Contracts, her evidence was as follows: I knew that there was some risk associated with trading but I thought that EuropeFX would help me trade, which would reduce the risk. I knew that trading with EuropeFX would be more risky than putting cash in the bank and gaining interest, but as far as I was aware, it was a similar level of risk to investing in shares on the stock market.
Ms Kuhn's evidence that she believed that trading in CFDs carried with it a similar risk to investing in shares on the stock market was not challenged in cross-examination. While in cross-examination, Ms Kuhn agreed that she knew trading with EuropeFX was "more risky than putting cash in the bank and gaining interest" (a fact which she had in any event acknowledged in her affidavit), it was not suggested she knew about the risks inherent in trading leveraged derivatives.
It is also significant, in that context, that Ms Kuhn's evidence was that she believed EuropeFX representatives would help her trade. That was a belief that EuropeFX representatives fostered and encouraged. Indeed, the account managers intimated to Ms Kuhn that while there were risks involved in trading, those risks were minimised in her case because they would look after her. To give just one example, in an early call with Robbie on 29 August 2018, the following exchange occurred after Ms Kuhn had expressed some concerns about the risk of losing money: LEANNE KUHN: Yep. I'll have to have a chat with hubby because obviously it's a bigger - a bit more money to put in to begin with, but obviously the potential's there, but it's also that risk, so. ROBBIE: Again, again -- LEANNE KUHN: For the higher loss. ROBBIE: There is always an (indistinct) you never say that you are going to do in life, okay? LEANNE KUHN: Mmm-hmm. ROBBIE: Every time that you have something with a big potential there is always a risk. There is always a risk, right? LEANNE KUHN: Yeah, yeah. ROBBIE: Every time that you will make an investment, even if it's in properties or, I don't know, with the banks, there is always a risk, okay? LEANNE KUHN: Yep. ROBBIE: But what we need to know is always how to minimise the risk as low as possible, okay? LEANNE KUHN: Yep. ROBBIE: And this is why you have me. This is why you're not going to do it by yourself. I will help you to minimise the risk as low as possible, okay? So it doesn't matter if you are putting 2000, for example, in the account. You are risking 2000, okay? You are putting that money in order to buy the oil, okay, the 1000 barrels of oil, okay?
As has already been noted, Ms Kuhn agreed that she understood that there was some risk in trading. The evidence clearly established, however, that she did not know or understand the particular risks involved in trading in leveraged securities like CFDs and Margin FX Contracts. Nor were the nature and extent of those risks every explained to her. It was not suggested to Ms Kuhn in cross-examination, by reference to a recording or transcript of a conversation between her and a EuropeFX representative or otherwise, that EuropeFX ever gave her any sensible or comprehendible advice concerning the nature and extent of the risks inherent in trading in leveraged derivatives. Nor was the Court ever taken to any recording or transcript of a communication between Ms Kuhn and a EuropeFX representative during which any such explanation or advice was given. Indeed, such explanations as were given to Ms Kuhn were at best superficial and at worst misleading. The following is one example.
On 29 August 2018, Robbie gave Ms Kuhn the following advice about risk: ROBBIE: No, no. All is good. All is good. And I will tell you something, okay. If, first of all, if you want to become an investor, I want you to understand something, okay. A lot of people -- LEANNE KUHN: Yeah. ROBBIE: -- thinking that every time that you are putting money in the account so you are putting everything in a risk. That if you have 50,000 -- LEANNE KUHN: Yeah. ROBBIE: -- or 100,000 you are putting everything in a risk, right. But, no -- LEANNE KUHN: Yeah. ROBBIE: -- it's not how it works, okay. Because each and every time you can decide by yourself how much you want to risk, okay. It doesn't matter how much money you have in the account. But sometimes, okay, the bigger the account that you have, the lower is the risk. Okay. The lower that we can minimise the risk. LEANNE KUHN: Yeah. ROBBIE: Okay. And, also, the more that we can maximise the potential profit. Okay. Why? Because let me - let me give an example, okay. LEANNE KUHN: Mmm-hmm. ROBBIE: Let me explain you how the market works, okay. Let's just say right now you, for example, you are buying a property, okay -- LEANNE KUHN: Yeah. ROBBIE: -- for the price of 200,000. Okay? LEANNE KUHN: Yeah. ROBBIE: Let's say that after one months - I don't know - there is an earthquake in your area. Okay? LEANNE KUHN: Yeah. ROBBIE: And the price of the property will go down to 150,000. Okay? LEANNE KUHN: Yeah. ROBBIE: Now, if you will sell that property for 150,000 -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- how much money you're going to lose at the end? LEANNE KUHN: 50,000. ROBBIE: Exactly. But you're still the owner of the property. You don't have to sell it yet. Right? LEANNE KUHN: Mmm-hmm. ROBBIE: If you will wait, I don't know, three months after, okay, and the price going back up -- LEANNE KUHN: Yeah. ROBBIE: -- to 250,000, and then you sell it -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- how much profit you are making? LEANNE KUHN: Yeah, yeah. Definitely. So, yeah, making 50,000. ROBBIE: Exactly. That is the market. LEANNE KUHN: Yeah. ROBBIE: Almost the same. Why? LEANNE KUHN: Yeah. ROBBIE: Because even if you will open a trade right now, even if you will make an investment, okay, and let's say that the prices -- LEANNE KUHN: Yeah. ROBBIE: -- go against you, the price will go down, so as long as you have the right capital in the account you don't care. Why? Because -- LEANNE KUHN: Yeah. ROBBIE: -- you know that you still have the potential that the price can go back up -- LEANNE KUHN: Yeah. ROBBIE: -- and then you can sit it in profit. Right? LEANNE KUHN: Yeah. ROBBIE: Why? Because on the market we don't have a time limit. You can open a trade -- LEANNE KUHN: Yeah. ROBBIE: -- for one hour, one day, one week, one13 month, one year. Okay? LEANNE KUHN: Yeah. ROBBIE: You can decide by yourself when you want to close the trade and the market -- LEANNE KUHN: Yeah. ROBBIE: -- it always going up and down, up and down, up and down. LEANNE KUHN: Mmm-hmm. ROBBIE: Right? LEANNE KUHN: That's correct, yeah. ROBBIE: Usually whatever's going up it can go back down. Whatever's going down can go back up. Right? LEANNE KUHN: Yeah.
That was, on just about any view, a spectacularly facile and inadequate explanation of the risks involved in trading in leveraged derivatives like CFDs. It was also potentially misleading in several respects. First, the explanation commenced with the apparent suggestion that the money that a person deposited in a CFD trading account was not all at risk. Second, it appeared to compare the risks involved in buying and selling a house in the real estate market with the risks involved in trading in CFDs. Third, the suggestion that a person who held an open position in a CFD was not at risk if the market turned against them was premised on the fact that the person could retain the open position until the market turned. That, of course, assumes that the person could retain a sufficient margin in their trading account over a potentially lengthy period. It also assumes that "[w]hatever's going down can go back up". That, however, is not always the case.
EuropeFX submitted that Ms Kuhn "understood, generally, the risks associated with trading", and that from 18 September 2018 she understood "the risk that any funds deposited to her account could be lost". I reject that submission. The evidence upon which EuropeFX relied in support of that submission included Ms Kuhn's evidence in respect of a conversation with Robbie on 18 September 2018, almost a month after she had started trading. During that conversation, Robbie advised Ms Kuhn that her account was "in a very high risk" because of her margin level and that the only way that she could deal with that situation without hedging the position was by increasing the balance. Ms Kuhn's evidence concerning that conversation included the following: I remember this conversation about my margin level, and recall Robbie telling me that my options were to either hedge or put more money in. At the time, I did not know exactly what low margin was but I understood that you need to have a certain amount in your account so that if your trade goes the opposite way, you have enough equity to counteract it. I do not recall exactly when I understood that the entire balance in my account was at risk, but as best I can recall it was around this point.
In cross-examination, it was put to Ms Kuhn that she was aware from 18 September 2018 that the entire balance of her account was at risk. She did not agree and said that she understood that the account was at risk if she did not deposit further funds. She gave the following evidence when asked what she meant by the whole account being at risk: HIS HONOUR: Just so I understand: what do you mean the whole account was at risk? [MS KUHN]: So if I didn't have the correct margin in there, and I was - they would have stop losses and it would just start shutting itself down. So you had to have that correct margin above that amount in there to keep those trades live otherwise, yes, they start shutting things down because they don't get their - they need to cover their costs so that's pretty much where they stop it out, that they're still going to get their costs from that trade, their money, but there's - obviously I have the loss there. HIS HONOUR: Right. And what did you understand would be the effect if the stops were put in, as you have just described? [MS KUHN]: I would lose everything that I had already invested into the trades.
That rather confused evidence rather typifies the rudimentary and superficial nature of Ms Kuhn's knowledge and appreciation of the risks involved. She acknowledged that she continued to trade despite that knowledge, but said that that was because "I was in so deep at that point with the money that I was grasping at any hope that was being shed and you will see in the transcripts that there was still hope being advised by my account manager and I still felt that they were in my corner".
It should also be noted in this context that Ms Kuhn's evidence was that she did not really understand what hedging meant. She understood that it involved "opening the same position with the same volume but in the other direction" and also understood that hedging meant that her account would not close. She did not understand Robbie's explanation about when to close a hedged position. It was not until later that she realised that it "would be difficult to get out of that situation and close both trades in profit" and that while hedging may have been "an immediate fix to stop the account from closing down, but it created longer term problems".
The evidence as a whole supports the finding that, throughout the period that she traded with EuropeFX, she had an at best superficial and inadequate understanding of the nature of the derivatives in which she was trading or the risks involved in trading those derivatives. I would also infer from the evidence as a whole, including the recordings and telephone conversations between Ms Kuhn and the EuropeFX account managers, that Ms Kuhn's relative ignorance must have been readily apparent to the EuropeFX representative with whom she dealt. As noted earlier, in one of her first calls with Robbie, Ms Kuhn confirmed she had no experience with trading and no knowledge about financial markets. Robbie nevertheless did little, if anything, towards ensuring that Ms Kuhn was properly informed in respect of those matters. I reject any suggestion that EuropeFX had any basis to believe that Ms Kuhn had an adequate understanding of CFDs or Margin FX Contracts or any real appreciation of the nature and extent of the risks involved in trading in those products.

[97]

Communications with EuropeFX account managers and trading

As has already been noted, Robbie was the EuropeFX representative with whom Ms Kuhn primarily communicated during the period that she traded with EuropeFX. She also had some communications with representatives named David and Steven. ASIC alleged that together those representatives made 110 personal advice statements during the time they communicated with Ms Kuhn. EuropeFX admitted that its representatives made 12 personal advice statements. ASIC also alleged that EuropeFX representatives made 59 false or misleading representations. EuropeFX admitted that one of its representatives made a misleading or deceptive representation to Ms Kuhn. As discussed later, I have found that a EuropeFX account manager made at least one other misleading or deceptive representation to Ms Kuhn.
There could be little doubt that throughout the period that she traded with EuropeFX, Ms Kuhn relied heavily on the information, advice and recommendations that the EuropeFX account managers gave her. That was no doubt in part a product of the fact that, as has already been discussed, Ms Kuhn had no prior trading experience and no prior knowledge in respect of derivatives like CFDs and Margin FX Contracts. It was also a product of the fact that the account managers, in particular Robbie, regularly telephoned her and gave her advice, recommendations and directions about opening and closing positions and trading generally. The account managers had remote access to Ms Kuhn's trading screen and the directions that they often gave Ms Kuhn extended to what she should click on, or what information she should enter, on the trading screen.
Ms Kuhn's evidence was, in general terms, that she placed trades in accordance with her account manager's "instructions", often while on the telephone with them. She also placed some trades when she was not on the telephone with an account manager, but on those occasions, she tried to follow what she understood to be their instructions in earlier telephone calls. I accept that evidence. It is corroborated by the recordings and transcripts of her many telephone conversations with the account managers. It suffices to give a few examples.
As was noted earlier, in her very first telephone conversation with Robbie on 29 August 2018, Robbie referred to "opportunities" in NASDAQ and oil. Those opportunities were supposedly based on information on third party websites. Ms Kuhn expressed some interest in oil. The transcript of that telephone call, and several other telephone calls on the same day, indicates that Robbie persuaded Ms Kuhn to deposit more funds into her account so she could open a position in respect of oil. Robbie directed Ms Kuhn how to open that position on her trading screen while they were on the telephone. It is readily apparent that Ms Kuhn had little if any idea what she was doing.
Even after a few weeks of trading, the telephone calls between Ms Kuhn and Robbie reveal that she was effectively just doing what Robbie told her to do. For example, on 17 September 2018, Robbie and Ms Kuhn had a conversation during which he drew attention to the fact that she had an open buy position in a NASDAQ CFD which was in the negative because the price had dropped. He indicated that Trading Central and Investing.com had NASDAQ as a strong sell, which indicated that the price would drop further, which meant that the "minus will get bigger". Robbie then directed Ms Kuhn to hedge the position by opening a sell position with the same volume. He told her exactly what to click on the screen to open that position. The following exchange occurred: ROBBIE: You know what - no, keep it as it is. And let me see. Just a second. Now, so right now because - because of the situation, what we can do basically is to take another opportunity with a potential to start like our (indistinct) with the free margin that you have. Okay? LEANNE KUHN: Mmm-hmm. ROBBIE: Now, if you want, we have a very nice recommendation by Trading Central on the Euro/AUD, with a strong buy with a very nice potential. So, if you want, we can go on that one. What do you say? LEANNE KUHN: Yeah. Which one was it? US -- ROBBIE: Euro/AUD. Okay. Go - go up. LEANNE KUHN: Oh, you say "Euro/AUD". ROBBIE: Euro against the Australian dollar. LEANNE KUHN: Oh, Euro against - Euro - Euro - where did it go? Just trying to find it. That one? ROBBIE: Euro/AUD, yes. Then you double click. LEANNE KUHN: That's the one? ROBBIE: Yes. Then you do "new order". LEANNE KUHN: Yeah. ROBBIE: And then you can see the volume -- LEANNE KUHN: What are the expectations on that one? ROBBIE: It's a same buy. Right now you are looking for the one minute, but if you will look on the hourly chart, four hours chart, you can see how the price is going up. Okay? LEANNE KUHN: Yes. Yeah. ROBBIE: All the daily charts. So right now by Trading Central it's a strong buy. Okay? So, if you want -- LEANNE KUHN: Yeah, so what -- ROBBIE: -- with the free margin that you have you can take about - up to four contracts. Every contract is between five to $600, with a free margin -- LEANNE KUHN: Okay. ROBBIE: -- the rest can take up to four, okay. You can take three, you can take 3.5, four - whatever you want. LEANNE KUHN: Okay. ROBBIE: Okay? LEANNE KUHN: So as in 3, not point three or four? ROBBIE: You can take three, if you want, yes. LEANNE KUHN: Yep. So, like that -- ROBBIE: Three, four or 2.5. Yes, it's okay. LEANNE KUHN: I'll go three. And "buy by market?" ROBBIE: No, no. Then you do "take profit". LEANNE KUHN: Okay. Yep. And what are we taking profit at? ROBBIE: On "take profit" you can set up 1.6. LEANNE KUHN: 1.6. ROBBIE: Then you can do 255 or you can do 260 or you can do 258 - whatever you want. LEANNE KUHN: One - one point -- ROBBIE: Six. LEANNE KUHN: -- six. ROBBIE: You can do two five -- LEANNE KUHN: And what you do we reckon that's going to -- ROBBIE: You can do 255 -- LEANNE KUHN: Two-five -- ROBBIE: -- 258, 260 - whatever you want. LEANNE KUHN: Like that? ROBBIE: Yes. And then you do "buy by market" by Trading Central. LEANNE KUHN: Buy by market. ROBBIE: That's it. LEANNE KUHN: Got it. ROBBIE: So right now just what you need to do is leave it and let it work as it is. Okay?
It is readily apparent that Ms Kuhn gave no independent thought to that trade. She effectively did what Robbie told her to do. It is not even clear that Ms Kuhn knew what she was trading in, other than that it involved currency of some sort. Robbie had previously advised Ms Kuhn that the currency market was unstable and risky. Ms Kuhn's evidence was that she believed that Robbie had "control" of her screen and was "navigating" the screen and "moving the mouse" when this transaction was effected. She said that she was confident in Robbie telling her that "it was a strong buy according to Trading Central".
Another example which demonstrates Ms Kuhn's almost complete reliance on her account managers involves the EuropeFX representative named Steven. Steven telephoned Ms Kuhn on 20 September 2018 and, after Steven introduced himself, the following conversation ensued: STEVEN: Now, right now we have a huge trading event going on. Robbie's in a market briefing. He told me to call you. There is some big -- LEANNE KUHN: Yeah. STEVEN: -- news on oil, okay? LEANNE KUHN: Okay, yeah. STEVEN: Right. I see you are on the crude oil, right? LEANNE KUHN: Yes. STEVEN: Okay, so what's happening now is there's crude oil but there's also UK oil. LEANNE KUHN: Yeah. STEVEN: Now, you're only in one kind of oil. LEANNE KUHN: Mmm-hmm. STEVEN: Okay, now are you interested in this event that could potentially make you 5 to $10,000 today if the asset goes where Investing.com says it will go? LEANNE KUHN: Yeah.
Steven then connected to Ms Kuhn's screen and they discussed how many "lots" Ms Kuhn would like. Steven said that the "trading event" was "very exciting" and that Ms Kuhn had a potential profit of $20,000 to $25,000 "if oil reaches 100". The conversation then continued: STEVEN: Yeah, I'm going to help you. I'm going to help you. Just how much volume would you like? LEANNE KUHN: (Indistinct) one -- STEVEN: Traders in Robbie's group are doing one, two, three, five. LEANNE KUHN: Yeah. And so one unit was about 2200, you said, wasn't it? STEVEN: 2200. Two of them is 4400. LEANNE KUHN: Yeah. STEVEN: And so on and so forth. What you could do -- LEANNE KUHN: So I'd only be able to - yeah? STEVEN: -- is you can do two, but only trade one so that one will have your risk management. LEANNE KUHN: Yep. How does that work? STEVEN: How? Okay. Why don't you go to the dashboard where the deposit page is. I'll help you out. LEANNE KUHN: Yeah, I need to just flick some funds around, that's all. STEVEN: Okay, okay. I'll go - here, how about this? Once I see the 4400 in, I'll give you a call back in, like, 10 minutes, okay? LEANNE KUHN: Yeah, can I -- STEVEN: Yeah, (indistinct; simultaneous speakers). Go ahead. What's that? LEANNE KUHN: Sorry, can I just - I'm just trying to find the funds. Can I do -- STEVEN: (Indistinct), right now, yeah. What's that? LEANNE KUHN: Can I just do the one unit? STEVEN: You could do one. You could do one and a half, you could do two, whatever you want. LEANNE KUHN: Yeah. STEVEN: We're just trying to make you aware there is a large trading event. LEANNE KUHN: Yeah, all right. Let me work out some funds then. STEVEN: Okay. As soon as the funds are in, I'll give you a call.
Ms Kuhn's evidence was that she was "very excited" when Steven told her about the profit she could make, though she said that she did not particularly understand what Steven meant by "trading events". She understood that Steven was telling her to deposit enough money for two contracts, so that "if the trade went the wrong way [she] would still have a positive margin and would not lose all of it". She subsequently deposited $4,400 into her trading account. Shortly thereafter Robbie rang her and with his assistance she opened the position that Steven had recommended while she was on the telephone. It is once again readily apparent that Ms Kuhn deposited further funds and opened a position in almost complete reliance on her account managers and their recommendations and representations about the profit she could make.
As it did with a number of the other EFX8, EuropeFX produced a schedule which purported to record the positions that Ms Kuhn opened or closed at a time when she was not on the telephone with an account manager. That schedule was said to support a submission that Ms Kuhn traded independently and did not rely on her account managers. While I accept that Ms Kuhn opened and closed positions on many occasions when she was not on the telephone with an account manager, it does not follow that she traded independently and did not rely on her account managers. As noted earlier, I accept Ms Kuhn's evidence that when she opened or closed positions while not on the telephone with an account manager, she was attempting to follow instructions that had been given to her over the telephone by one of her account managers, usually in an attempt to save her account, and usually when she was unable to contact one of her account managers. When pressed in cross-examination about that evidence, Ms Kuhn responded as follows: [MS PAINTER]: You mean the trades you made after the 48? [MS KUHN]: So the trades after the 48 that I made independently I used the information that had been given by the account managers to make a conscious choice with that and it was usually in the times that I could not get a hold of my account manager for advice when my account was free-falling. HIS HONOUR: Just so I'm clear: when you say information from your account managers do you mean telephone calls or emails or both? [MS KUHN]: Yes. So usually telephone calls in this instance. So they would tell me where they got information from, like investing.com, or CNBC and that, and also what was hot at the time and that. MS PAINTER: I think you said in the answer to my question just before his Honour asked his question that you suggested that you were making these trades on your own when your account was free-falling; did I understand that correctly? [MS KUHN]: Yes. There were trades there that I couldn't get a hold of my account manager for advice and I did what I thought and had previously done on other trades to try and stop it from - so whether it was a hedging, things like that.
The reference in that evidence to "the 48" was a reference to the 48 very small trades that Ms Kuhn placed before she had spoken to any account manager. As noted earlier, when she first spoke to EuropeFX account managers, she told them that she had no idea what she was doing when she placed those trades.
As noted earlier, I would also infer from the evidence as a whole that the account managers with whom Ms Kuhn dealt were well-aware that she really had no idea what she was doing and was almost entirely reliant on them. In a telephone call with Robbie on 3 October 2018, Ms Kuhn told Robbie that she was not going to deposit any more money and that she was just going to try to close off her open positions. Robbie's response was as follows: ROBBIE: I see. But try not to do too much things by yourself without you know what you are doing because -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- if you will not close the right position you can put your account in a very high risk and your margin level can you too low, okay?
When asked in cross-examination whether she took that advice, Ms Kuhn responded: "It was hard not to do anything by myself when I couldn't get in [contact] with my account manager and I could see my account free falling, so I did what I thought was best".
As well as being reliant on her account managers, Ms Kuhn was frequently pushed or pressured to trade, usually by reference to what were said to be exciting "trading events" and the potential to make substantial profits. The account managers often emphasised that Ms Kuhn should place trades quickly otherwise she would "miss the opportunity". That is apparent from some of the telephone conversations to which reference has already been made. Ms Kuhn's evidence was that the account managers often called her many times a day and often fairly late at night. She felt that they were "very pushy" on the calls and that she felt "intimidated". I accept that evidence. I reject EuropeFX's submission that Ms Kuhn's evidence in that respect should be rejected because the evidence indicated that she requested calls and was "actively involved in scheduling calls". I do not consider that to be a fair or accurate summary or characterisation of the evidence.
The pressure to trade that the EuropeFX account managers frequently exerted on Ms Kuhn is readily apparent in many of the recordings and transcripts of the telephone conversations between Ms Kuhn and the account managers. It again suffices to give few examples.
On 30 August 2018, which was fairly early in the period during which Ms Kuhn traded with EuropeFX, Robbie called Ms Kuhn and told her that oil was "exploding" and that "the potential is huge". The following exchange then occurred: ROBBIE: I will tell you what, when we see those kinds of opportunities, we need to know how to maximise the potential. LEANNE KUHN: Mmm-hmm. ROBBIE: And you already, you got into (indistinct) by yourself, before me and you we spoke, you lost money because you didn't know -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- exactly what you were doing, right? LEANNE KUHN: Yeah. ROBBIE: So you lost money, okay, but you can see that when you have right information on the right time and you're making the right -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- investment, okay, you have the potential to make a lot of money. Okay? LEANNE KUHN: Mmm-hmm. ROBBIE: Because so far in one day you made 25 per cent return out of your investment
Robbie then told Ms Kuhn that she should "maximise the potential" by "buy[ing] more contracts on oil." After Ms Kuhn expressed reluctance about depositing more funds, Robbie said "maybe you can squeeze the - check what you can squeeze that maybe you will be able to". Ms Kuhn again expressed reluctance with depositing more funds, saying "we don't have that available money". Robbie's response was "you are going to miss the opportunity, okay?"
Ms Kuhn's evidence concerning that conversion with Robbie was to the effect that she felt pressured to make the trade that Robbie had recommended. She also thought, based on what Robbie had said, that the "potential to make profit was huge" and that it would be "silly not to give it a go".
Several points may be made regarding this exchange between Ms Kuhn and Robbie and Ms Kuhn's evidence concerning it. First, Robbie repeatedly emphasised the potential profits that Ms Kuhn might make from "oil" with no discussion of the risks involved. Second, it is not surprising that Ms Kuhn felt pressured by Robbie and equally unsurprising that, based on what Robbie had said, she thought that the potential to make money from the trade recommended by Robbie was "huge". Third, when Ms Kuhn expressed reluctance about depositing further funds, Robbie effectively ignored her and instead asked whether she could "squeeze" more money in. He emphasised the urgency of depositing further funds.
I accept Ms Kuhn's evidence that she felt pressured by Robbie during this and other similar exchanges she had with Robbie and other EuropeFX account managers. I do not accept EuropeFX's global submission that, when EuropeFX account managers told Ms Kuhn about opportunities in the market, they were not pressuring her to invest. Among other things, the premise underlying that submission is fallacious. The example just given was fairly typical. Robbie and the other account managers almost invariably did not simply tell Ms Kuhn about opportunities in the market. Rather, they effectively told her that it was effectively a fait accompli that she would profit from the trade and thereby exploited her naivete and fear of missing out.
As the example just given amply demonstrates, the pressure that the EuropeFX account managers exerted on Ms Kuhn to trade was also almost invariably accompanied by pressure to deposit further funds. There are many other examples.
In late September 2018, Robbie told Ms Kuhn that she should deposit more funds into her trading account to improve her margin. That was said to be necessary to "minimise the risk" and "survive the minus". On the evening of 28 September 2018, Ms Kuhn deposited a further $4,000 into her trading account. It may be inferred from the sequence of events and the earlier conversations that she had with Robbie that she did so in accordance with Robbie's recommendation that this was necessary to improve her margin. Almost immediately after she had deposited those funds, however, Robbie telephoned Ms Kuhn and presented her with what he said was an "amazing opportunity" on NASDAQ and a "strong buy" on Investing.com in respect of oil where the "potentially [was] huge". When Ms Kuhn asked whether she could do "just one" because she wanted to "keep a bit of a margin", Robbie's response was that the "potential" in oil alone was "not enough to start to recover that minus". The conversation then continued: ROBBIE: I will tell you what, okay, if you can squeeze just another 4, we can maybe even diversify and even maybe to squeeze both of them, okay? LEANNE KUHN: Yeah, no. That is -- ROBBIE: The potential is huge -- LEANNE KUHN: Yeah -- ROBBIE: -- when we are talking about something huge just another 4 and we can diversify -- LEANNE KUHN: Yep. ROBBIE: -- with both of them and we are talking about a very nice potential maybe to start recover -- LEANNE KUHN: Yeah. ROBBIE: -- potentially some 10, 15,000 from that minus. LEANNE KUHN: Yep. It is not going to happen. That is like all I have got. I just had to beg and plead so it is - yeah that is -- ROBBIE: How much - can you squeeze more? LEANNE KUHN: No more, that is it.
As can be seen, while Robbie had initially told Ms Kuhn to deposit more money in order to improver her margin, as soon as she did deposit funds, he pressured her to open further positions, which in turn required her to deposit further funds. Ms Kuhn subsequently opened a position in oil and shortly thereafter received an email notification from EuropeFX that her margin was low.
It should also be noted in this context that one of the EuropeFX representatives, David, also pressured Ms Kuhn to deposit more funds with the promise of discounts on commission if her account reached a certain size. In a telephone conversation between Ms Kuhn and David on 2 October 2018, David informed Ms Kuhn that he had gotten "a severe alert about [her] trading account" and that her account was "in the very high risk". He said that he could "show can I help you to be on the safe side" and that his role was "to take client like yourself, that they have a very big minus on the trading account." The following exchange then occurred: DAVID B SHMUELI: My job is to actually share with you a different philosophy and a different strategy to make -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- to make sure that you will understand in the personal level why it's going to work for you, how can we do that, and what will be the risk that will be involved in the potential of the profit and by how much time. And as long as you don't -- LEANNE KUHN: Yes. DAVID B SHMUELI: You know, as a human being it's really hard for us to make any kind of a decision or to go out of our comfort zone because fear, panic and stress, those - those kind of passion killers - LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- they will always try -- LEANNE KUHN: Yep. DAVID B SHMUELI: -- to prevent us from taking action. Now, when you see that kind of a red colour in front of you right now -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- for all of your grief and anxiety. Now when we become emotional we become irrational. And when we become irrational this is where we are doing mistakes.
David went on to reassure Ms Kuhn that, while her "account is in a huge minus", nevertheless "the entire picture in the account can be changed in any given time". He told Ms Kuhn that "your goal right now is not even to make money, is to stabilise the minus in the account", that Ms Kuhn could be "on the safe side by having a bigger equity" and that "as big as your equity is lower the level of the risk that you have in your trading account."
Ms Kuhn gave the following evidence about what David told her about her account. I recall David telling me my only way out was to increase my equity. I felt gutted as I had nothing left. However, I recall that I still trusted David. Even though simply putting more money into my account seemed like the same strategy as with Robbie, David was a different pair of eyes looking at my account. I felt that because a new person was looking at my account, he may have had some other component to what he was contemplating that made it different.
The conversation between David and Ms Kuhn continued: DAVID B SHMUELI: Now, let me do math. Okay. Can I put you on a quick hold for two second? I'm just checking something for you. LEANNE KUHN: Yep. No worries. Thanks. DAVID B SHMUELI: Two seconds. My pleasure. One second. Okay. Here's the thing. I just went -- LEANNE KUHN: Yep. Mmm-hmm. DAVID B SHMUELI: -- to the commission and swap department to check something can be done from my side, just to give you extra boost -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- and extra help. Okay. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: First, normally you have three options right now. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: Okay. Option number one is to take AUD$5,000. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: Write it down. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: And then your equity will become almost nine. What is that mean that your -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: You know my job, what I'm doing normally is actually I'm following after the news all day long. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: I have the access to that kind - those kinds of reliable resources that we can trust them. How do I know so? I am doing statistic. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: If I can see that that specific website give to my clients -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- many times along the road good advice, so that kind of the resource can be trusted. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: Now our goal is to close trades, not to open trades. LEANNE KUHN: Yep. DAVID B SHMUELI: And then - you know, my mum used to say that in life it's better to be ready to an opportunity and not having one, than having an opportunity without being prepared. I want that your account -- LEANNE KUHN: Yeah. DAVID B SHMUELI: -- will have the ability that I will just give you a quick call and you will be able to -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- close the trade. And as long as you don't have the time, or you can pick up the phone - I can either send you an SMS or email -- LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: -- (indistinct) assets. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: And then, normally - let's make an example, let's say the NASDAQ going down, down, down. LEANNE KUHN: Mmm-hmm. DAVID B SHMUELI: So you are covering 4k on the sell position. LEANNE KUHN: Yep. DAVID B SHMUELI: And then champing back up.
David then explained that "option number two" was if Ms Kuhn could "squeeze 7, 500" in which case David could "get you 20 per cent discount, okay, on commission." David explained that the last option was for "10,000" (by which he meant that Ms Kuhn would deposit $10,000), which would then result in a discount of "30 per cent." David said that this amount would be a "game changer" and that he could "take [her] personally under [his] wing."
Ms Kuhn gave the following evidence about this exchange with David: I recall this exchange as it was the first time that I was offered a discount on the commission. I thought: "Awesome, I will be able to make more money because I won't be paying as much commission." David gave me a glimmer of hope that I would be able to get back on my feet and get rid of trades that I do not want. However, I needed more money to do this so I can have more equity. When David told me to write it down, I recall writing down what he was saying on a piece of paper, which helped me follow along. … I do remember at the time trusting David more due to what he said about his experience and because he was higher up the hierarchy.
Later that day, Ms Kuhn deposited $5, 000 into her trading account.
The exchange between Ms Kuhn and David is illustrative of the type of pressure that was exerted on Ms Kuhn by her account managers and the tactics that they used to cajole her into depositing further funds. It also shows Ms Kuhn's almost blind trust and reliance on the account managers. It is also worth reiterating in this context that EuropeFX account managers were not permitted to give personal advice to their customers. That prohibition was plainly ignored by both Robbie and David in Ms Kuhn's case.
The examples just given are by no means isolated examples. Other examples of the account managers placing pressure on Ms Kuhn to invest or deposit further funds are identified and summarised in Annexure E.1 to the SOC, in particular at rows 424, 425, 429, 430, 432, 437, 438, 443 and 455.
Ms Kuhn was not only often pressured to deposit more money into her trading account. She was also often prevented, impeded or at least dissuaded from withdrawing funds from her account. It again suffices to give one example. On 27 September 2018, Ms Kuhn made a request to EuropeFX to withdraw $5,000 from her trading account. Shortly thereafter, Robbie called her and the following exchange occurred: ROBBIE: Yeah, I will tell you what: if you right now we will send 5,000 back in the free margin, you have a lot of right now free margin, because most of the account -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- is in hedge, so it's giving you more free margin. LEANNE KUHN: Yeah. ROBBIE: Okay? LEANNE KUHN: Yeah. ROBBIE: If you want potentially to recover those hedges, to recover those minuses that you have on the open trades, we need to start use - to take some other opportunities with a potential to start to recover -- LEANNE KUHN: Mmm-hmm. ROBBIE: -- that minus. Like, for example, maybe -- LEANNE KUHN: Yes. ROBBIE: -- we did yesterday, okay, because yesterday -- LEANNE KUHN: Yeah. ROBBIE: -- you made some very nice profits, okay? LEANNE KUHN: Yeah, yeah. ROBBIE: So if you will take right now the 5,000, you will not have enough in the free margin to take some other opportunities with a potential to recover that minus, okay? What I was trying to explain -- LEANNE KUHN: Oh, really? I didn't -- ROBBIE: -- to explain -- LEANNE KUHN: Yes. ROBBIE: -- is, first of all, you know, potentially to recover that minus, and then if you want, you can transfer something for the available balance, if you need to take to the bank account, okay? LEANNE KUHN: Yeah. So -- ROBBIE: So I will tell you what -- LEANNE KUHN: -- I need that 5,000 on the basis we make some, yeah. ROBBIE: So I will tell you what, okay, right now, we have a few very nice events, very big events.
Ms Kuhn's evidence was that as a result of that exchange she cancelled her withdrawal request and, while on the telephone with Robbie, she opened a position in a NASDAQ CFD which Robbie told her was expected to go up based on what was said on Investing.com. This is again not an isolated example of the way in which EuropeFX account managers dealt with Ms Kuhn.

[99]

EVIDENCE RELATING TO THE EFX22

As noted earlier, the EFX22 were 22 other customers of EuropeFX. What distinguished them from the EFX8 is that ASIC did not call any of the EFX22 as witnesses. Rather, ASIC relied entirely on documentary evidence in respect of their engagement, interactions and trading with EuropeFX. ASIC relied in particular on the recordings and transcripts of telephone conversations between each of the EFX22 and EuropeFX representatives, as well as business records in respect of their trading.
EuropeFX submitted that the Court should draw a Jones v Dunkel inference to the effect that the evidence of the EFX22 would not have assisted ASIC. It also submitted that the transcripts of the conversations between the EFX22 and EuropeFX representatives, insofar as they are relied upon for the truth of what was said by the EFX22, should be afforded no, or little weight.
There is a tension between the submissions advanced by EuropeFX in respect of the evidence of the EFX8 and its submissions concerning the weight that should be given to the transcripts of the EFX22. As discussed earlier, EuropeFX submitted that the best evidence of the interactions between the EFX8 and EuropeFX was the recordings and transcripts, and that the affidavit evidence of the witnesses added little and should be given little weight. In respect of the EFX22, however, EuropeFX took the opposite position and contended that the transcripts should be given little weight because the EFX22 had not been called and that their "remarks" accordingly, could not be tested.
EuropeFX's submissions also focussed on the weight that should be given to the transcripts insofar as statements made by the EFX22 in those transcripts are relied on to prove the truth of those statements. Two observations may be made in relation to those submissions.
First, it would appear that, for the most part, the transcripts were tendered by ASIC as proof of what was said by the participants to the recorded conversations, as opposed to the truth of what was said. For example, ASIC relied on the transcripts as evidence which tended to establish the insufficiency or inadequacy of what, if anything, the EuropeFX representatives said to the EFX22 about the nature of CFDs or Margin FX Contracts, or the concepts of leverage and margin, or the risks involved in trading in CFDs or Margin FX Contracts.
Second, where ASIC did rely on statements made by the EFX22 as evidence of the truth of the asserted facts, for the most part those statements were made in circumstances where there was no sound reason to doubt the truthfulness or reliability of the facts asserted in those statements. For example, one of the transcripts of conversations between EFX7 (who was one of the EFX22) and a EuropeFX representative recorded that EFX7 told the representative that his trading experience was "very, very basic", that he had traded "a little bit of shares" 30 years ago and that he "did a bit of Bitcoin" in more recent times and "did alright". There is no sound reason to doubt the truthfulness of those statements given their nature and the circumstances in which they were made. Another example is a statement made by EFX15 to a EuropeFX representative that "he did not have cash on the side". That statement was made in response to a question asked by the representative about whether EFX15 had any other source of funds to make a further deposit and trade. The nature of that statement and the circumstances in which it was made do not give rise to any real doubt or question as to the truthfulness of the statement by EFX15.
It follows that I do not accept the global submission by EuropeFX that little weight should be given to any statements in the EFX22 transcripts to the extent that those statements are relied on to prove the truth of the asserted fact or facts. That is not to say that limited weight should be given to some statements if it is possible to point to particular facts and circumstances which would tend to indicate that those statements may not be truthful, reliable or accurate. For the reasons already given, much will depend on the nature of the particular statement in question and the circumstances in which it was made.
I am also unable to accept the global Jones v Dunkel submission advanced by EuropeFX.
The relevant principle arising from Jones v Dunkel is that, where a party does not call a particular witness, the Court may infer that the evidence of the absent witness would not have assisted the party that failed to call the witness. The court may also more readily draw an inference unfavourable to the party that failed to call the witness. The availability of those inferences generally depends on the existence or establishment of three circumstances or conditions: first, that the absent witness would be expected to be called by one party rather than the other; second, that the evidence of the uncalled witness would be expected to elucidate a particular fact in issue; and third, that the absence of the witness is unexplained: Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) [2020] FCA 1442; (2020) 277 FCR 223 at [34]. The first of those conditions generally hinges on whether the absent witness could be said to be in a particular party's "camp". The party that contends that a Jones v Dunkel inference should be drawn bears the onus of establishing that the absent witness is within the other party's "camp": Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97; (2023) 411 ALR 315 at [357]-[358].
In my view, EuropeFX failed to discharge its onus of establishing that the EFX22 were in ASIC's "camp", in the sense that they were willing to cooperate with and assist ASIC by being involved in the lengthy process which resulted in them swearing an affidavit, as the EFX8 did. ASIC had no more power or control over the EFX22 than EuropeFX: see Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 at [254], [265]; cf Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 at [472]. Nor could it be said that there was any close relationship between ASIC and the EFX22: see Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157 at [64]; Australian Securities and Investments Commission v Lending Centre Pty Ltd (No 3) [2012] FCA 43; (2012) 213 FCR 380 at [153].
EuropeFX also failed to identify any particular fact or facts in issue that the EFX22 would be expected to elucidate, or any inference or inferences that should more readily be drawn against ASIC, because it did not call the EFX22. The submission was put at a global and very general level.
While I am not persuaded that any inference or inferences adverse to ASIC should be drawn because it did not call any of the EFX22 as witnesses, I accept that the fact that none of the EFX22 gave evidence in this proceeding means that the Court should exercise caution before drawing some of the inferences that ASIC contended should be drawn from the documentary evidence relating to the EFX22. For example, the Court should exercise some caution before inferring, from the documentary evidence alone, that particular customers within the EFX22 were relevantly vulnerable or disadvantaged, or did not fully understand or comprehend the concepts involved in trading in CFDs or appreciate the risks involved in such trading. That issue, however, cannot sensibly be addressed at a global or general level. It can only be addressed customer by customer and having regard to the available evidence, in particular the recordings and transcripts.
I should also note, in this context, that EuropeFX effectively submitted that Jones v Dunkel inferences should be drawn against ASIC in respect of various other people that it did not call, including Mr Amar, Mr Martin, Mr Sean Zhou and various other people who were not specifically identified. I do not propose to address that submission any detail because it was, in my view, entirely unmeritorious. I have already briefly addressed EuropeFX's Jones v Dunkel suggestion about Mr Amar. As for the other people who were the subject of the submissions, there was either no basis for finding that any of them were somehow in ASIC's camp. More fundamentally, EuropeFX did not point to any inference contrary to ASIC's case that the uncalled witnesses might be expected to have been called to explain.
Bearing those general observations in mind, it is useful to now provide a very brief summary of the facts relating to each of the EFX22 which may be gleaned from the evidence, particularly the recorded telephone calls and transcripts, but also other documentary evidence, including the customers' responses to EuropeFX's account opening questionnaire, the customers' trading statements, and in some circumstances the content of the customers' complaints to regulators. Despite the large volume of material, I do not propose to give as detailed a summary of the facts and circumstances concerning the EFX22 as was given in the case of the EFX8. That is in part because the parties gave very little attention to facts and circumstances of the EFX22 in their oral closing submissions. I will instead focus more on the points of similarity and outline some findings based on my review of those parts of the transcripts that were highlighted in the parties' written summaries and submissions. I should also emphasise again that I do not propose to refer to and address every submission that the parties advanced in respect of the trading experiences of the EFX22. That is neither desirable not possible given the excessive length of the parties' written submissions and schedules. When I make a particular finding about, for example, a customer's reliance on his or her EuropeFX account manager, it may be taken that I have made that finding despite, or in the face of, any submissions to the contrary.

[100]

Miriam Battersby (EFX5)

Ms Battersby was semi-retired and receiving a pension when she opened her trading account with EuropeFX. She had no investment experience, though she had previously made some term deposits.
In her complaint to ASIC, she claimed that she came to engage with EuropeFX after seeing an online advertisement for an "auto-trading bot" called "Bitcoinrush". She completed an online sign-up form and was subsequently contacted by telephone. Ms Battersby later told EuropeFX representatives that she had responded to an advertisement which related to automated trading in Bitcoin. I would infer from the evidence that Ms Battersby was contacted by EuropeFX after she responded to an online advertisement concerning Bitcoin.
Ms Battersby made an initial deposit of $2,500 on 27 August 2019. She traded with EuropeFX between that date and 29 November 2019. She opened a total of 12 positions and deposited a total of $17,500. She ultimately lost $15,947.91 as a result of her trading.
The questionnaire that was completed as part of the account opening process in respect of Ms Battersby recorded that: she was self-employed; her source of funds was an "inheritance"; her annual income was between $20,000 and $29,999; her liquid net worth was between $300,000 and $1,000,000; and she had no trading experience in securities, commodities, futures, CFDs or "OTC forex exchange".
The account manager with whom Ms Battersby primarily communicated was Elay Yotam, though she also communicated with Leo Tura. ASIC alleged that 25 personal advice statements and 35 false or misleading representations were made to Ms Battersby during those communications. The personal advice statements, which are considered in some detail later, included recommendations that Ms Battersby open certain positions, deposit further funds and adopt certain trading strategies. The alleged misrepresentations, which are also considered later, included that Ms Battersby could earn greater returns with EuropeFX than by keeping her money in a bank account and that EuropeFX held an ASIC licence, and its business was regulated.
During her first conversations with Elay, he asked Ms Battersby to tell him about herself, including whether she had any investment experience and why she had come to open a trading account with EuropeFX. Ms Battersby told Elay that she was semi-retired, was a web-site consultant, that the money she had to invest was from an inheritance, that she had no investment experience, and that she came to EuropeFX because she was interested in Bitcoin. She also told Elay that she was "very cautious: and was not a "gambler". Elay told Ms Battersby that she did not need to understand everything, that she was "never going to be alone" and that he was going to do his best to be with her as much as he could. When Elay told Ms Battersby about the "products" she could "buy", she responded that she thought that it was "just Bitcoin".
In Ms Battersby's first conversation with Elay, he explained to her how he made money as her account manager. His explanation was in the following terms: ELAY YOTAM: Yeah. And what I wanted to tell you as well it's that eventually I'm not hear to convince you or to sell you something. How I'm making my money? First of all, I have a lot of agents over here. When a client pay commission on a trade, okay, we get their commissions as well. So the company get the commission and they're paying us first of all a base salary, very nice. And as well we get commissions as well. Not so big, I can tell you, but it's not irrelevant. What can I tell you as well? It's in my full interest that you will be full successful and (indistinct), because obviously as long as you increase your investments and you make money out of it you have more money to pay on the higher side investments which mean higher commission, okay? So as long as you do it in a better way it's better for me. It's like your success is mine. (Emphasis added)
It is apparent from the evidence as a whole, including the transcripts of Ms Battersby's conversations with EuropeFX account managers, in particular Elay, that: to EuropeFX's knowledge, Ms Battersby had no prior knowledge of, or experience trading in, CFDs or Margin FX Contracts or any similar financial products; throughout the time she traded with EuropeFX, Ms Battersby had an inadequate understanding of CFDs and Margin FX Contracts, an inadequate understanding of concepts such as leverage and margin, and an inadequate appreciation of the risks involved in trading leveraged derivatives. Despite being aware of the fact that Ms Battersby had no prior knowledge and trading experience in respect of CFDs and Margin FX Contracts, the EuropeFX account managers with whom Ms Battersby dealt did not give her any adequate or comprehendible explanations in respect of those products or concepts that were important for her to understand in order to trade in them. It is also readily apparent from the transcripts that, to the extent that the account managers gave Ms Battersby any explanations about those matters, Ms Battersby was unable to understand those explanations. Ms Battersby relied heavily on the advice and recommendations of the EuropeFX account managers with whom she dealt, gave them access to her trading screen, and was often unduly pressured to deposit further funds into her trading account.
I reject EuropeFX's submissions to the contrary, including: its submissions based on the quiz supposedly completed by Ms Battersby as part of the account opening procedure; its submissions based on the reading by the account managers of the disclaimer, which on any view was formulaic and often rushed; and its submissions based on some selective and isolated statements made by Ms Battersby. In my view, EuropeFX's submissions concerning Ms Battersby's circumstances and trading experiences are not supported by a fair or balanced consideration of the evidence as a whole.

[101]

Paul Bonini (EFX7)

Mr Bonini opened his trading account with EuropeFX on 30 May 2019 and made an initial deposit of $600. He traded with EuropeFX from that date until July 2019. He deposited a total $50,000. He made a total net loss of $46,967.51 from his trading.
It was recorded in Mr Bonini's account opening questionnaire that: his annual income was between $100,000 and $299,999; his liquid net worth was between $300,000 and $1,000,000; and that he had no trading experience in securities, options, commodities, futures, CFDs or OTC forex exchange. He told a EuropeFX representative in his first telephone call that he had some previous experience with Bitcoin.
The EuropeFX representative with whom Mr Bonini mainly dealt was Alan. ASIC alleged that during Mr Bonini's conversations with EuropeFX representatives, those representatives made 77 personal advice statements and 31 false or misleading representations. The personal advice statements, which are considered in some detail later, included recommendations that Mr Bonini open certain positions, deposit further funds and adopt certain trading strategies. EuropeFX admitted that it made two personal advice statements to Mr Bonini concerning the making of deposits. The alleged misrepresentations, which are also considered in later, included that Mr Bonini could reasonably be expected to make specified profits from his trading, and that EuropeFX was regulated by ASIC.
During one of his early conversations with Alan, Mr Bonini confirmed that he had "very, very basic" trading experience, including that he did "a little bit of shares" about "30 years back" and that he had "dabbled in Bitcoin". He said, however, that he "certainly did not know what [he was] doing" and believed that EuropeFX's platform meant that he did not "really need to think too much". He also told Alan that he did not understand the market, "so obviously that's why you're here". In a later conversation, another EuropeFX representative, Steven, asked Mr Bonini about his goals and what he wanted from his account with EuropeFX.
It is apparent from the evidence as a whole, including the transcripts of Mr Bonini's conversations with EuropeFX account managers, in particular Alan, that: to EuropeFX's knowledge, Mr Bonini had no prior knowledge of or experience trading in CFDs, Margin FX Contracts, or like financial products; throughout the time he traded with EuropeFX, Mr Bonini had at best a superficial understanding of CFDs and Margin FX Contracts, at best a rudimentary understanding of concepts such as leverage and margin, and an inadequate appreciation of the risks involved in trading leveraged derivatives; EuropeFX representatives were alive to the fact that Mr Bonini had no relevant knowledge or trading experience in respect of CFDs or Margin FX Contracts, but never gave him adequate or comprehendible explanations in respect of any of those products or the risks inherent in trading in those products; Mr Bonini relied heavily on the advice and recommendations of the EuropeFX account managers and frequently made trades exactly as recommended to him by his EuropeFX account managers; and on occasion Mr Bonini was unduly pressured to open positions and deposit further funds into his trading account.
I reject EuropeFX's submissions to the contrary, including its submissions that Mr Bonini was given a satisfactory explanation of leverage, including the increased risk created by leverage, and its submissions based on a schedule that included trades supposedly effected by Mr Bonini while he was not on the telephone with one of the account managers. EuropeFX's submissions concerning Mr Bonini's circumstances are in my opinion not supported by the evidence considered as a whole.

[102]

Darren Singleton (EFX10)

Mr Singleton opened his trading account with EuropeFX on about 1 February 2019 and made an initial deposit of $1,000. He traded with EuropeFX from 4 February to 14 March 2019. He lost a total of $657,900 as a result of his trading.
Mr Singleton's account opening questionnaire recorded that: his annual income was between $30,000 and $99,999; his liquid net worth was between $300,000 and $1,000,000; and that he had no trading experience in equities, options, commodities, futures, CFDs or OTC forex exchange. While Mr Singleton had previously owned his own business, he told a EuropeFX representative that he had lost his business, was recently divorced, and that his trading with EuropeFX was "a last ditch effort to try and come back". It would appear from Mr Singleton's conversation with a EuropeFX representative on 8 April 2019 that he came to engage with EuropeFX after conducting internet searches concerning Bitcoin trading and ended up being "redirected" to EuropeFX.
The EuropeFX representatives with whom Mr Singleton mainly dealt were Mia and David. ASIC alleged that during his conversations with EuropeFX representatives, the representatives made 106 personal advice statements and 29 false or misleading representations. The personal advice statements, which are considered in some detail later, included recommendations that Mr Singleton open certain positions, deposit further funds and adopt certain trading strategies.
The evidence as a whole, including the transcripts of Mr Singleton's conversations with EuropeFX account managers, supports the following findings: that to EuropeFX's knowledge, Mr Singleton had no experience in respect of trading in CFDs or Margin FX Contracts; Mr Singleton did not acquire any sound or adequate understanding of CFDs or Margin FX Contracts or the concepts involved in trading in those financial products as a result of his engagement with EuropeFX; Mr Singleton essentially relied on the advice and recommendations of the EuropeFX account managers when it came to his trading; EuropeFX representatives were aware of Mr Singleton's inexperience and lack of trading experience and knew that he was making "mistakes" when he traded on his own; EuropeFX representatives frequently recommended that Mr Singleton open certain positions, including recommendations based on information supposedly found on third-party websites; and Mr Singleton was pressured to deposit further funds into his trading account, and was even encouraged to use borrowed funds in that regard.
I reject EuropeFX's submissions to the contrary, including its submission that, despite his obvious lack of relevant knowledge and experience, Mr Singleton was not a vulnerable trader; and its submission that Mr Singleton was a willing participant in the market who appeared to be happy to trade in CFDs. EuropeFX's submissions concerning Mr Singleton's circumstances and trading experience with EuropeFX are in my view not supported by the evidence considered as a whole.

[103]

Xiaodong (Joan) Liu (EFX12)

Ms Liu made an initial deposit of $500 on 8 January 2019. She traded with EuropeFX between 16 January and 10 June 2019. She lost $354,208.10 from her trading.
Ms Liu's account opening questionnaire recorded that: she was self-employed; her annual income was between $20,000 and $29,999; her liquid net worth was between $30,000 and $99,999; she had no trading experience in options, commodities, futures, or CFDs; and she had 1 to 5 years' experience in OTC foreign exchange.
The account managers with whom Ms Liu primarily communicated were Victor and David, though she also communicated with Robyn and Emre. ASIC alleged that 214 personal advice statements and 183 false or misleading representations were made to Ms Liu during those communications. The personal advice statements, which are considered later, included recommendations that Ms Liu open certain positions, deposit further funds and adopt certain trading strategies. EuropeFX admitted that its representatives made 30 personal advice statements to Ms Liu. The alleged misrepresentations, which are also considered later, included that EuropeFX representatives would develop a plan to meet Ms Liu's objectives, that Ms Liu would be able to readily withdraw funds from her account, and that Ms Lui could reasonably be expected to earn particular specified profits from her trading. EuropeFX admitted that its representatives made five false or misleading statements to Ms Liu.
During some of her many conversations with David and Victor, Ms Liu was asked about her financial position and her investment goals and targets. Ms Liu told the representatives that her goals included making enough money to buy a house close to her child's school and acquiring enough skill and knowledge to be able to trade by herself. While Ms Liu's account opening questionnaire indicated that she had some experience in trading foreign exchange, she said many things to David and Victor which indicated that she lacked any sound or adequate understanding of CFDs and Margin FX Contracts, that she was relying heavily on their advice and recommendations in respect of trading, and that she trusted them and their recommendations. The account managers fostered Ms Liu's reliance and frequently told Ms Liu that she should trust their judgment. Indeed, many of the conversations reveal or support the inference that David and Victor were inappropriately seeking to foster or develop a close personal relationship with Ms Liu to ensure her continuing dependency on them in respect of her trading.
I am satisfied from the evidence as a whole, including the transcripts of Ms Liu's conversations with EuropeFX account managers, in particular David and Victor, that: throughout the time she traded with EuropeFX, Ms Liu did not have any sound or adequate understanding of CFDs and Margin FX Contracts and had an inadequate appreciation of the nature and extent of the risks involved in trading those products; EuropeFX representatives were well-aware of the fact that Ms Liu had an inadequate understanding of the financial products in which she was trading, and an inadequate appreciation of the risks involved in that trading, and yet they did little if anything to ensure that she had an adequate understanding and appreciation of those matters; Ms Liu relied heavily on the advice and recommendations of her account managers; the account managers encouraged and exploited that reliance; and Ms Liu was frequently directed by the account managers to open and close positions in accordance with their recommendations and advice, and was frequently pressured to deposit further funds into her trading account.
I reject EuropeFX's submissions to the contrary, including: its submissions that Ms Liu was not a vulnerable investor given her lack of relevant experience and lack of adequate understanding and appreciation of CFDs and the risk of trading in them; its submission that the EuropeFX account managers gave Ms Liu an adequate explanation of the risks involved in trading CFDs and Margin FX Contracts; and its submission that Ms Liu made strategic trading decisions independently of the account managers and their advice and recommendations. The evidence revealed that Ms Liu mostly just did what her account managers told her to do. When she did trade by herself, those trades were generally misguided attempts to follow her account managers' advice and recommendations and were mostly unsuccessful. The evidence, considered as a whole, does not support EuropeFX's submissions to the contrary.

[104]

Toni Aldous (EFX13)

Ms Aldous was 63 years old and receiving a disability pension when she opened her trading account with EuropeFX. She had no investment experience whatsoever.
Ms Aldous made an initial deposit of $250 on 30 January 2019. She traded with EuropeFX between 5 February and 8 May 2019. She lost $52,552.05 as a result of her trading.
The questionnaire that was completed when Ms Aldous opened her account recorded that: she was a "homemaker"; her annual income was between $10,000 and $19,999; her liquid net worth was between $100,000 and $299,999; and she had no trading experience in securities, commodities, futures, CFDs or OTC forex exchange.
The account manager with whom Ms Aldous primarily communicated was Shaun, though she also communicated with other account managers. ASIC alleged that 145 personal advice statements and 107 false or misleading representations were made to Ms Aldous during those communications. The personal advice statements, which are considered later, included recommendations that Ms Aldous open certain positions, deposit further funds and adopt certain trading strategies. EuropeFX admitted that its representatives made 14 personal advice statements to Ms Aldous. The alleged misrepresentations, which are also considered later, included that Ms Aldous could reasonably be expected to make specific profits from her trading, that a plan would be developed to meet Ms Aldous's objectives, and that open positions that had moved against her only represented temporary losses and it was reasonably likely that they would recover and become profitable.
During one of her first conversations with Shaun, Ms Aldous indicated that she was computer illiterate, that she didn't know "what the hell" she was doing and that she had "no clue". Ms Aldous told another EuropeFX representative that she had failed maths at school. In response to Ms Aldous' clear indication that she knew nothing about trading in financial products, Shaun told Ms Aldous, in effect, that it didn't matter because he would explain what she was supposed to do and that he was going to "build a business plan" that was going to "suit her needs … expectations and … goals, and will of course suit your financial situation". Shaun also asked Ms Aldous why she had opened the trading account and what she would like to achieve. Ms Aldous told Shaun that she opened the account because she had a "little bit of money left to [her] when [her] father died" and that she just wanted to make a bit of money. She also confirmed that she had no experience in financial markets. Another account manager, Jani, also told Ms Aldous that he would make a plan to help Ms Aldous to live a comfortable life and to retire.
It is in my view readily apparent from the evidence as a whole, including the transcripts of the conversations that Ms Aldous had with EuropeFX account managers, in particular Shaun, that: to EuropeFX's knowledge, Ms Aldous had absolutely no prior knowledge of, or experience trading in, any financial products, let alone complex derivatives like CFDs and Margin FX Contracts; throughout the time that she traded with EuropeFX, Ms Aldous never acquired from the account managers any sound or adequate understanding of CFDs and Margin FX Contracts, or trading concepts such as margin and hedging, or any appreciation of the nature and extent of the risks involved in trading leveraged derivatives; EuropeFX representatives were aware of the fact that Ms Aldous had no prior knowledge or experience in respect of CFDs and Margin FX Contracts, but nevertheless failed to give her any adequate and comprehendible explanations about those products, or the associated trading concepts, or the risk inherent in trading in such products; Ms Aldous relied almost entirely on the advice and recommendations of the EuropeFX account managers, to the point where they effectively told her where to click on the screen to open and close positions; the account managers fostered and encouraged that reliance; and Ms Aldous was unduly pressured to trade and deposit further funds into her trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that Ms Aldous was a willing participant in the market; its submission that Ms Aldous understood the financial products that she was trading and was aware of the risks involved; and its submission that Ms Aldous was not the subject of unfair tactics. The transcripts of the telephone conversations between Ms Aldous and the EuropeFX representatives, read fairly and in the context of the evidence as a whole, reveal that those submissions have no merit.

[105]

John Isaacs (EFX14)

Mr Isaacs was 84 years old when he opened his trading account with EuropeFX. He opened his account on 8 May 2019 with an initial deposit of $500. He traded with EuropeFX from 10 May to late August 2019. He deposited a total of $115,470 and made a total net loss of $108,999.72 from his trading. He borrowed $15,000 from his daughter to fund his trading.
It is open to infer from an email that Mr Isaacs sent to EuropeFX that he came to engage with EuropeFX after responding to a dubious advertisement which misleadingly referred to various celebrities extolling the virtues of foreign exchange investments. In that email, Mr Isaacs stated: Following a broadcast on the ABC Channel in Sydney, featuring Andrew Forest with Waleed Aly interviewing, on the subject of Foreign Exchange investments I felt that I too could be interested in this unique way of investing money. I typed in Foreign Exchange business on my internet and immediately up came EuropeFX and Profitix Ltd.
Mr Isaacs' account opening questionnaire recorded that: he was self-employed; his source of income was a pension account; his annual income was between $30,000 and $99,999; his liquid net worth was between $300,000 and $1,000,000; he had 6 to 10 years' experience in trading securities; and he had no trading experience in equities, options, commodities, futures, CFDs or OTC forex exchange.
The EuropeFX representatives with whom Mr Isaacs mainly dealt were Shaun and Jacob, but he also had conversations with Scott, Emre, Steven and Leo. ASIC alleged that during his conversations with EuropeFX representatives, those representatives made 81 personal advice statements and 40 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Isaacs open certain positions, including positions in accordance with indicators on third-party websites, that that he deposit further funds in his trading account and that he adopt certain trading strategies. EuropeFX admitted that it made one personal advice statement to Mr Isaacs. The alleged misrepresentations, which are also considered later, included: that Mr Isaacs could be expected to make specific profits from his trading; that a plan would be developed to meet Mr Isaacs' objectives; that open positions that had moved against him only represented temporary losses and it was reasonably likely that they would recover and become profitable; and that it was likely that he would reduce his exposure to risk or increase his returns if he reduced his investments in equities and increased his investment in the products offered by EuropeFX. EuropeFX admitted that its representatives made four false or misleading representations to Mr Isaacs.
During one of his initial conversations with Shaun, Mr Isaacs confirmed that he had no experience in trading in the financial products offered by EuropeFX, telling Shaun that this was the first time he had tried "this kind of trading". In one of Mr Isaacs' initial conversations with Jacob, Jacob asked him a detailed series of questions concerning his financial position, as well as some questions about his aims, objectives and goals in trading with EuropeFX, including how much money he would like to make in a year.
I am satisfied from the evidence as a whole, including the transcripts of Mr Isaacs' conversations with EuropeFX account managers, that: throughout the time he traded with EuropeFX, Mr Isaacs had had an at best a superficial and inadequate understanding of CFDs and Margin FX Contracts and did not fully understand some of the trading strategies that EuropeFX representatives had told him to employ; Mr Isaacs relied on the advice, recommendations and directions of the EuropeFX account managers; while he had some general understanding about the risks involved in his trading, he also believed, based on what he was told by the EuropeFX representatives, that he would mitigate risk by depositing further funds into his trading account; and he was often pressured to deposit further funds into his trading account, including funds sourced from credit cards and the sale of shares in his portfolio.
I reject EuropeFX's submissions to the contrary, including: its submission that Mr Isaacs traded independently of the recommendations and advice of the EuropeFX representatives; its submission that Mr Isaacs had an adequate understanding of the risks involved in his trading; and its submission that EuropeFX representatives did not apply any undue pressure on Mr Isaacs or employ any unfair tactics. I am not persuaded that the evidence, considered as a whole, provides any support for those submissions.

[106]

Sami Ayoub (EFX15)

Mr Ayoub was 80 years old, unemployed, receiving a modest pension, and about to undergo an operation when he opened his trading account with EuropeFX in June 2019. He made an initial deposit of US$5,000 on 19 June 2019. He traded with EuropeFX from 19 June to 3 July 2019, opening six positions. He deposited US$6,700 in total. His net loss from trading was US$3,736.21.
It is open to infer from the terms of a conversation that Mr Ayoub had with Robbie that he was contacted by EuropeFX after he responded to a promotion that suggested that Kerry Packer and David Koch had made millions of dollars out of Bitcoin. I can see no reason to doubt the reliability of that contemporaneous statement.
Mr Ayoub's account opening questionnaire recorded that: he was unemployed; his source of income was a pension; his annual income was between $20,000 and $29,999; his liquid net worth was between $20,000 and $29,999; and he had no experience in trading securities, equities, options, commodities, futures, CFDs or OTC forex exchange.
The EuropeFX representatives with whom Mr Ayoub mainly dealt were Robbie and Thomas. ASIC alleged that during his conversations with EuropeFX representatives, those representatives made 28 personal advice statements and 17 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Ayoub deposit further funds in his trading account and adopt certain trading strategies. The alleged misrepresentations, which are also considered later, included representations to the effect that by depositing further funds into his trading account, Mr Ayoub would reduce the level of risk to which he was exposed.
During one of his initial conversations with Robbie, Mr Ayoub told Robbie that he was old, in response to which Robbie told Mr Ayoub that he would not be alone and that he, Robbie, would help him with everything and would guide him through every step of the process. He also asked Mr Ayoub to tell him about himself, including how old he was, why he opened the account, what he wanted to achieve and whether he had any experience with investments. Mr Ayoub told Robbie that he had built a successful café business, but that he had lost that business and now lived on a pension in a rented home and had little money. He also told Robbie that he needed his help to try to make some money and that his main goal was to help his divorced daughter and her children. In a later conversation with Thomas, Mr Ayoub indicated that he was "scared stiff" and could not afford to lose anything. He also told one of his account managers that he was experiencing memory loss and was starting to get dementia. I can see no reason to doubt the reliability of that statement. More importantly, I can see no reason why the account manager would have any reason to doubt the reliability of the statement at the time.
I am satisfied from the evidence as a whole, including the transcripts of Mr Ayoub's conversations with EuropeFX account managers that: Mr Ayoub believed, as a result of advertising involving Australian celebrities, that EuropeFX was reputable and could help him make a large amount of money; throughout the time he traded with EuropeFX, Mr Ayoub had virtually no understanding of CFDs and Margin FX Contracts, or the concepts that he would have needed to understand to appreciate the risks involved in trading in those products; Mr Ayoub's very limited understanding of those matters was readily apparent to his account managers; the account managers nevertheless did little, if anything, to ensure that Mr Ayoub had an adequate understanding of those matters; Mr Ayoub was almost totally reliant on the advice, recommendations and directions of the EuropeFX account managers; the EuropeFX account managers pressured Mr Ayoub not to close his account; and Mr Ayoub was subject to considerable pressure to invest and deposit further funds into his trading account. It is abundantly clear that Mr Ayoub was in a highly vulnerable position. I would also readily infer that his vulnerability was exploited by EuropeFX.
I reject EuropeFX's submissions to the contrary. Those submissions, which need not be detailed in the circumstances, are entirely unsupported by the evidence considered fairly and as a whole. Indeed, Mr Ayoub's vulnerability and reliance on the EuropeFX account managers was identified in a contemporaneous internal report prepared by one of EuropeFX's own employees, Ms Ajaz, who reported as follows: This client is a beginner trader and even mentioned he might have dementia. During the calls, can hear his struggle to remember things and to navigate to the platform to open trades. He is totally dependent on Robbie on every single step executing his trade.
The internal EuropeFX report recorded that, during one of his telephone calls with Mr Ayoub, Robbie "kept pushing the client to deposit", that Robbie opened a trade with Mr Ayoub even though it was apparently a struggle for Mr Ayoub to even enter the details of the trade into the trading platform and that Mr Ayoub "kept on asking Robbie what should I do". The report concluded that "[t]his client doesn't have good understanding on how to navigate the platform". EuropeFX's apparent suggestion that Mr Ayoub was a willing and competent trader has no merit whatsoever. Indeed, it is fanciful and demonstrative of the unreality of some of EuropeFX's submissions concerning the circumstances of the EFX22. I should also add in that regard, that one only need listen to the recording (played by ASIC in its closing address) and read the transcript of a telephone call between Mr Ayoub and Robbie on 24 June 2019 (at 4.24pm) to emphatically reject EuropeFX's apparent submission that Mr Ayoub was anything other than a vulnerable customer who was exploited by EuropeFX account managers. The suggestion that he was a "willing participant in the market" is, with respect, nothing short of absurd.

[107]

Anne Marie Robinson (EFX16)

Ms Robinson was 43 years old when she opened her trading account with EuropeFX. She had no relevant trading or investment experience.
Ms Robinson made an initial deposit of $5,000 on 17 June 2019. She traded with EuropeFX between that date and 1 August 2019. She ultimately lost a total of $54,317.04 as a result of her trading.
Ms Robinson's account opening questionnaire recorded that: she was employed; her source of funds was "savings"; her annual income was between $20,000 and $29,999; her liquid net worth was between $30,000 and $99,999; and she had no trading experience in securities, commodities, futures, CFDs or "OTC forex exchange".
The account manager with whom Ms Robinson mainly communicated was Leo, though she also communicated with Edward. ASIC alleged that 112 personal advice statements and 54 false or misleading representations were made to Ms Robinson during those communications. The personal advice statements, which are considered later, included recommendations that she open certain positions, deposit further funds and adopt certain trading strategies. EuropeFX admitted that one of its representatives made a personal advice statement to Ms Robinson. The alleged misrepresentations, which are also considered later, included that a EuropeFX account manager would develop a "business plan" for Ms Robinson and that EuropeFX was regulated by ASIC. EuropeFX admitted that its representatives made three false or misleading representations to Ms Robinson.
During one of Ms Robinson's first conversations with Leo, Leo said that "the purpose of our first conversation is … to understand what are your needs, where you are coming from, what are your expectations and what are your goals when it comes to your trading account". Ms Robinson told Leo during that conversation that she had no previous experience trading in the market and that she had always just had her money in the bank. She also told Leo that her only source of income was money she received from the government to look after her mother. Leo then asked Ms Robinson a series of questions about her financial circumstances and her "target".
It is apparent from the evidence as a whole, including the transcripts of Ms Robinson's conversations with EuropeFX account managers, in particular Leo, that: despite her lack of any prior trading or investment experience, EuropeFX did not give Ms Robinson any sensible or comprehendible explanation of CFDs and Margin FX Contracts, or concepts such as leverage and margin, or the nature or extent of the risks involved in trading leveraged derivatives; Ms Robinson relied on the advice and recommendations of the EuropeFX account managers with whom she dealt and shared her trading screen with them; and Ms Robinson was at times unduly pressured to open positions and deposit further funds into her trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that Ms Robinson was an adult with "agency" who had no obvious disability; its submission that Ms Robinson was able to trade independently; and its submission that, in the absence of evidence to the contrary, the Court should find that Ms Robinson understood that all of the money in her account was at risk. In my view, EuropeFX's submissions concerning Ms Robinson are not supported by a fair or balanced consideration of the evidence as a whole.

[108]

Lewis Stubna (EFX17)

Mr Stubna was 66 years old when he opened his trading account with EuropeFX. He was retired, received a pension and had no relevant investment or trading experience. He made an initial deposit of $2,500 on 12 July 2019 and opened 30 positions between 17 July 2019 and 16 August 2019. He deposited a total of $42,800. He lost a net total of $36,195.34 as a result of his trading with EuropeFX.
Mr Stubna's account opening questionnaire recorded that: his annual income was between $30,000 and $99,999; his liquid net worth was between $300,000 and $1,000,000; and that he had no trading experience in securities, options, commodities, futures, CFDs or OTC forex exchange. In one of his first telephone conversations with a EuropeFX representative, Mr Stubna was asked a series of questions about his financial position, his investment experience, and his goals. Mr Stubna confirmed in that call that he was 66 years old, retired, had no trading or investment experience and that his goal was to "have a decent income", otherwise the money that he currently had would "fizzle away".
The EuropeFX representative with whom Mr Stubna mainly dealt was Robbie, though he also had dealings with Tony and Eli. ASIC alleged that during Mr Stubna's conversations with EuropeFX representatives, those representatives made 72 personal advice statements and 49 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Stubna open certain positions, deposit further funds and adopt certain trading strategies. The alleged misrepresentations, which are also considered later, included representations to the effect that Mr Stubna's trading was likely to generate specified profits, that Mr Stubna would be able to readily withdraw money from his trading account, and that EuropeFX was regulated by ASIC and its main office was in Sydney.
In my view, the evidence as a whole, including the transcripts of Mr Stubna's conversations with EuropeFX account managers, supports the following findings: to the knowledge of EuropeFX, Mr Stubna had no prior knowledge of, or experience trading in, CFDs, Margin FX Contracts, or any similar financial products; throughout the time he traded with EuropeFX, Mr Stubna did not fully understand the financial products he was trading or fully appreciate the nature and extent of the risks involved in trading them; the EuropeFX account managers with whom Mr Stubna dealt did little, if anything, to ensure that Mr Stubna had a sound and adequate understanding or appreciation of those matters; Mr Stubna relied heavily on the advice and recommendations of the EuropeFX account managers; EuropeFX representatives were aware of aspects of Mr Stubna's personal and financial circumstances that made him vulnerable; EuropeFX representatives frequently pressured Mr Stubna to trade and to deposit further funds into his trading account, and were told by Mr Stubna that he had withdrawn funds from his superannuation.
I reject EuropeFX's submissions to the contrary, including: its submission that Mr Stubna was not vulnerable or at a disadvantage; its submission that Mr Stubna "willingly" traded in the financial products offered by EuropeFX; and its submission that Mr Stubna was not subject to any pressure. In my view, EuropeFX's submissions are not supported by a fair or balanced reading of the evidence as a whole.

[109]

Zina Curtin (EFX18)

Ms Curtin opened an account with EuropeFX on 26 July 2019 with an initial deposit of $5,000. She traded with EuropeFX from late July to mid-August 2019. She deposited a total of $127,000 into her trading account and suffered a net loss of $81,722.20 as a result of her trading.
There is evidence to suggest that Ms Curtin came to invest with EuropeFX as a result of responding to an advertisement which represented that Nicole Kidman had invested in Bitcoin. In a letter of complaint to EuropeFX which Ms Curtin sent to EuropeFX in September 2019, she stated: Our initial contact was to investigate the Bitcoin. We had noticed an advertisement that was promoted by Nicole Kidman, expressing that every ordinary Australian should be made aware of this potential opportunity to make a real difference to their financial situation by investing in Bitcoin. When we were initially contacted we expressed what we had seen this advertisement and that we were interested in the Bitcoin. In order to get our account going we were told that we would have to invest $5000 and this would come with full support in our trading activities.
In her first conversation with a EuropeFX account manager, Ms Curtin confirmed to the account manager that she came to engage with EuropeFX as a result of a Bitcoin advertisement. I can see no reason to doubt the reliability of Ms Curtin's contemporaneous statements that she came to engage with EuropeFX because she responded to an advertisement spruiking investing in Bitcoin.
Ms Curtin's account opening questionnaire recorded that: she was employed; her source of funds was "savings"; her annual income was between $20,000 and $29,999; her liquid net worth was between $100,000 and $299,999; and she had no trading experience in securities, options, commodities, futures, CFDs or "OTC forex exchange".
The account managers with whom Ms Curtin mainly communicated were Steven and David. ASIC alleged that 17 personal advice statements and 21 false or misleading representations were made to Ms Curtin during those communications. The personal advice statements, which are considered in detail later, included recommendations that she adopt certain trading strategies. The alleged misrepresentations, which are also considered in detail later, included that she would be able to readily withdraw funds from her trading account.
During one of Ms Curtin's first conversations with Steven, in which her partner, John, was also present, Steven asked her why she had opened an account with EuropeFX and said that he wanted to understand her "goals" and her "needs" and what would "suit [her] the most". Ms Curtin confirmed with Steven that she had no previous experience with any kind of trading and that she worked in hospitality.
In my view, the evidence as a whole, including the transcripts of Ms Curtin's conversations with EuropeFX account managers, indicates that: to EuropeFX's knowledge, she had no prior knowledge of, or experience trading in, CFDs or Margin FX Contracts or like financial products; throughout the time that she traded with EuropeFX, she had an inadequate understanding of the operation of CFDs, Margin FX Contracts, basic trading concepts such as hedging, and the nature of the risks involved in trading in those financial products; the EuropeFX account managers with whom Ms Curtin mainly dealt did not give Ms Curtin any sensible or comprehendible explanations about any of those matters; Ms Curtin substantially relied on the advice and recommendations of the EuropeFX account managers with whom she dealt; the EuropeFX account managers fostered and encouraged Ms Curtin's reliance; and Ms Curtin was at times pressured to open positions and deposit further funds and actively dissuaded from closing her trading account.
I reject EuropeFX's submissions to the contrary, including: its submission to the effect that Ms Curtin had an adequate understanding of the risks involved in trading CFDs; its submission that Ms Curtin traded independently of the recommendations and advice she received from the EuropeFX account managers; and its submission that Ms Curtin was a willing participant in the market who traded independently. The evidence concerning Ms Curtin's circumstances and her engagement and trading with EuropeFX does not support those submissions.

[110]

David Grubb (EFX19)

Mr Grubb was 58 years old when he opened an account with EuropeFX. He was a retiree with no prior trading experience. He opened his account with an initial deposit of $500 on 17 July 2019. The total net loss he suffered as a result of trading with EuropeFX was $504,135.36.
Mr Grubb's account opening questionnaire recorded that: he was retired; his source of income was savings; his annual income was between $100,000 and $299,000; his liquid net worth was between $100,000 and $299,999; and he had no experience trading in securities, options, commodities, futures, CFDs or "OTC forex exchange".
The EuropeFX representative with whom Mr Grubb mainly dealt was Robbie. ASIC alleged that during his conversations with EuropeFX representatives, those representatives made 96 personal advice statements and 48 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Grubb open certain positions, including positions in accordance with indicators on third-party websites, that he adopt certain trading strategies, and that he deposit further funds in his trading account. EuropeFX admitted that it made two personal advice statements to Mr Grubb. The alleged misrepresentations, which are also considered in detail later, included that he could reduce risk by increasing the amount of money in his trading account.
I am satisfied from the evidence as a whole, including the transcripts of Mr Grubb's conversations with EuropeFX account managers, that: Mr Grubb had no prior knowledge of, or experience trading in, CFDs or Margin FX Contracts, or any similar financial products; the EuropeFX account managers with whom Mr Grubb dealt were readily aware of this lack of knowledge and expertise; throughout the time he traded with EuropeFX, Mr Grubb had no understanding of CFDs and Margin FX Contracts or the risks associated with trading in those products; it must have been readily apparent to Robbie, the account manager with whom Mr Grubb primarily dealt, that Mr Grubb did not understand much of what had been explained to him and that at times he appeared to believe that the trading was somehow automated; Mr Grubb relied almost entirely on the advice, recommendations and directions of the EuropeFX account managers with whom he dealt; and Mr Grubb was subjected to pressure to deposit further funds in his trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that Mr Grubb had an adequate understanding of CFDs and Margin FX Contracts; its submission that Mr Grubb traded independently of the recommendations of his EuropeFX account managers; and its submission that Mr Grubb was simply a willing participant in the market. In my view, those submissions are not supported by a fair consideration of the entirety of the evidence concerning Mr Grubb's circumstances and his engagement and trading with EuropeFX.

[111]

Ken Geering (EFX20)

Mr Geering was 71 years old when he opened his trading account with EuropeFX. He was retired, received a pension and had no relevant investment or trading experience. He made an initial deposit of $1,000 on 11 September 2018 and traded between late October and early December 2018. He deposited a total of $35,000 into his trading account. His total net loss from trading was $34,823.85.
Mr Geering's account opening questionnaire recorded that: he was retired; his source of funds was his pension; his annual income was between US$20,000 and $29,999; his liquid net worth was between US$300,000 and $1,000,000; and he had no trading experience in securities, options, commodities, futures, CFDs or "OTC forex exchange". In one of his first telephone conversations with a EuropeFX representative, Mr Geering was asked why he had opened an account with EuropeFX. Mr Geering told the representative that he was on a pension, did not have a "lot of dollars" and wanted to "create a bit of an income" or "income stream". He also told the representative that he knew nothing about trading, had "very little knowledge of the stock market", had previously lost money from "silly investments" and wanted to "try to get that money back". He also told EuropeFX representatives that he was having "financial struggles", that his health was not good and that he needed a lot of support.
The EuropeFX representatives with whom Mr Geering dealt included Ali, Daniel, Edward, Giovani, Eric and Benjamin. ASIC alleged that during Mr Geering's conversations with EuropeFX representatives, those representatives made 71 personal advice statements and 91 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Geering open certain positions, including positions based on information on third-party websites, that he deposit further funds and that he adopt certain trading strategies. EuropeFX ultimately admitted that its representatives made 12 personal advice statements to Mr Geering. The alleged misrepresentations, which are also considered later, included representations to the following effect: that a representative would create a "low risk plan" for Mr Geering; that depositing funds into his trading account was no riskier than depositing funds into a bank account; that it was reasonably likely that Mr Geering would generate specified profits from his trading; that further trading was likely to result in Mr Geering recovering losses from previous trades; and that he would be able to readily withdraw money from his trading account. EuropeFX ultimately admitted that its representatives made five false or misleading representations to Mr Geering.
It may readily be inferred and concluded from the evidence as a whole, including the transcripts of Mr Geering's conversations with EuropeFX account managers, that: EuropeFX representatives were aware of aspects of Mr Geering's personal and financial circumstances that made him vulnerable; EuropeFX was aware that Mr Geering had no prior experience in respect of trading in CFDs, Margin FX Contracts, or any like financial products; throughout the time he traded with EuropeFX, Mr Geering did not have any adequate understanding of the financial products that he was trading in, or any adequate appreciation of the nature and extent of the risks involved in trading them; Mr Geering was misled by EuropeFX representatives about the nature and extent of the risks involved in his trading; in particular, Mr Geering was led to believe that his trading account was like his bank account, and that his money was no more at risk with EuropeFX than it would be with a bank; Mr Geering was completely reliant on the advice and recommendations of the EuropeFX account managers; and EuropeFX representatives frequently pressured Mr Geering to trade and to deposit further funds into his trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that Mr Geering was not vulnerable or disadvantaged and had overcome his health issues and was ready to trade; its submission that Mr Geering had previous experience with risky investments and was adept at becoming aware of unscrupulous acting in financial markets; and its submission that Mr Geering traded independently and without influence from EuropeFX representatives. Those submissions are based on a highly selective account of the evidence and are not supported by a fair or balanced consideration of the evidence as a whole.

[112]

Nathan Lapham (EFX21)

Mr Lapham opened his trading account with EuropeFX with a deposit of $1,000 in mid-December 2018. He traded with EuropeFX between mid-December 2018 and mid-July 2019. He deposited a total of $106,000 into his trading account, though he was ultimately able to withdraw funds towards the end of his trading. He lost a total of $66,631.40 as a result of his trading.
Mr Lapham's account opening questionnaire recorded that: his annual income was between $100,000 and $299,999; his liquid net worth was between $100,000 and $299,999; and that he had no trading experience in securities, options, commodities, futures, CFDs or OTC forex exchange. Mr Lapham was made redundant and ceased being employed during the period he traded with EuropeFX.
The EuropeFX representative with whom Mr Lapham mainly dealt was Shaun, though he also had interactions with Victor, Steven and Edward. ASIC alleged that during his conversations with EuropeFX representatives, those representatives made 71 personal advice statements and 51 false or misleading representations. The personal advice statements, which are considered in detail later, included recommendations that Mr Lapham open certain positions, deposit further funds and adopt certain trading strategies. The alleged misrepresentations, which are also considered in detail later, included representations to the effect that it was likely that Mr Lapham would generate specified profits from his trading, and that further trading was likely to result in him recovering losses from previous trades. EuropeFX ultimately admitted that one of its representatives made one false or misleading representation to Mr Lapham.
It is apparent from the evidence as a whole, including the transcripts of Mr Lapham's conversations with EuropeFX account managers that: EuropeFX was aware that Mr Lapham had no prior knowledge of, or prior experience trading in, CFDs or Margin FX Contracts, or like financial products; throughout the time he traded with EuropeFX, Mr Lapham lacked any relevant or adequate knowledge or understanding of CFDs and Margin FX Contracts, and lacked any sound or adequate appreciation of the nature and extent of the risks involved in trading those products; Mr Lapham did not fully understand, and was given no reasonable or comprehendible explanation of, the specific products in which he was trading or the risks involved in that trading; Mr Lapham relied on the advice and recommendations of the EuropeFX account managers; EuropeFX representatives frequently recommended and often pushed Mr Lapham to open positions; EuropeFX representatives often made representations about what profits he might make from opening certain positions and encouraged him to pursue further trades to recover losses; and Mr Lapham was persuaded and pressured to deposit further funds into, and to not to withdraw funds from, his trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that, despite his obvious lack of relevant knowledge and experience, Mr Lapham was not a vulnerable trader, despite the fact that he had no prior knowledge of or experience in trading in CFDs or Margin FX Contracts; its submission that Mr Lapham was given adequate explanations about trading strategies like stop losses; and its submission that Mr Lapham made decisions concerning the opening and closing of trades in the absence of advice from his account managers. I am not persuaded that those submissions are supported by the evidence considered as a whole.

[113]

Adam Cartwright (EFX22)

Mr Cartwright was 31 years old and worked as a pharmacist when he opened his trading account with EuropeFX. Mr Cartwright opened his trading account with EuropeFX on about 12 November 2019 and made an initial deposit of $500. He deposited a total of $445,500. He traded with EuropeFX from 30 November 2018 to 14 March 2019. He lost a total of $436,567.85 as a result of his trading with EuropeFX.
Mr Cartwright's account opening questionnaire recorded that: his annual income was between $100,000 and $299,999; his liquid net worth was between $100,000 and $299,999; and he had no experience trading in securities, options, commodities, futures, CFDs or "OTX forex exchange". In one of his first conversations with a EuropeFX representative, the representative asked Mr Cartwright about his expectation in respect of his trading account. Mr Cartwright's reply indicated that he believed that his investment would not require any active participation or decision-making by him. He said, among other things, that he did not have the time to give his account his "full attention" and that he was hoping to just "put the money in and have it work" for him. The EuropeFX representative did little, if anything, to disabuse Mr Cartwright of his obviously erroneous understanding of what might be required of him were he to trade in risky financial products like CFDs. The EuropeFX representative asked Mr Cartwright a series of questions about his personal and financial circumstances, as well as his goals and what he wanted to achieve from his trading. Mr Cartwright indicated that he wanted "an additional passive income" of at least $1,000 per week. The representative replied that "people are making much more than $1,000 per week". Mr Cartwright told the representative that he hoped to diversify his investment portfolio, and that he his existing share portfolio was managed by someone else and was giving him a "conservative" return.
The EuropeFX representative with whom Mr Cartwright mainly dealt was Shaun, though he also spoke with Ray, Victor, Greg and Steven. ASIC alleged that during his conversations with EuropeFX representatives, those representatives made 120 personal advice statements and 97 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Cartwright open certain positions, deposit further funds and adopt certain trading strategies. EuropeFX ultimately admitted that its representatives made 24 personal advice statements to Mr Cartwright. The alleged misrepresentations, which are also considered later, included representations to the effect that: EuropeFX was licenced and regulated by ASIC and that its headquarters and main offices were in Sydney; it was reasonably likely that Mr Cartwright would make certain specified profits from his trading; EuropeFX mainly generated revenue from commissions; Mr Cartwright would be able to regularly withdraw funds from his trading account; and that further trading was likely to result in him recovering losses from previous trades. EuropeFX ultimately admitted that its representatives made five false or misleading representations to Mr Cartwright.
It may in my view readily be inferred and concluded from the evidence as a whole, including the transcripts of Mr Cartwright's conversations with EuropeFX account managers, that: Mr Cartwright had no prior knowledge or experience in respect of trading in CFDs or Margin FX Contracts; EuropeFX representatives were aware of Mr Cartwright's inexperience and lack of trading experience with those products; throughout the time he traded with EuropeFX, Mr Cartwright was not given any adequate explanation, and had an inadequate understanding, of those products or the nature and extent of the risks associated with trading in them; Mr Cartwright relied heavily on the advice and recommendations of the EuropeFX account managers; and Mr Cartwright was pressured to deposit further funds into his trading account, and was even encouraged to use borrowed funds in that regard. The evidence also indicates that the EuropeFX client relations department became aware that Mr Cartwright had suffered considerable distress and was even experiencing suicidal thoughts as a result of losses that he was incurring as a result of his trading, but his account managers nevertheless continued to encourage and pressure Mr Cartwright to trade.
I reject EuropeFX's submissions to the contrary, including: its submission that, despite his obvious lack of relevant knowledge and experience, Mr Cartwright was not a vulnerable trader; its submission that Mr Cartwright showed an awareness of the key risks in trading in CFDs; its submission that Mr Cartwright traded independently and without influence from EuropeFX account managers; its submission that Mr Cartwright was not pressured and was a willing participant in the market; and its submission that it was reasonable for EuropeFX representatives to be sceptical about Mr Cartwright's mental health issues which arose as a result of his trading. In my view, those submissions are unsupported by the evidence, considered fairly and as a whole. Indeed, they are largely inconsistent with EuropFX's admission that its representatives made numerous personal advice statements and false or misleading representations to Mr Cartwright.

[114]

James Chircop (EFX 23)

When he opened his trading account with EuropeFX on 4 September 2019, Mr Chircop was in his 30s and was running a take-away food shop. He had no relevant trading experience. He made an initial deposit of $1,500. His deposits eventually totalled $49,000. He made a loss of $47,590.30 as a result of his trading.
Mr Chircop's account opening questionnaire recorded that: his annual income was between $100,000 and $299,000; his liquid net worth was between $100,000 and $299,999; and that he had 1 to 5 years' experience in trading securities, options, commodities, futures, CFDs and "OTC forex exchange". The statement in the questionnaire concerning Mr Chircop's trading experience appears not to have accurately reflected his actual trading experience. In his first conversation with a EuropeFX representative, Mr Chircop said that he had no trading experience other than that he had "done a bit of stocks" for about six months. The representative asked Mr Chircop about his goals and what he was seeking to accomplish from his trading with EuropeFX. Mr Chircop said that his goal was to "build some more funds" and "bring in" about $5,000 per month.
The EuropeFX representatives with whom Mr Chircop primarily dealt were Allan, Steven and Emre. ASIC alleged that, during his conversations with EuropeFX representatives, those representatives made 40 personal advice statements and 29 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Mr Chircop should deposit further funds in his trading account and adopt certain trading strategies. The alleged misrepresentations, which are also considered later, included that Mr Chircop could make specified profits from his trading and that he could make more money from trading than having his money in a bank account. EuropeFX admitted that one of its representatives made one false or misleading representation to Mr Chircop.
I am satisfied from the evidence as a whole, including the transcripts of Mr Chircop's conversations with EuropeFX account managers, that: Mr Chircop had no prior knowledge or experience in respect of trading in derivatives like CFDs or Margin FX Contracts; throughout the period that he traded with EuropeFX, Mr Chircop had an inadequate appreciation of the nature of the risks associated with trading in those products; the EuropeFX account managers with whom Mr Chircop dealt failed to give him an adequate explanation of the nature and extent of the risks involved in trading in leveraged derivatives like CFDs and Margin FX Contracts; Mr Chircop relied on the advice, recommendations and directions of the EuropeFX account managers with whom he dealt; and Mr Chircop was subjected to pressure to deposit funds into his trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that Mr Chircop was not vulnerable or at a disadvantage because he had relevant trading experience; its submission that Mr Chircop had an adequate understanding in respect of trading risks because he understood the concept of hedging; and its submission that Mr Chircop was not pressured and that he traded independently of the recommendations of his EuropeFX account managers. I am not persuaded that those submissions are supported by the evidence considered as a whole.

[115]

Jessica Green (EFX24)

Ms Green was 36 years old when she opened her trading account with EuropeFX. She had no relevant trading or investment experience.
Ms Green made an initial deposit of $500 on 18 June 2019. She traded with EuropeFX between 20 June 2019 and 29 July 2019. She deposited a total of $29,600 and ultimately lost a total of $28,908.63 from her trading.
Ms Green's account opening questionnaire recorded that: she was employed in financial services; her income was between $30,000 and $99,999; her liquid net worth was between $20,000 and $29,999; and she had no trading experience in securities, commodities, futures, CFDs or "OTC forex exchange". Shortly after she opened her account, Ms Green had a conversation with a EuropeFX representative during which the representative asked her several questions about her personal and financial circumstances. Ms Green was also asked why she had opened an account with EuropeFX and what she wanted to achieve. She said that she was looking at doing something more with her money and that her long-term goal was to pay off her mortgage, the balance of which was $300,000. The account manager acknowledged that Ms Green did not have "any kind of experience", but said that "everything is possible" in the market, that he would "guide [her] step by step through the whole process", and that he was "there to make sure that [she] will not do any kinds of mistakes by [herself] and to help [her] hopefully to reach [her] goal".
The account manager with whom Ms Green mainly communicated was Robbie. ASIC alleged that 28 personal advice statements and 19 false or misleading representations were made to Ms Green during her communications with EuropeFX representatives. The alleged misrepresentations, some of which are considered later, included: that a EuropeFX account manager would develop a plan for Ms Green; that Ms Green was likely to get a higher return with EuropeFX than she would with investment in securities or with money in the bank; that Ms Green was likely to make specified profits from her trading; and representations about the risk of depositing money into her trading account with EuropeFX.
In my view, the evidence concerning Ms Green's engagement with EuropeFX, considered as a whole, supports the following findings: Ms Green had no relevant trading or investment experience prior to opening her account with EuropeFX; Ms Green did not have an adequate understanding of CFDs and Margin FX Contracts or the risks associated with trading in such products throughout the period she traded with EuropeFX; EuropeFX did not give Ms Green any sensible or comprehendible explanation of CFDs and Margin FX Contracts, or concepts such as leverage and margin, or the nature and extent of the risks involved in trading leveraged derivatives; Ms Green's lack of experience and inadequate understanding or appreciation of the risks associated with her trading was, or must have been, readily apparent to EuropeFX; Ms Green relied on the advice and recommendations of the EuropeFX account managers with whom she dealt; and Ms Green was often persuaded and pressured to open positions and deposit further funds into her trading account.
I reject EuropeFX's submissions to the contrary, including: its submission that, despite her lack of knowledge and experience in respect of trading in derivatives, Ms Green was neither vulnerable nor disadvantaged because she was employed in the financial services industry; its submission that Ms Green understood the risks involved in CFD trading; and its submission that Ms Green was a willing and active participant who traded independently of the advice and recommendations that she received from the EuropeFX account managers. In my view, EuropeFX's submissions concerning Ms Green are not supported by a fair or balanced consideration of the evidence as a whole.

[116]

Ariel Larsen (EFX25)

Ms Larsen was 27 years old when, on 29 May 2019, she opened her trading account with EuropeFX with an initial deposit of $500. She was a self-employed beautician who had no prior knowledge or experience with respect to trading CFDs or Margin FX Contracts. Ms Larsen traded with EuropeFX between 6 June and 11 July 2019. Ms Larsen's brother, Mr Larsen, also traded using Ms Larsen' account. They deposited a total of $15,678 into the trading account and lost $14,443.11 as a result of their trading.
Ms Larsen's account opening questionnaire recorded that: she was self-employed; her source of funds was "business"; her annual income was less than $10,000; her liquid net worth was between $20,000 and $29,999; and she had no trading experience in securities, commodities, futures, CFDs or OTC forex exchange.
Ms Larsen confirmed that she had no prior trading experience, and that this was her "first time", during her first telephone conversation with a EuropeFX representative. During that conversation, the EuropeFX representative asked Ms Larsen a detailed series of questions about her personal and financial situation, as well as her goals. The representative told Ms Larsen that she was going to "build" Ms Larsen a "business plan" according to her financial situation and financial goals. In another call, Ms Larsen told a EuropeFX representative that she had only $200 in her bank account, but that she had $10,000 in a friend's bank account that was the money she received from the settlement of a medical negligence case arising from the death of her father. Ms Larsen said that she was "scared" and "paranoid" about using that money because it was her "dad's money and he died for that".
Mr Larsen spoke with the same EuropeFX representative when trading using Ms Larsen's account. He was 24 years old at the time and was unemployed.
Ms Larsen and her brother primarily communicated with a EuropeFX account manager named Anastasia. ASIC alleged that during those communications the EuropeFX account manager made 50 personal advice statements and 39 false or misleading representations. The personal advice statements, which are considered later, included recommendations that Ms Larsen and her brother open certain positions, including recommendations based on information obtained from third-party websites, and recommendations that they deposit further funds and adopt certain trading strategies. The alleged misrepresentations, which are also considered later, included: that the EuropeFX representative would develop a plan to meet Ms Larsen's goals or objectives; that Ms Larsen would be able to readily withdraw funds from her account; and representations concerning the risks associated with her trading. EuropeFX admitted that its representative made one false or misleading statement to Ms Larsen.
The evidence concerning Ms Larsen's engagement with EuropeFX, considered as a whole, supports the following findings: Ms Larsen had no relevant trading or investment experience prior to opening her account with EuropeFX; at no point did Ms Larsen have an adequate understanding of CFDs and Margin FX Contracts, or an adequate appreciation of the nature and extent of the risks associated with trading in such products; EuropeFX never gave Ms Larsen a sensible or comprehendible explanation of CFDs and Margin FX Contracts and did not at any point give Ms Larsen an adequate explanation of the risks inherent in trading leveraged derivatives; Ms Larsen's lack of experience and inadequate understanding or appreciation of the risks associated with her trading were, or must have been, readily apparent to EuropeFX; Ms Larsen relied on the advice and recommendations of the EuropeFX account manager with whom she dealt; and Ms Larsen was pressured to deposit further funds, including borrowed funds, into her trading account. The evidence also supports similar findings in respect of Ms Larsen's brother.
I reject EuropeFX's submissions to the contrary, including: its submission that, despite her lack of knowledge and experience in respect of trading in derivatives, Ms Larsen had an adequate understanding of the risks involved in CFD trading; its submissions concerning Ms Larsen's appreciation of risk based on the reading of risk disclosures or disclaimers; and its submission that Ms Larsen was a willing participant in the market who traded independently of the advice and recommendations that she received from the EuropeFX account managers. I am not persuaded or satisfied that EuropeFX's submissions concerning Ms Larsen are supported the evidence considered fairly and as a whole.

[117]

Patrick Hillier (EFX26)

Mr Hillier opened his trading account with EuropeFX on 19 December 2018 with an initial deposit of $350. He traded with EuropeFX from early January to mid-February 2019. He made a net loss of $15,486 as a result of his trading. It would appear that Mr Hillier transferred all of his available money into his trading account and was relying on his weekly paycheques to make deposits.
The questionnaire that was completed as part of Mr Hillier's account opening procedure recorded that Mr Hillier had an annual income between US$30,000 to $99,999, a liquid net worth of US$20,000 to $29,999, and had had a number of years' experience trading in securities, options, commodities, futures, CFDs and "OTX forex exchange". It is, however, clear from later conversations between Mr Hillier and EuropeFX representatives that this was not a true reflection of his trading experience. Indeed, he later told a representative that he had no trading experience.
It would appear from the terms of Mr Hillier's first conversation with a EuropeFX representative on 19 December 2018 that Mr Hiller first came to engage with EuropeFX because he had signed up for a "Bitcoin trader account". During that conversation, Mr Hillier told the representative that he was 34 years old, he worked as an electrician, and his monthly income was more than $1,300. In a conversation with a different representative in early January 2019, the representative asked Mr Hillier a series of questions about his personal and financial situation. Those questions included why Mr Hillier had opened his account and what his goal or target was. Mr Hillier told the representative that he opened his account because he saw an advertisement on the internet and that his goal was to double his money in three months.
The EuropeFX account manager with whom Mr Hillier mainly spoke was Francis, though he also spoke with Greg and Julian. ASIC alleged that EuropeFX representatives made 97 personal advice statements and 40 false or misleading representations to Mr Hillier during their conversations with Mr Hillier. The personal advice statements, which are considered later, included: recommendations that Mr Hillier open certain positions, including recommendations based on information obtained from third-party websites; recommendations that Mr Hillier deposit further funds; and recommendations that Mr Hillier adopt certain trading strategies. EuropeFX ultimately admitted that its representatives made 13 personal advice statements to Mr Hillier. The alleged misrepresentations, which are also considered later, included that Mr Hillier was reasonably likely to derive specified profits from his trading, and that positions that moved against him were only temporary losses and it was reasonably likely that they would recover and become profitable.
I am satisfied from the evidence as a whole, including the transcripts of Mr Hillier's conversations with EuropeFX account managers, that: Mr Hillier had no prior knowledge or experience in respect of trading in CFDs or Margin FX Contracts; Mr Hillier had an inadequate understanding in respect of the operation of CFDs and Margin FX Contracts and an inadequate appreciation of the nature of the risks associated with trading in those products; Mr Hillier was reliant on the advice, recommendations and directions he received from the EuropeFX account managers with whom he dealt; and that Mr Hillier was subjected to undue pressure to invest and deposit funds into his trading account, including by reference to unfair promotions, such as discounted commissions.
I reject EuropeFX's submissions to the contrary, including: its submission that Mr Hillier was not vulnerable or at a disadvantage, despite the fact that he had no prior relevant knowledge or experience in respect of trading; that Mr Hillier was given adequate explanations about CFD trading and had an adequate understanding of trading and trading risks; and its submission that Mr Hillier was able to trade independently of the recommendations of his EuropeFX account managers. I am not persuaded that those submissions are supported by the evidence considered as a whole.

[118]

Zina Sofer (EFX27)

Ms Sofer was 59 years old and retired when she opened her account with EuropeFX on 12 April 2019 with an opening deposit of $3,500. She had no trading experience in respect of CFDs or Margin FX Contracts. She traded with EuropeFX from 15 April 2019 to 23 May 2019. She deposited a total of $124,000 into her trading account, though she was ultimately able to withdraw $59,682.92. Her net loss from trading was $64,337.08.
There is evidence to suggest that Ms Sofer came to engage with EuropeFX as a result of a false or misleading advertisement. In an email complaint that she sent to EuropeFX shortly after she closed her account, Ms Sofer recorded that she opened her account after seeing a Facebook advertisement which suggested that there had been a story on the television show, "The Project", concerning the "richest man in Australia" who was "only trading foreign exchange with EuropeFX" which was "how he is making his millions". Ms Sofer noted that she subsequently found out that the advertisement was a "hoax" because The Project had never aired any such story. I am not persuaded that those contemporaneous assertions by Ms Sofer were unreliable in any material respect.
Ms Sofer's account opening questionnaire recorded that: she was self-employed; her source of funds was "Super and freelance photographer"; her annual income was between $20,000 and $29,999; her liquid net worth was between $300,000 and $1,000,000; she had 6 to 10 years' experience trading in securities, 1 to 5 years' experience trading in commodities, and no experience trading in futures, CFDs or "OTC forex exchange". Shortly after she opened her trading account, Ms Sofer had a conversation with a EuropeFX representative during which the account manager asked her whether she had any "specific goal". Ms Sofer confirmed to the representative that she had retired, and that photography was "more a hobby than a business". She also said that the money she would invest was a lump-sum payment that her mother had received as a Holocaust survivor and that she was the custodian of that money. The EuropeFX representative acknowledged that Ms Sofer was a "beginner" who still needed to learn.
The account manager with whom Ms Sofer primarily dealt was Scott, however she also had interactions with EuropeFX representatives named Edward, Leo, Elay and David. ASIC alleged that 59 personal advice statements and 33 false or misleading representations were made to Ms Sofer during those communications. The personal advice statements, which are considered in more detail later, included recommendations that she open certain positions and adopt certain trading strategies. EuropeFX ultimately admitted that its representatives made one personal advice statement to Ms Sofer. The alleged misrepresentations, which are also considered in more detail later, included that Ms Sofer's open positions that had moved against her were only temporary losses and that there was a reasonable prospect that those positions would recover and become profitable.
I am satisfied that the evidence as a whole, including the transcripts of Ms Sofer's conversations with EuropeFX account managers, supports the following findings: to EuropeFX's knowledge, Ms Sofer had no prior experience trading in CFDs or Margin FX Contracts or like financial products; throughout the time that she traded with EuropeFX, she had an inadequate understanding of the operation of CFDs, Margin FX Contracts and an inadequate appreciation of the nature and extent of the risks involved in trading in those financial products; Ms Sofer substantially relied on the advice and recommendations of the EuropeFX account managers with whom she dealt; the EuropeFX account managers encouraged Ms Sofer's reliance; and Ms Sofer was at times pressured to leave losing trades open and to deposit further funds.
I reject EuropeFX's submissions to the contrary, including: its submission to the effect that Ms Sofer was not disadvantaged in respect of her trading and dealings with EuropeFX; its submission that Ms Sofer had an adequate understanding of the risks involved in trading CFDs; its submission that there was no undue pressure placed on Ms Sofer and no use of unfair tactics; and its submission that Ms Sofer traded independently of the recommendations and advice she received from the EuropeFX account managers. In my view, the evidence concerning Ms Sofer's engagement with EuropeFX does not support those submissions.

[119]

Margaret Scott (EFX28)

Ms Scott was 59 years old when she opened her trading account with EuropeFX on 29 January 2019 with an initial deposit of $350. She had no relevant trading or investment experience in respect of CFDs and Margin FX Contracts. She traded with EuropeFX between 30 January 2019 and 15 May 2019. She ultimately lost a total of $81,689.31 from her trading.
Ms Scott's account opening questionnaire recorded that: she was unemployed; her income was between $10,000 and $19,999; her liquid net worth was between $20,000 and $29,999; and she had she had 1 to 5 years' experience trading futures and 6 to 10 years' experience trading in securities, but no trading experience in options, commodities, CFDs or "OTC forex exchange". The statement concerning Ms Scott's experience trading in futures may not have been entirely accurate. Ms Scott later told a EuropeFX representative that her trading experience was limited to shares.
Shortly after she opened her account, Ms Scott had a conversation with a EuropeFX representative named Greg. During that conversation, Greg asked Ms Scott some questions about her personal and financial situation. Ms Scott said that she had been a financial planner and that she was working as a bookkeeper. The following day, Ms Scott had a conversation with another EuropeFX representative, Leo, during which she indicated that she had previously traded shares. In response to a question about her reason for opening the account, Ms Scott indicated that she was "coming up close to retirement", but that she did not have "a lot to go into retirement with" because her house had been damaged by a flood and "the insurance wouldn't pay".
The account manager with whom Ms Scott mainly communicated was Leo. ASIC alleged that 114 personal advice statements and 64 false or misleading representations were made to Ms Scott during those communications. The personal advice statements, which are considered later, included: recommendations that Ms Scott open certain positions; recommendations that she open positions on the basis of information on third party websites; recommendations that she adopt certain trading strategies; and recommendations that she deposit further funds into her trading account. EuropeFX ultimately admitted that its representatives made 21 personal advice statements to Ms Scott. The alleged misrepresentations, which are considered later, included: that EuropeFX was licenced and regulated by ASIC; that Ms Scott was likely to make specified profits from opening certain positions; that Ms Scott would be readily able to withdraw funds from her trading account; that positions that had moved against her only represented temporary losses and there was a reasonable prospect that the positions would become profitable; and representations concerning the risks associated with depositing money into her trading account. EuropeFX ultimately admitted that its representatives made five false or misleading representations to Ms Scott.
The evidence concerning Ms Scott's engagement with EuropeFX, considered as a whole, supports the following findings: Ms Scott had no previous experience in respect of trading in financial products like CFDs and Margin FX Contracts; throughout the period she traded with EuropeFX, Ms Scott had an inadequate understanding of CFDs and Margin FX Contracts, and an inadequate appreciation of the risks involved in trading those products; despite having some experience in trading shares and some knowledge about other securities and financial products, Ms Scott was nevertheless significantly reliant on the advice and recommendations of the EuropeFX account managers, who frequently guided and directed Ms Scott in relation to the opening or closing of certain positions or the adoption of certain trading strategies; the EuropeFX account managers fostered and encouraged Ms Scott's reliance on them; and Ms Scott was often persuaded and pressured to open positions and deposit further funds into her trading account. While Ms Scott's knowledge of some of the concepts underlying CFD trading no doubt improved over time as she continued to trade, as did her appreciation of the risks involved, I am nonetheless satisfied that the evidence revealed a degree of naiveté that was exploited by her EuropeFX account managers.
I reject EuropeFX's submissions to the contrary, including: its submission that, despite the fact that she had no prior CFD trading experience, Ms Scott was vulnerable in any relevant respect because she had worked as a financial planner and had prior experience investing in other financial products; its submission that Ms Scott traded independently of those account managers because she opened and closed many positions while not on the telephone with a EuropeFX representative; and its submission that Ms Scott was a willing participant in the market and was not subjected to any undue pressure. While it may be accepted that there was some evidence to suggest that Ms Scott was more knowledgeable and perhaps less reliant than most of the other EFX30, I am nevertheless not persuaded that EuropeFX's submissions concerning Ms Scott are supported by a fair consideration of the evidence as a whole.

[120]

Mark Dand (EFX29)

Mr Dand opened his EuropeFX account on 19 December 2018 with an initial deposit of $500. He traded with EuropeFX for a relatively short period - from 29 January 2019 to 11 February 2019. His net loss from that short period of trading was $26,568.77.
Mr Dand's account opening questionnaire recorded that: he was employed in financial services; his annual income was between US$30,000 and $99,000; his liquid net worth was between US$100,000 and $299,999; and he had no experience in respect of securities, options, commodities, futures, CFDs or "OTC forex exchange".
Shortly after he opened his account, Mr Dand had a conversation with a EuropeFX representative during which the representative asked Mr Dand about his financial circumstances and said that he wanted to know what goals Mr Dand had for himself. The representative also asked Mr Dand whether he was a conservative trader, or an aggressive trader or gambler. Mr Dand said that he was not a gambler, but that he would "rather go high risk to a certain extent" and "have a crack", though that depended on how much he was willing to invest.
ASIC alleged that EuropeFX representatives made 7 personal advice statements and 9 false or misleading representations to Mr Dand during the period in which he engaged with EuropeFX. EuropeFX admitted that one of its representatives made one personal advice statement to Mr Dand.
Despite Mr Dand's employment in some capacity in the financial services industry, and his statement about going "high risk" and having a "crack" when he first spoke to a EuropeFX account manager, in my view the evidence as a whole concerning Mr Dand's engagement with EuropeFX supports the following findings: Mr Dand had no prior knowledge or experience in respect of trading in CFDs and Margin FX Contracts; Mr Dand did not have a sound or adequate understanding of the financial products in which he was trading, or an adequate appreciation of the nature and extent of the risk involved in trading in those products; EuropeFX representatives did not give Mr Dand any sensible or comprehendible explanations about CFDs and Margin FX Contracts, or the nature and extent of the risks inherent in trading in those products; Mr Dand essentially relied on the advice and recommendations of the EuropeFX account managers; and Mr Dand was on occasion subjected to unfair and undue pressure to invest and deposit funds into his trading account.
It should be noted in this context that a contemporaneous internal "quality control" report prepared by EuropeFX identified the following instances of misconduct by a EuropeFX account manager during a telephone conversation between that account manager and Mr Dand on 6 February 2019: "promising profits"; "[i]nvestment advice, promising profits, psychological pressure and aggressive sales"; "misleading information, psychological pressure and aggressive sales promising profits"; and "investment advice, misleading information". EuropeFX did not produce a recording or transcript of the telephone call that was the subject of that report.
I reject EuropeFX's submissions which run counter to the findings I have made, including: its submission that, despite his lack of any experience in trading in CFDs and Margin FX Contracts, Mr Dand was not vulnerable or at any disadvantage in respect of his dealings with EuropeFX; its submission to the effect that Mr Dand had an adequate understanding of the risks associated with trading in CFDs and Margin FX Contracts; its submission that Mr Dand traded independently of the recommendations and advice that he received from the EuropeFX account managers; and its submission that EuropeFX did not subject Mr Dand to any undue pressure. I am unpersuaded that EuropeFX's submissions are supported by the evidence considered as a whole.

[121]

Joe Costa (EFX30)

Mr Costa opened his EuropeFX account on 28 March 2019 with an initial deposit of $1,000. He deposited a total of $14,000 and opened four trading positions between 3 April and 17 April 2019. His net loss from that short period of trading was $11,923.55.
Mr Costa's account opening questionnaire recorded that: his annual income was between $30,000 and $99,999; his liquid net worth was $100,000 and $299,999; and he had no experience in respect of securities, options, commodities, futures, CFDs or "OTC forex exchange".
Mr Costa had a telephone conversation with a EuropeFX representative, Robbie, on the day after he opened his trading account. Robbie asked Mr Costa a series of questions about his personal and financial situation and circumstances. Mr Costa revealed that he was 54 years old, he was a music teacher, and that he had a little, but not much, experience in respect of shares and property. It is readily apparent, and must have been apparent to Robbie, that Mr Costa had very little, if any, knowledge about CFDs and Margin FX Contracts or the risks associated with trading in those products. Among other things, Mr Costa said to Robbie: "I don't know what I have got myself into"; and "do I have to physically do things or does it do it automatically" - to which Robbie responded: "[t]his is why first of all you're not going to do this by yourself, and this is why I'll guide you step-by-step through the whole process to make sure that you're not doing any of kind of mistakes"; "I will teach you how to open a trade" and "I will show you everything". Robbie also asked Mr Costa if he had "any specific goal" and Mr Costa confirmed that his goals included making some extra income and paying off his mortgage.
The EuropeFX account manager with whom Mr Costa mainly dealt was Robbie, though he also had some conversations with Leo. ASIC alleged that, despite the very short period during which Mr Costa traded with EuropeFX, EuropeFX representatives made 44 personal advice statements and 67 false or misleading representations to Mr Costa. The personal advice statements included recommendations that Mr Costa open certain positions and deposit further funds to his trading account. EuropeFX ultimately admitted that its representatives made seven personal advice statements to Mr Costa. The alleged misrepresentations included representations that: EuropeFX's main office was in Sydney; EuropeFX was regulated by ASIC; Mr Costa was reasonably likely to derive certain specified profits from his trading; Mr Costa would earn more from investing with EuropeFX than he would leaving his money in a bank account; Mr Costa could easily withdraw money from his trading account; and representations about the risks associated with depositing money in his trading account.
I am satisfied from the evidence as a whole, including the transcripts of Mr Costa's conversations with EuropeFX account managers, that: Mr Costa had no prior knowledge of, or experience trading in, CFDs, Margin FX Contracts or any similar financial products; throughout the time he traded with EuropeFX, Mr Costa had no understanding of CFDs and Margin FX Contracts or the risks associated with trading in those products; the account managers with whom Mr Costa primarily dealt must have been aware that he did not have any sound understanding of the financial products in which he was trading, though they did little, if anything, to remedy that situation; Mr Costa relied on the advice and recommendations of the EuropeFX account managers with whom he dealt and essentially followed their directions; and Mr Costa was subjected to pressure to deposit further funds in his trading account.

[122]

Summary of findings and conclusions in respect of the EFX22

The findings that have been made concerning the individual circumstances and engagement and trading experience of the EFX22 are in many respects very similar. That is because, for the most part, the evidence concerning their dealings with EuropeFX was very similar. There are several common themes.
First, prior to engaging and trading with EuropeFX, each of the EFX22 either had no, or very little, relevant knowledge of, or experience trading in, any type of financial products, or at least no knowledge of, or experience in trading, in CFDs, Margin FX Contracts or any similar financial products. In that respect, each of the EFX22 was relevantly vulnerable in the context of their engagement and trading with EuropeFX, at least unless and until they were given appropriate information and explanations about the nature of the financial products in which they were going to trade and the nature and extent of the risks involved in trading in those products.
Second, the evidence, mainly in the form of the transcripts of the telephone calls between the EFX22 and EuropeFX representatives, indicated that, on the whole, the EFX22 were not given reasonable, comprehendible and appropriate information and explanations about the nature of the financial products in which they were going to trade and the nature and extent of the risks involved in trading in those products. To the extent that the EuropeFX account managers gave the EFX22 information and explanations about CFDs and Margin FX Contracts, those explanations tended to be simplistic, superficial and deficient. The same can be said with regard to any explanations that the EuropeFX account managers gave the EFX22 concerning important concepts such as leverage and margin. It is difficult to see how an inexperienced trader could fully appreciate the nature and extent of the risks involved in trading in CFDs and Margin FX Contracts without a sound understanding of those concepts. Similarly, to the extent that EuropeFX account managers gave the EFX22 any comprehendible explanations concerning the nature and extent of the risks inherent in trading in CFDs and Margin FX Contracts, those explanations were deficient and tended to downplay and even obscure the real risks.
Third, it followed that, almost without exception, each of the EFX22 had an inadequate understanding of CFDs and Margin FX Contracts, and an inadequate appreciation of the nature and extent of the risks inherent in trading in those products throughout the period that they each traded with EuropeFX. Some of the EFX22 who traded for longer periods may have acquired some basic knowledge or understanding of CFDs and Margin FX Contracts, as well as concepts such as margin, as they continued to trade. Likewise, some of the EFX22 no doubt eventually came to appreciate that their trading was very risky, though usually only when it was essentially too late and their positions turned against them, and when they were continually pressured to deposit further funds to prop up their margin. That was, however, hardly an appropriate substitute for having been given appropriate information and explanations at the outset of their trading.
Fourth, each of the EFX22 relied heavily on the EuropeFX account managers with whom they dealt. That was hardly surprising given their relative ignorance of the financial products in which they were trading and the concepts that it was necessary for them to understand for them to be able to trade independently. It was also hardly surprising given that the EuropeFX account managers regularly peppered them with advice, recommendations and instructions about positions that they should open or close, including by reference to information which was supposedly on third-party websites, trading strategies that they should employ, and amounts that they should or must deposit. It may also be inferred that the EuropeFX account managers fostered and encouraged reliance on the part of their customers. The account managers regularly told their customers that they, the customers, were not on their own and that they, the account managers, would teach and guide them in relation to their trading. In some instances, the account managers actively cautioned their customers not to trade on their own.
EuropeFX relied on schedules in relation to some of the EFX22 that purported to record the trades carried out while the customer was not on the telephone with an account manager. Close consideration of those schedules, along with the transcripts, tends to indicate that many of the trades referred to in the schedules were trades effected in reliance on advice and recommendations previously given by the account managers, trades effected pursuant to a trading strategy recommended by the account managers, or trades effected very shortly after a telephone conversation with an account manager ended. I do not accept that all of the trades included in the schedules represented genuinely independent trades, in the sense that they were trades carried out independently of any advice or recommendation by an account manager, or as a result of the independent judgment of the customer.
Fifth, each of the EFX22 was, to a greater or lesser degree, subject to undue pressure by a EuropeFX account manager to open positions, or to deposit further funds into their trading accounts. Sometimes the pressure was subtle or indirect, such as when account managers referred to information on third-party websites which they said gave the customer profit opportunities that were too good to miss. The tactic employed by the case managers in that regard involved the exploitation of the customers' understandable fear of missing out. That sort of indirect or subtle pressure was regularly employed. Sometimes, however, the pressure was blunter and more direct, particularly when the account manager told the customer that they would need to deposit further funds into their trading account because their margin was dangerously low, or because a further deposit was supposedly required to ensure adequate "risk management". It should be noted in this context that many of the personal advice statements admitted by EuropeFX involved recommendations to a customer to deposit further funds into their trading account.
Sixth, each of the EFX22 ultimately sustained significant losses as a result of their trading with EuropeFX. Given their inexperience and lack of knowledge and understanding concerning the financial products in question and the risks involved in trading in them, those losses were reasonably foreseeable. Indeed, they were almost inevitable.

[124]

Mr Parry

Mr Parry was a customer, or at least prospective customer of EuropeFX, though he was not one of the EFX8 or the EFX22. He opened a trading account with EuropeFX and paid a deposit, but ultimately did not trade and eventually cancelled his account. His deposit was eventually refunded. His evidence was of some relevance to ASIC's allegation, as part of its systemic unconscionability case, that customers were lured into contacting EuropeFX by online material which promoted automatic trading in Bitcoin or cryptocurrency.
Mr Parry's evidence may be shortly summarised. On 30 July 2019, he received an email, purportedly from Andrew Forrest, which attached an article, purportedly published or authored by ABC News, which was headed: "SPECIAL REPORT: Andrew Forrest's Latest Investment Has Experts in Awe And Big Banks Terrified". The article, in summary, promoted a cryptocurrency auto-trading platform called "Bitcoin Future". Mr Parry clicked on a link in the article which took him to another website. He entered his name and contact details in an online form on that webpage. Shortly thereafter, he received a telephone call from someone who identified himself as a representative of EuropeFX. While speaking with that person, Mr Parry received an email from EuropeFX which provided login details and a link to the EuropeFX website. Mr Parry entered some personal details and paid a deposit of $500 by credit card. The EuropeFX officer arranged an appointment for Mr Parry to speak with a "trader" the following day.
As events transpired, Mr Parry became suspicious and decided to cancel his EuropeFX account and withdraw his deposit. After numerous telephone calls and emails with EuropeFX, he eventually received his deposit back some weeks later. Mr Parry prepared a contemporaneous document which recorded, among other things, his receipt of the original cryptocurrency email and his subsequent engagement with EuropeFX.
EuropeFX submitted that Mr Parry was an unreliable witness whose evidence should be rejected. It pilloried him and characterised him as an "officious bystander" who acted as a "caped crusader". It contended that Mr Parry's recollection was poor and that his contemporaneous record was "fallible". I reject those submissions. Mr Parry presented as a frank, honest and credible witness. Nothing in EuropeFX's cross-examination of Mr Parry caused me to doubt his credibility or the honesty and reliability of his evidence. EuropeFX's criticisms of Mr Parry and his contemporaneous report have no merit and there is no sound reason to doubt the reliability of his evidence, including his contemporaneous report.

[125]

Evidence of "quality control" officers

As noted earlier, Ms Ajaz and Mr Liu were employed as "quality control" officers at EuropeFX. Their evidence was mainly relevant to ASIC's systemic unconscionability case against EuropeFX.
Ms Ajaz commenced her employment with EuropeFX in April 2019. She had no real experience in respect of trading in CFDs. Her role and responsibilities were to randomly listen to recorded conversations between EuropeFX "retention officers" in Israel and EuropeFX customers for the purpose of identifying any misconduct. The retention officers were the EuropeFX representatives who frequently interacted with customers in respect of their trading. While Ms Ajaz did not receive any formal training, she was given a copy of USG's "Compliance Guide". That document outlined, among other things, what could, and what could or should not, be said to customers and set out the monitoring procedure.
The "Compliance Guide" identified and characterised the following conduct as "medium wrongdoing": provision of misleading information to clients; misrepresentations to clients with regards to the profit potential without providing the client with the necessary warning; and aggressive sales. It identified and characterised the following conduct as "serious wrongdoing": aggressive sales (psychological pressure on clients to deposit money); investment advice or return guarantee; and use of team viewer.
Ms Ajaz was supervised by Mr Martin. She prepared daily call monitoring reports in which she identified misconduct by EuropeFX officers. She graded and categorised that misconduct. The categories of misconduct which she graded as serious included: agents pressuring customers to deposit; agents guaranteeing profits; agents failing to read customers the risk disclaimer; and agents permitting customers to use borrowed funds to trade without warning the customer that EuropeFX did not recommend the use of superannuation or borrowed funds for trading.
ASIC tendered, through Ms Ajaz, many of her daily call monitoring reports. It is pertinent to give some examples of the sort of misconduct that Ms Ajaz recorded in her reports.
In her daily call monitoring report in respect of calls made on 16 July 2019, Ms Ajaz identified, among other things, the following conduct by an account manager named Francis which she, Ms Ajaz, characterised as serious misconduct: Client said no money to put in more has bills to pay then Francis still started saying going for big contracts, and said he doesn't know how client cannot call him after this progress and not take big contract with what's happening on the market, potential profits of more than $9K on 1 full contract. Client said he understand but his cash flow has been interrupted business wise - Francis still went ahead that client makes money. Client still said dont [sic] have money. Theres a push for client to deposit when client been saying his cash flow is already affected by his business. … Try to come up money today, for example credit card - pushing client to deposit, client said he has no credit card, said stop giving him excuses, said he's sure can come up with $5k, $3k, etc -really hard on pushing client to deposit
She also identified, among other things, the following misconduct: "Why not make 30 contracts, look at the potential" "You can add funds to trade with 30 contracts or at least 20 contracts" (giving personal advice)
In her daily monitoring report for 22 July 2019, Ms Ajaz identified the following misconduct: Client no experience in trading. Asked client about his investments, properties, mortgage, credit card limits, life expenses a month. "Every client is different, I'm building on financial strategies according to their needs. "Clients at Europefx, potentially makes 8-16% every month potentially" (unbalanced should mention they may lose as well)
In her daily monitoring report for 23 July 2019, Ms Ajaz identified the following misconduct by an account manager named Robbie: "you have a potential to recover the loss" kept talking about recovery but need capital to recover the loss, client said no capital just wants to work on what he's got. Robbie again push by saying start with something small, but you don't want to recover the loss??
In her daily monitoring report for 26 July 2019, Ms Ajaz identified and reported the following misconduct by a EuropeFX account manager named Robbie: Client said his daughter told her to cancel this trading account because he's old and he probably has dementia as he forgets many things. Then Robbie mentioned he made profits of 25%, then client felt happy and said he will wait for a while then, struggled with Robbie on how to connectwise, even forgotten his password so Robbie has to send an email with a new password. Mentioned Bitcoin, Robbie said its exploding according to investing.com and asked if client wants to take advantage of it, client said yes, Robbie directed client every single step on how to open trade on Bitcoin. Client struggling with how to open trade, Robbie has to guide and tell exactly where to go on the platform to execute the trade. Initially opened $2k, then Robbie said Nasdaq is closed so asked client if he wants to increase Bitcoin trade, so client said ok, another $2k and went ahead with adding it. So client opened trade altogether $4300, then Robbie said strong momentum on Nasdaq too, but client said Bitcoin is better. Robbie said right now margin level after the trades is now around 100% so should try to put more money to increase margin level and minimise level of risk. Then after opening trades, mentioned swap and commissions, free margin is Zero so try to get another $5k to take account to $10k, client said can't do that now, Robbie said what do you mean, client said not now. … Client struggling to sharescreen with Robbie again, took 16mins before being able to connect. Then so far, Robbie said client made $1k, Robbie started saying take advantage opportunities, client said he cant put more money, Robbie said what do you mean youve been saying that for a week. Client kept on saying at the moment I cant, Robbie still insist and client said he understand, then said listen tomorrow I will share some stocks then I will put some money in, then Robbie said you said that last week. Robbie said "What I'm saying put right now just another $5K, let's continue working and then we can take it from there." Client said not before Monday, just give me a chance, I can't create money. Robbie just kept on pushing for client to deposit. Client said Robbie is getting difficult said he thought he wanted to get investment, but Robbie is making him put more money, Robbie said your account is very small. Client said take it easy on him and he doesnt want to be pushed. then opened another trade with Robbie, it was a struggle for him even putting the amount, kept on asking Robbie, what should I do? what do I open.. I'm showing you simple things and you cannot understand said Robbie, client said you get very upset and hurry. Client asking how to watch the investment. This client doesnt have good understanding on how to navigate the platform.
These are but a few of the many reported instances of misconduct. They are by no means isolated or unrepresentative examples.
Ms Ajaz emailed copies of her daily monitoring reports to Mr Martin and officers who she understood were part of EuropeFX's overseas compliance team. She understood that her role was "not to make a decision as to whether the conduct was good or bad", but rather was to bring certain types of conduct to the attention of Mr Martin and the overseas compliance team. Ms Ajaz also reviewed calls involving customers who had lodged complaints and prepared similar reports.
In September 2019, Ms Ajaz moved from EuropeFX to USG.
Mr Liu's evidence was similar to Ms Ajaz's evidence. He worked at EuropeFX from May 2019 to January 2020 and at USG from February to July 2020. Like Ms Ajaz, he performed duties as a quality control officer. Unlike Ms Ajaz, he had prior experience in respect of CFD and Margin FX Contract trading, having worked at various companies that offered trading in CFDs and Margin FX Contracts. He also had a university degree in finance. Ms Ajaz trained Mr Liu for his role. Like Ms Ajaz, Mr Liu was supervised by Mr Martin, was provided with a copy of the "Compliance Guide", was responsible for randomly listening to calls between EuropeFX representatives and customers with a view to identifying misconduct by the representatives, prepared daily call monitoring reports and emailed those reports to Mr Martin and members of EuropeFX's "management team" who were based overseas.
Mr Liu identified and recorded the following categories of "serious" misconduct: providing personal advice to the customer; pressuring the customer to deposit money or to make a trade; recommending that the customer borrow money to trade; persuading the customer not to make a withdrawal; advising the customer not to use a stop loss; making misleading representations about profit and risk; advising a customer to hedge a position that was trading at a loss without providing the customer with four other options (those four options being to leave open the position, deposit more money, close the position, or hedge the position); and advising the customer to undertake "double direction trading" (that is, to open a sell and a buy position at the same volume on the same product at the same time). Mr Liu's evidence was that on some days he identified serious misconduct in about half of the calls that he listened to, and that days on which he did not identify any serious misconduct were "very rare".
ASIC tendered some of Mr Liu's daily call monitoring reports which he had saved on his home computer on those occasions when he had worked from home. It is useful to give an example of one of Mr Liu's entries in one of his reports which recorded an instance of serious misconduct.
Mr Liu's report in respect of calls that were made on 3 June 2019 included the following entries: Mentioned recovery plan. You are not losing for those negative position. Always going up story. Always going up story. Mentioned recovery plan. Did not balance mention the risk and profit. Adivesed [sic] client to put pending hedge. Client felt pushed to deposit. Tried to mislead client about the balance and equity. Sell the Nasdaq story again.
Mr Liu also occasionally listened to calls between EuropeFX representatives and customers who had lodged a complaint. His evidence was that when he first started doing that work, he was "surprised by the amount of misconduct that [he] heard in a call when listening to consecutive calls between a customer and an account manager".
EuropeFX submitted that Ms Ajaz and Mr Liu had "poor recollections of the relevant events". I disagree. While they obviously did not have a particularly good independent recollection of individual calls and specific events, they each had a good recollection of how they performed their duties, particularly in respect of the compilation of their daily call monitoring reports. EuropeFX characterised the notations in those reports as "preliminary views" because Ms Ajaz and Mr Liu were not responsible for actually deciding if the incidents recorded constituted misconduct. That was a matter for the overseas compliance team. They submitted on that basis that their views had little probative value. I again do not agree. The fact that the overseas compliance team supposedly had the final say does not detract from the cogency of the reports of misconduct prepared by Ms Ajaz and Mr Liu, particularly in circumstances where EuropeFX did not adduce evidence from any members of the overseas compliance team.

[129]

General observations

As I have already observed, both Mr Blundell and Mr Dowd were generally impressive witnesses who appeared to give their evidence diligently and professionally. I have no reason to doubt that the opinions they expressed in both their written and oral evidence were opinions they honestly and genuinely held, and that they were conscious of their duty to the Court. As a general proposition, however, in most respects I have preferred and given more weight to the opinions expressed by Mr Blundell. That is the case for a number of reasons.
First, as has already been noted, Mr Blundell and Mr Dowd had somewhat contrasting and divergent qualifications and experience. In my view, Mr Blundell's experience was more relevant and pertinent to most of the facts in issue in respect of which he and Mr Dowd expressed materially differing views.
EuropeFX was critical of Mr Blundell and much of his evidence because he was "only" a compliance officer and was not himself a "trader". For the reasons given in Trial Ruling No 2 at [16]-[18], that is not a valid criticism of Mr Blundell or the opinions he expressed in respect of trading and trading strategies in CFDs and Margin FX Contracts, including the nature and extent of the risks involved in trading in those products. Contrary to EuropeFX's submissions, Mr Blundell was not a mere "observer or nonparticipating onlooker", but rather had for several years been actively engaged in communicating with clients, client advisers and other market participants in the very same markets in which EuropeFX operated. While he may not himself have traded in CFDs and Margin FX Contracts in those markets, he had nonetheless plainly acquired significant specialised knowledge and experience in respect of trading, trading strategies and the inherent risks in trading in those financial products.
Mr Dowd, on the other hand, may have been an experienced derivatives trader, but his background, knowledge and experience was in respect of derivatives trading by large and financially sophisticated institutions, primarily in the United States. He had no background, experience, qualifications or training in respect of over-the-counter retail trading in CFDs and Margin FX Contracts in Australia. That is perhaps not surprising given that, as noted earlier, much of Mr Dowd's training and experience had been acquired in the United States and retail clients have been prohibited from trading in CFDs in the United States since at least 2011.
While it may perhaps be accepted, as EuropeFX submitted, that some of the "fundamentals in trading do not vary between an institutional participant and a retail participant", there could be little doubt that the types of trades made, and the types of trading strategies employed, by or on behalf of large and sophisticated institutional investors in the United States were likely to differ markedly from the types of trades made, and the trading strategies employed, by relatively unsophisticated individuals in the retail market for CFDs and Margin FX Contracts in Australia. Similarly, the nature and extent of the risks faced by large and sophisticated institutional investors in the United States were likely to differ markedly from those faced by unsophisticated individuals in the retail market for CFDs and Margin FX Contracts in Australia.
Unlike individual retail traders in Australia, Mr Dowd's institutional clients: had trading accounts with many millions of dollars in capital; were unlikely, given the nature and size of the trades in question, to be troubled by the size of overnight swap fees or commissions; were equally unlikely to be troubled by the possibility of having insufficient margin to keep positions open; and often had trading parameters set by risk monitoring committees who were likely to have had a sound understanding of the fundamental concepts involved in trading in derivatives. Not surprisingly, in those circumstances, Mr Dowd acknowledged that he had never himself experienced a margin call, let alone a forced liquidation. In contrast, the evidence tended to indicate that the majority of EuropeFX's customers (and, specifically, the EFX30): had little, if any, knowledge or understanding of CFDs and Margin FX Contracts, or the fundamental concepts involved in trading in those products, or the inherent risks in such trading; had limited available capital for trading; were affected and troubled by swap fees and commissions; and were frequently at risk of margin calls or forced liquidation as a result of having insufficient margin in their trading accounts.
Second, and perhaps flowing to some extent from the first point, while many of Mr Blundell's opinions and reasons were expressed in simple and practical terms, I often found that Mr Dowd's opinions and often elaborate reasoning were based on assumptions, hypotheses or theories that were, in the context of the retail trading engaged in by EuropeFX's customers, somewhat theoretical, unrealistic and speculative. That was perhaps a product of the different perspective from which Mr Dowd approached the issues, namely from the perspective of a highly experienced trader for, or adviser to, large financial institutions engaged in trading in the United States. The clearest examples of Mr Dowd's elaborate reasoning based on unrealistic assumptions or theories are discussed later in the context of Mr Dowd's opinions about whether it was reasonably likely that customers would make the sort of profits that EuropeFX account managers had told them they were likely to make if they placed certain trades. I also found that, at times, Mr Dowd appeared unwilling to make appropriate concessions or agree to what appeared to be fairly self-evident propositions that were put to him, particularly if they appeared at odds to, or undermined, the opinions that he had expressed in his report.

[131]

Statutory provisions and relevant principles

Sections 911A and 911B of the Corporations Act relevantly provide as follows: 911A Need for an Australian financial services licence (1) Subject to this section, a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services… Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)). … (5B) A person contravenes this subsection if the person contravenes subsection (1). Note: This subsection is a civil penalty provision (see section 1317E). 911B Providing financial services on behalf of a person who carries on a financial services business (1) A person (the provider) must only provide a financial service in this jurisdiction on behalf of another person (the principal) who carries on a financial services business if one or more of the following paragraphs apply: … (b) these conditions are satisfied: (i) the principal holds an Australian financial services licence covering the provision of the service; and (ii) the provider is an authorised representative of the principal; and (iii) the authorisation covers the provision of the service by the provider; and (iv) in the case of a provider who is an employee or director of any other person (the second principal) who carries on a financial services business, or of a related body corporate of such a second principal - if the provider provides any financial services in this jurisdiction on behalf of the second principal, the provider does so as an authorised representative of the second principal; … Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).
As noted earlier, EuropeFX's ability to provide financial product advice as a corporate authorised representative of USG was subject to the terms of USG's AFSL. That AFSL authorised USG to, among other things, provide "general financial product advice" for derivatives and Margin FX Contracts.
Section 766B of the Corporations Act defines "financial product advice" and in that context distinguishes between "personal advice" and "general advice". Subsections 766B(1) to (4) relevantly provide 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. … (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.
Subsections 766B(5) to (9) in effect specify particular circumstances in which advice is not financial product advice, and particular acts which do not constitute the making of a recommendation relating to a financial product for the purposes of s 766B. None of the circumstances or acts specified in s 766B(5)-(9) are relevant to the facts and circumstances of this case.
The distinction between personal and general advice is no doubt necessitated by the more onerous obligations which are imposed on advisers who are permitted to tailor, or purport to tailor, their advice regarding a financial product to a customer's individual circumstances: see Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) and Others (No 3) [2020] FCA 208; (2020) 275 FCR 57 at [153]-[155]. Division 3 of Part 7.7 and Division 2 of Part 7.7A of the Corporations Act provides additional obligations in respect of the provision of personal advice to retail clients, such as the obligation to provide a Statement of Advice to a client (s 946A) and to act in a client's best interests (s 961B(1)).
A simple analysis of s 766B(1) and (3) reveals that, in order to determine whether a statement by a person constituted "personal advice" as defined, it is necessary to answer three questions. Those questions are, in summary, as follows.
First, did the statement constitute or amount to a "recommendation" or "statement of opinion"?
Second, was the statement either: 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 could it reasonably regarded as having been intended to have such an influence? Clearly the first of those alternatives poses a subjective test, whereas the second poses an objective test.
It should be noted, in this context, that CFDs and Margin FX Contracts are undoubtedly "derivatives", as defined in s 761D of the Corporations Act, and are therefore financial products by reason of s 764A(1)(c) of the Corporations Act.
Third, was the statement provided in circumstances where either: the provider of the advice (the maker of the statement) had considered one or more of the person's (the person who received the advice) "objectives, financial situation and needs"; or a reasonable person might expect the provider to have considered one or more of those matters? Once again, the first of those alternatives poses a subjective test, whereas the second poses an objective test.
The following principles may be distilled from the authorities in respect of each of those questions.
In relation to the first question, the words "recommendation" and "statement of opinion" are to be interpreted broadly in this context and encompass not only explicit or direct recommendations and statements of opinion, but also recommendations and statements of opinion that are implicit or implied: Australia Securities and Investments Commission v Westpac Securities Administration Ltd [2019] FCAFC 187; (2019) 272 FCR 170 (ASIC v Westpac) at [16]-[18] (Allsop CJ), [216]-[217], [240] (Jagot J), [333]-[336] (O'Bryan J); affirmed in Westpac Securities Administration Ltd v Australia Securities and Investments Commission [2021] HCA 3; (2021) 270 CLR 118 (Westpac v ASIC) at [49] (Gordon J); see also AGM Markets at [162], [165].
A statement that implies that the maker favours or commends a particular course of action without saying so in specific terms, or the provision of information or other material in a manner or form that implies that the provider's view is that the contemplated course of action is likely to be beneficial, may constitute a recommendation or statement of opinion: Australian Securities and Investments Commission v Park Trent Properties Group Pty Ltd (No 3) [2015] NSWSC 1527 at [365]-[466] (Sackville AJA); AGM Markets at [162].
A "statement of opinion" is simply a statement of a view, or the expression of a "belief, view, estimation or judgment": ASIC v Westpac at [240] (Jagot J), [336] (O'Bryan J). The concepts of "recommendation" and "statement of opinion" are not mutually exclusive: the latter may be the basis of the former, and the former may imply the latter, but the latter need not be accompanied by or imply the former: ASIC v Westpac at [18] (Allsop CJ), [336] (O'Bryan J); AGM Markets at [165]. There is no super-added "advice" component to either "recommendation" or "statement of opinion": ASIC v Westpac at [333]-[334] (O'Bryan J).
In relation to the second question, the existence of the alternative subjective and objective tests, as well as the statutory context, "supports the notion of a broad reading of the provisions, consistent with their protective purpose": AGM Markets at [161].
In relation to the third question, the words "in connection with" indicate that personal financial advice is in some way "connected to the consideration of one or more of the person's objectives, financial situation and needs": ASIC v Westpac at [242]; AGM Markets at [168]-[169]. The word "considered" in this context, has its usual or ordinary meaning of "pay attention to, have regard to, view, think about with attention or scrutinise": AGM Markets at [170]; ASIC v Westpac at [25]-[26] (Allsop CJ), [373] (O'Bryan J); see also Westpac v ASIC at [15] (Kiefel CJ, Bell, Gageler and Keane JJ) and [59] (Gordon J). That does not require an active and comprehensive process of evaluation on the provider's part, or require that the advice comprehensively considers each one of the customer's objectives, financial situation and needs: Westpac v ASIC at [10], [17] (Kiefel CJ, Bell, Gageler and Keane JJ). Nor is it necessary for the provider to have considered so much of each category - objectives, financial situation and needs - as is relevant to the subject matter of the advice: Westpac v ASIC at [19] (Kiefel CJ, Bell, Gageler and Keane JJ). It 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": ASIC v Westpac at [247] (Jagot J); see also [375] (O'Bryan J).
The use of the expression "one or more" in s 766B(3) indicates that it is not necessary for the provider to have considered all of the specified categories - the person's objectives, financial situation and needs. Rather, it suffices that one of the categories was considered, or that a reasonable person might expect that one of the categories was considered: ASIC v Westpac at [250] (Jagot J), [369], [371] (O'Bryan J); AGM Markets at [173].
As for the objective test in s 766B(3)(b), the test involves what a reasonable person "might" expect, which has a wider meaning than things which a reasonable person "would" expect; the "standard is one of reasonable possibility, not reasonable probability": Westpac v ASIC at [58] (Gordon J). The "reasonable person" in this context is a "reasonable person in the position of the person to whom the financial product advice is given or directed": ASIC v Westpac at [260], [264] (Jagot J) and [377]-[378] (O'Bryan J); AGM Markets at [177]. The reasonable person in that context will be "informed by the interactions between the provider and the recipient" and the expectations of that person will be "informed by other facts that are likely to be known by such a person: ASIC v Westpac at [380] (O'Bryan J); AGM Markets at [179]. 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": AGM Markets at [181].
Finally, disclaimers by the provider of the advice that the advice was only general and not personal in nature are not alone sufficient to alter the character of the advice as specifically pertaining to a customer's situation: Westpac v ASIC at [8] (Kiefel CJ, Bell, Gageler and Keane JJ), [78] (Gordon J).

[134]

Signal Provider Statements

Signal Provider Statements were defined as statements to the effect that customers should take (that is, open, close or leave open) CFD or Margin FX Contract positions in accordance with indicators on third-party websites.
By way of example, on 21 January 2019, Ms Xiadong (Joan) Liu (EFX12) had a telephone conversation with a EuropeFX account manager, Victor. Victor had access to Ms Liu's trading screen at the time. The following exchange occurred (row 1179 in Annexure A.1 to the SOC): VICTOR: Now, something happened. Okay, first of all, as you know, all the trades I'm giving you are coming from different sources. You already know that, it's not our - it's not our private advice, it's in general. And, today we're going to do two small things about the crude oil, and about NASDAQ again. But, before we're going to touch NASDAQ - before we're going to touch NASDAQ, I just want to check something small from investing.com. One second, I'm finishing. Let me - let me check it for us. One second, love, stay with me on the line. One second. … VICTOR: Okay. Let's do something together. First of all, let's go to - you already checked here? Perfect. Listen, first of all, there is a strong signal from Trading Central for them - investing.com, that NASDAQ can go - can continue go up. Let's go to the platform. Let's go first of all to the empty floor. Now, double click on NASDAQ. Wait, let me open my - now I can see your screen. Wonderful. You have it here - you have it here, love. Yes. Double click. 0.5, of course you can make more than that, but let's keep it low, you know, let's not be greedy. Now, just - - - JOAN LIU: I'm listening all to you. VICTOR: But, remember love, it's not a direct advice, it's in general. All the time remember that. JOAN LIU: I know. VICTOR: Perfect. It's very important because, you know, the market is volatile and the risk is all the time on the table, and you know that, I'm not a magician. The only thing I'm giving you is the - you know, the - the information that we have from different sources. So, it's not particular for you. It's - you know, it's - there is no difference between you to a - a millionaire client, or a client who's fallen out of money. So, the take profit from investing.com is 7,100, and Trading Central as well, for the long term. But, because we're not greedy, we're going to - we're going to take it low so we can take it 6,805. JOAN LIU: Right. VICTOR: Yeah. It's enough. Let's - you know, it's better to do it smaller instead of wait right now, something for the long term. You can continue if you feel comfortable with that, of course. Now, click on okay. Let's go to NASDAQ. Right click over here. Let's use trailing stop. Trailing stop. Now, wait a second. Let's make it 45 points. Just to keep you in a safe position. You know, if the - if it's going up by 45 points you know that you're in a good position already. Perfect….
The discussion continued with Victor making a further recommendation in respect of an oil CFD. ASIC alleged that the statements made by Victor during this exchange were properly characterised as constituting a Signal Provider Statement so defined. EuropeFX ultimately conceded that this exchange constituted a Signal Provider Statement and admitted that it constituted personal advice. As can readily be seen, Victor recommended that Ms Liu should open a position in a NASDAQ CFD based on information on Trading Central and Investing.com.

[136]

Trading Strategy Statements

Trading Strategy Statements were defined as statements to the effect that customers should adopt a trading strategy as advised by the account manager in relation to Margin FX Contracts and/or CFD positions. Trading strategies, in this context, included: leaving open positions that had moved adversely to the customer with the intention of waiting for them to turn positive; closing positions that had achieved a small profit, or utilising small "take profit" settings; opening multiple positions simultaneously; adopting hedging strategies, whether through the use of pending orders or otherwise, including to increase the amount of free margin in the customer's trading account; and to take advantage of, or open positions based on, upcoming world events, such as the release of economic data in the United States.
By way of example, on 29 August 2018, Ms Kuhn had a conversation with a EuropeFX account manager, Robbie. During that conversation, Robbie had access to Ms Kuhn's trading screen and drew her attention to the fact that there was a "minus" showing next to a position that he had just told Ms Kuhn to open. He then told her that "even if you see the minus on the open trade it doesn't mean that you lost the money … because you still have the trade open". After some further discussion on that topic, the following exchange then occurred (row 1059 in Annexure A.1 to the SOC): ROBBIE: You know, some of the times a lot of people see that minus and they are - if you will see right now, for example, on the open trade you will see a minus of 300 or 400, you will become stressed. LEANNE KUHN: Mmm-hmm. ROBBIE: You will get a lot of emotions, you will become scared, right? LEANNE KUHN: Mmm-hmm. ROBBIE: So what I want you to do is leave it, okay? Close the account. LEANNE KUHN: Yeah. ROBBIE: Don't look at it. Don't sit all day in front of the computer and look on the account for the trade. LEANNE KUHN: Yeah. ROBBIE: Leave it. Let it work. Let the market work, okay? LEANNE KUHN: Yeah. ROBBIE: If the market -- LEANNE KUHN: Do I -- ROBBIE: If the oil will go up and if it starts to take profit, the system will close the trade automatically and will take the profit to the balance, okay? LEANNE KUHN: Yes. And then I can reinvest you said, can't I? ROBBIE: Exactly. LEANNE KUHN: Yeah. ROBBIE: So just leave it. Let it work. I will make sure also to keep on eye on the account. LEANNE KUHN: Perfect. ROBBIE: If we need to do anything, you just let me know, okay? LEANNE KUHN: All right. Excellent. I'm shutting it down. I've gone. Excellent. Cool (Indistinct). ROBBIE: So do whatever you need to do. Enjoy your day. LEANNE KUHN: Yeah. Awesome. ROBBIE: And if we need to do something I will let you know, okay? LEANNE KUHN: Perfect. Thank you so much for that.
ASIC alleged that the statements made by Robbie during this exchange were properly characterised as constituting a Trading Strategy Statement so defined. EuropeFX ultimately conceded that this exchange constituted a Trading Strategy Statement and admitted that it constituted personal advice. Robbie was, in effect, telling Ms Kuhn to adopt a trading strategy which included leaving open positions that had moved adversely to her with the intention of waiting from them to turn positive.

[137]

Customer objectives, financial position, or needs

ASIC initially contended that EuropeFX and TradeFred, through their representatives, made the alleged personal advice statements in circumstances where either the EuropeFX representatives who made the statements had considered the relevant customer's objectives, financial position or needs, or a reasonable person might have expected the representatives to have taken account of the customer's objectives, financial position or needs. The advice provided in those circumstances was therefore said to constitute personal advice within the meaning of s 766B(3) of the Corporations Act. As discussed later, ASIC ultimately only pressed the allegation that a reasonable person might have expected the EuropeFX representatives to have taken account of the customer's objectives, financial position or needs.
In its case against EuropeFX, ASIC relied on the fact that, as part of the account opening procedures, EuropeFX customers completed a financial questionnaire in which they were required to provide certain personal details, including details of their annual income, liquid net worth and trading experience in respect of certain financial products. ASIC also relied on numerous recorded exchanges between EuropeFX representatives and the EFX30 in which the representatives sought and were provided with information that revealed the customer's objectives, financial situation and needs. Annexure B.1 to the SOC identified the exchanges relied on by ASIC in that context. It suffices to give one example.
During a lengthy conversation between Mr Wilson and a EuropeFX account manger on 13 September 2019, the following exchanges occurred (row 2 in Annexure B.1 to the SOC): JACOB: Okay. Okay. So let me tell you again who I am. I am going to be the person that's going to be with you step-by-step, to understand what you want. Okay. Where I will - in the end of the day you can - can to accomplish something, right. BEN WILSON: Yep. … JACOB: … I would like right now to ask you a couple of financial questions, if it's okay with you, Ben, just to know you better. BEN WILSON: Yeah. JACOB: Okay. And to know -- BEN WILSON: Yeah. JACOB: -- what do you want? Right. What do you need, actually. … JACOB: So first of all, before we are moving forward, tell me how old you are, Ben? BEN WILSON: Thirty-three. JACOB: Thirty-three. Oh, young! Okay. You're a young person. What about the marriage - are you married? BEN WILSON: No. Single. Single. … JACOB: What about the profession - what do you do for a living? BEN WILSON: Soil technician or geotechnical technician. … JACOB: Okay. What about your life? Is that your first time that you're making any investment in your life or you already made some investment in other fields? What (indistinct)? BEN WILSON: I - I've had a lot of success in Apple shares going back about three years ago. JACOB: Okay. BEN WILSON: Ten years up to three years ago. JACOB: Okay. BEN WILSON: And I've also had a little bit of success with Ripple, and I've got some money tied up in Daxi coin, which is another cryptocurrency. JACOB: Okay. And in terms of percentage, how much did you make on Apple? BEN WILSON: I made about 70 grand profit. JACOB: Yeah, yeah, 70 grand is a beautiful number, but in terms of percentage what is the -- BEN WILSON: Percentage - almost - almost a thousand percent profit over a seven-year period. JACOB: A thousand percent in seven years. BEN WILSON: Yeah, something like that. JACOB: Mmm. Mmm. You invested 7,000 and then you made - okay. Okay. Which is approximately 100 -- BEN WILSON: Something like that, yeah. … JACOB: Okay. Let me - let me know better your financial situation in terms of interest. What about the bank savings that you have today? What your bank giving you for your savings on a yearly basis in terms of percentage? BEN WILSON: The net worth or current savings? JACOB: Current savings. BEN WILSON: Current savings - oh, 30 - 30, 40 grand. JACOB: In terms of percentage? You like to talk numbers. Percentage. I am a person of percent. BEN WILSON: Sorry, a percentage of what though? JACOB: Of your savings. BEN WILSON: Percentage of savings? How do you mean? JACOB: Let me ask you this: How much savings do you have today with the bank? Let's say 100, 200,000? BEN WILSON: Well, 50,000 roughly. Well under 50,000. JACOB: Okay. So in terms of percentage today the average is two percent, okay. The bank giving you two percent because they are saving your money. Okay. BEN WILSON: Yes. … JACOB: … What about the account reason, what do you want to accomplish here? BEN WILSON: I'm not a man that needs to be rich, by any stretch of the imagination. My main goal for me working at the moment is just to pay off my mortgage and then I'm quite happy to completely adjust my life to have a low - low income, low expenditure lifestyle. My current thing is basically paying off my mortgage, which is about - a sum over 300,000. JACOB: Okay. … JACOB: … What about the mortgage? Do you have any mortgage under - you have the 300. Do you have any other mortgage under your name? BEN WILSON: No. And I have no other debt either. JACOB: Okay. Good for you. And how much do you pay per month for your mortgage? BEN WILSON: About 1600 a month. JACOB: 600 a month. BEN WILSON: 1600 - 1,600. JACOB: Okay. Okay. … JACOB: What about the pension? Do you have any pension plan under your name? I mean you're 33 right now but in the blink of an eye you'll be 60 already. So you already thought about it? BEN WILSON: I've got my superannuation in place and I do have a financial adviser who's put me on the best track for the time being. … JACOB: Okay. Okay. What about your living expenses, how much do you spend on a monthly basis? BEN WILSON: Oh, I do have the numbers - not in front of me. I think it works out to be - the number is not fresh on the top of my head. I think it's something like - what do I get a fortnight? - 1600, 800, 40 - off the top of my head it's like 300 - 350 a fortnight, I think, minus - minus like living rates, which is, you know, 1600 a year - 1200 a year. JACOB: Okay. What about your goal? Do you have any goal under your name? Do you have any goal under your name? I mean -- BEN WILSON: Goal? JACOB: Goal. Goal under your name? I mean do you have any goal? Because there is a lot of people that living out of goal. So my question for you, if you thought about - already about what you want to achieve in a big picture. You want to close the mortgage. I understood. What else? BEN WILSON: I still don't know what you mean - goal. Goal? JACOB: Goal. Goal. G-O-A-L. Target. What is your target in the end? BEN WILSON: Ah, target. To live on a small (indistinct) house on a rural, you know, acreage. And to be able to travel and have my four-wheel drive, pretty much.
It should perhaps also be noted in this context that ASIC relied on similar exchanges between TradeFred and its customers in its case against TradeFred. Those exchanges are summarised in Annexure B.2 to the SOC.

[139]

ASIC's personal advice case against EuropeFX as originally pleaded

ASIC alleged that EuropeFX provided personal advice to the EFX30 and thereby contravened s 911A(5B) of the Corporations Act on 2,406 separate occasions. Each of those occasions was identified and particularised in Annexure A.1 to the SOC. ASIC initially pressed the Court to make findings in respect of each one of those 2,406 alleged personal advice statements.
EuropeFX admitted, albeit belatedly, that its representatives made a large number of statements to the EFX30 which constituted or comprised personal advice. The statements that EuropeFX admitted were personal advice statements were identified by reference to 177 rows of Annexure A.1 to the SOC. While EuropeFX may be taken to have admitted that it contravened s 911A of the Corporations Act when it made the statements identified in those 177 rows of Annexure A.1, there is a potential issue about how contraventions of s 911A(5A) of the Corporations Act flow from the making of the statements. That issue, which arises from the fact that ASIC characterised some of the statements in those rows in more than one way, is discussed later.
EuropeFX denied that it contravened s 911A(5B) on the other occasions alleged by ASIC, though it admitted, or did not dispute, that some of the statements made by its representatives had accurately been characterised by ASIC as constituting either Position Statements, Signal Provider Statements, Deposit Statements, or Trading Strategy Statements. The relevance of EuropeFX's admissions in relation to the characterisation of some of the statements is discussed later.
Putting the admitted contraventions to one side, the task involved in considering and determining whether 2,228 statements made by EuropeFX representatives (the disputed personal advice statements) satisfied all the elements of the statutory definition of personal advice was unquestionably massive, if not oppressive. Annexure A.1 is a very lengthy and detailed document. It is a table comprising 2,406 entries (one entry for each statement alleged to have constituted personal advice) and is 1,839 pages long. It contains often lengthy extracts from the transcripts of telephone conversations between EuropeFX representatives and each of the EFX30. Each of the extracts is given a reference or row number in the table. To determine whether each of the extracted statements constituted personal advice, it would not be sufficient to consider the statements in isolation. It would undoubtedly be necessary to read each of the statements in the context of the surrounding exchanges between the EuropeFX representative and the customer in question, along with such inferences as are able to be drawn in respect of the relationship between the representative and the customer generally.
As the earlier analysis of the relevant statutory provisions revealed, to determine whether a particular statement constituted personal advice as defined, three questions must be addressed.
First, did the statement constitute or amount to a "recommendation" or "statement of opinion"?
Second, was the statement either: 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 could it reasonably regarded as having been intended to have such an influence?
Third, was the statement provided in circumstances where either: the provider of the advice (the maker of the statement) had considered one or more of the person's (the person who received the advice) "objectives, financial situation and needs"; or a reasonable person might expect the provider to have considered one or more of those matters?
The task of determining whether a statement made by a EuropeFX representative constituted a recommendation or statement of opinion was assisted somewhat by ASIC's characterisation or categorisation of the various statements. Each of the categories was defined as involving a statement by a EuropeFX representative that the customer with whom they were dealing should take some type of action in relation to their trading or trading account. It is not a large leap to conclude that such a statement could be said constitute a recommendation or statement of opinion by the representative. That still would still leave the second and third questions for determination. To answer those questions, it would be necessary to consider each of the disputed statements in the context in which they were made. The context would include not only the conversations that surrounded the disputed statements, but also the nature of the relationship between the EuropeFX representatives who made the statements and the customer to whom the statements were made.
As will be explained shortly, given the huge task involved in addressing those questions in respect of over 2,000 separate statements, ASIC ultimately agreed to narrow its case and press the Court to make findings in respect of a more limited selection of statements. Before considering the disputed personal advice statements that were the subject of ASIC's narrowed case, it is useful to identify the statements that EuropeFX admitted constituted personal advice and therefore gave rise to contraventions of s 911A(5B) of the Corporations Act.

[140]

Contraventions admitted by EuropeFX

As has already been noted, EuropeFX admitted that it made the personal advice statements the particulars of which are in 177 rows in Annexure A.1 to the SOC. The statements made to the EFX30 which EuropeFX admitted comprised or constituted personal advice are as follows:
In respect of Ms Love, the statements identified in the following rows of Annexure A.1 to the SOC: row 24 (Deposit Statement); 37 (Deposit Statement); 38 (Deposit Statement); 50 (Deposit Statement); 51 (Deposit Statement); 52 (Deposit Statement); and 53 (Deposit Statement).
In respect of Mr Kalusinghe, the statements identified in the following rows of Annexure A.1 to the SOC: row 54 (Deposit Statement); 56 (Deposit Statement); 58 (Deposit Statement); 59 (Deposit Statement); 62 (Deposit Statement); 63 (Deposit Statement); 67 (Position Statement); 70 (Trading Strategy Statement); 72 (Position Statement); 73 (Position Statement); 74 (Position Statement); 77 (Position Statement); 81 (Trading Strategy Statement); 84 (Deposit Statement); 85 (Deposit Statement); 86 (Trading Strategy Statement); 87 (Deposit Statement); 88 (Deposit Statement); 94 (Position Statement); 96 (Deposit Statement); 99 (Deposit Statement); 100 (Deposit Statement); and 101 (Deposit Statement).
In respect of Ms Elford, the statements identified in the following rows of Annexure A.1 to the SOC: row 227 (Deposit Statement); and 228 (Deposit Statement).
In respect of Mr Bonini, the statements identified in the following rows of Annexure A.1 to the SOC: row 352 (Deposit Statement); and 354 (Deposit Statement).
In respect of Ms Sapor, the statements identified in the following rows of Annexure A.1 to the SOC: row 400 (Deposit Statement); 432 (Deposit Statement); 434 (Deposit Statement); 469 (Deposit Statement); and 601 (Deposit Statement/Position Statement).
In respect of Ms Kuhn, the statements identified in the following rows of Annexure A.1 to the SOC: row 1059 (Trading Strategy Statement); 1062 (Deposit Statement); 1067 (Deposit Statement); 1068 (Trading Strategy Statement); 1106 (Deposit Statement); 1109 (Deposit Statement); 1124 (Deposit Statement); 1126 (Deposit Statement); 1138 (Deposit Statement/Position Statement); 1148 (Position Statement); 1154 (Deposit Statement); and 1155 (Trading Strategy Statement/Deposit Statement).
In respect of Ms Liu, the statements identified in the following rows of Annexure A.1 to the SOC: row 1162 (Deposit Statement); 1163 (Deposit Statement); 1164 (Deposit Statement); 1165 (Deposit Statement); 1175 (Deposit Statement); 1179 (Signal Provider Statement); 1180 (Position Statement); 1181 (Trading Strategy Statement); 1184 (Deposit Statement); 1189 (Deposit Statement); 1203 (Position Statement); 1204 (Position Statement); 1215 (Trading Strategy Statement Only); 1239 (Trading Strategy Statement); 1242 (Deposit Statement); 1258 (Deposit Statement); 1269 (Deposit Statement); 1271 (Deposit Statement); 1279 (Deposit Statement); 1298 (Deposit Statement); 1302 (Trading Strategy Statement); 1305 (Deposit Statement/Trading Strategy Statement); 1306 (Position Statement); 1317 (Position Statement); 1320 (Deposit Statement); 1321 (Deposit Statement); 1327 (Trading Strategy Statement); 1328 (Deposit Statement); 1332 (Position Statement); and 1333 (Deposit Statement).
In respect of Ms Aldous, the statements identified in the following rows of Annexure A.1 to the SOC: row 1354 (Trading Strategy Statement); 1360 (Trading Strategy Statement Only); 1362 (Deposit Statement Only); 1367 (Trading Strategy Statement Only); 1382 (Trading Strategy Statement); 1386 (Trading Strategy Statement); 1393 (Trading Strategy Statement); 1416 (Trading Strategy Statement); 1426 (Deposit Statement); 1429 (Position Statement); 1430 (Position Statement); 1434 (Position Statement); 1435 (Position Statement); and 1436 (Position Statement).
In respect of Mr Isaacs, the statement identified in row 1509 of Annexure A.1 to the SOC (Signal Provider Statement).
In respect of Ms Robinson, the statement identified in row 1642 of Annexure A.1 to the SOC (Deposit Statement/Position Statement).
In respect of Mr Grubb, the statements identified in the following rows of Annexure A.1 to the SOC: row 1756 (Trading Strategy Statement); and 1757 (Trading Strategy Statement Only).
In respect of Mr Geering, the statements identified in the following rows of Annexure A.1 to the SOC: row 1816 (Deposit Statement); 1843 (Trading Strategy Statement); 1844 (Signal Provider Statement); 1849 (Deposit Statement); 1850 (Position Statement); 1854 (Deposit Statement); 1861 (Deposit Statement); 1862 (Deposit Statement); 1865 (Deposit Statement); 1868 (Deposit Statement); 1869 (Trading Strategy Statement); and 1871 (Deposit Statement).
In respect of Mr Cartwright, the statements identified in the following rows of Annexure A.1 to the SOC: row 1936 (Deposit Statement); 1942 (Deposit Statement); 1948 (Trading Strategy Statement Only); 1950 (Trading Strategy Statement); 1951 (Deposit Statement); 1955 (Deposit Statement); 1963 (Trading Strategy Statement); 1969 (Trading Strategy Statement/Position Statement); 1973 (Deposit Statement Only); 1975 (Deposit Statement); 1982 (Position Statement); 1987 (Deposit Statement); 1989 (Trading Strategy Statement); 1993 (Trading Strategy Statement); 1995 (Deposit Statement); 1997 (Deposit Statement); 2000 (Position Statement); 2005 (Trading Strategy Statement Only); 2006 (Deposit Statement); 2009 (Deposit Statement); 2013 (Trading Strategy Statement); 2017 (Deposit Statement); 2026 (Trading Strategy Statement Only); and 2027 (Trading Strategy Statement Only).
In respect of Mr Hillier, the statements identified in the following rows of Annexure A.1 to the SOC: row 2130 (Deposit Statement); 2139 (Deposit Statement); 2154 (Trading Strategy Statement Only); 2165 (Deposit Statement Only); 2166 (Deposit Statement); 2169 (Deposit Statement); 2171 (Deposit Statement); 2172 (Signal Provider Statement); 2180 (Deposit Statement); 2185 (Deposit Statement Only); 2190 (Trading Strategy Statement); 2193 (Signal Provider Statement); and 2206 (Signal Provider Statement).
In respect of Ms Sofer, the statement identified in row 2233 of Annexure A.1 to the SOC (Position Statement).
In respect of Ms Scott, the statements identified in the following rows of Annexure A.1 to the SOC: row 2297 (Signal Provider Statement); 2310 (Position Statement); 2314 (Deposit Statement); 2318 (Deposit Statement Only); 2321 (Position Statement); 2329 (Trading Strategy Statement Only); 2330 (Deposit Statement); 2338 (Signal Provider Statement); 2341 (Deposit Statement); 2347 (Deposit Statement); 2348 (Deposit Statement); 2350 (Position Statement/Trading Strategy Statement Only); 2352 (Trading Strategy Statement); 2355 (Position Statement/Deposit Statement); 2356 (Deposit Statement Only); 2357 (Deposit Statement); 2358 (Deposit Statement); 2359 (Signal Provider Statement); 2360 (Deposit Statement Only); 2361 (Position Statement/Trading Strategy Statement); and 2363 (Position Statement).
In respect of Mr Dand, the statement identified in row 2365 of Annexure A.1 to the SOC (Deposit Statement).
In respect of Mr Costa, the statements identified in the following rows of Annexure A.1 to the SOC: row 2383 (Deposit Statement); 2384 (Deposit Statement); 2385 (Deposit Statement); 2400 (Deposit Statement Only); 2402 (Position Statement/Deposit Statement); 2404 (Position Statement/Deposit Statement); and 2406 (Deposit Statement).
As adverted to earlier, there is a potential issue about the number of contraventions s 911A(5B) of the Corporations Act flow from the making of those personal advice statements. That issue arises from the fact that some of the statements in the 177 rows have been characterised by ASIC as comprising more than one of the defined categories of personal advice. For example, the statement at row 601 of Annexure A.1 is characterised as comprising both a Deposit Statement and a Position Statement and the statement at row 1305 is characterised as comprising both a deposit Statement and a Trading Strategy Statement. Does that statement constitute or give rise to one or three contraventions of s 911A(5B) of the Corporations Act?
On one view, in the case of those statements in the 177 rows that ASIC has characterised as comprising two or more of the defined categories, there is a separate contravention in respect of each of the defined categories that EuropeFX admitted that the statement fell within. The statement at row 601, for example, would in those circumstances give rise to two contraventions. If that is the correct approach, the making of the 177 particularised statements would result in 187 contraventions.
The other available view, however, is that, where a EuropeFX account manager is found to have made a personal advice statement on a single occasion, that gives rise to a single contravention of s 911A(5B) of the Corporations Act. The statement of row 601, for example, would constitute one instance of giving personal advice, and give rise to one contravention of s 911A(5B), even though EuropeFX admitted that the statement fell withing two of the defined categories of personal advice statements.
This issue was not addressed by the parties in their submissions. My present inclination is to proceed on the basis that, where a personal advice statement is made on a single occasion, that gives rise to or constitutes a single contravention of s 911A(5B) of the ASIC Act, even if that statement may fall within two or more of the defined categories of personal advice statements. On that basis, EuropeFX may be taken to have admitted 177 occasions. I will, however, entertain further submissions in respect of this issue at the relief hearing if necessary.

[141]

ASIC's narrowed personal advice case against EuropeFX

After being pressed by the Court to explain the utility in requiring the Court to engage in the unquestionably massive task of determining whether EuropeFX contravened s 911A(5B) on over 2,000 separate occasions, and how that would be consistent with the overarching purpose of the Court's civil practice and procedure provisions (as defined in s 37M of the Federal Court of Australia Act 1976 (Cth) - FCA Act), ASIC ultimately agreed to limit its case against EuropeFX in respect of personal advice statement contraventions. Specifically, ASIC agreed to limit its case by only pressing the Court to consider and make contravention findings in respect of statements made in 108 rows in Annexure A.1 to the SOC (in addition to the statements in the 177 rows that EuropeFX admitted were statements of personal advice).
While EuropeFX disputed that the statements in those 108 rows of Annexure A.1 constituted personal advice, it admitted (with some minor qualifications) ASIC's characterisation of those statements. In other words, it admitted that those statements were correctly characterised by ASIC as being a Position Statement, a Signal Provider Statement, a Deposit Statement, or a Trading Strategy Statement as defined. As was the case with the admitted personal advice statements, some of the statements in the 108 rows had been characterised by ASIC as falling within more than one of the defined categories. For example, the statement at row 29 was characterised by ASIC as being both a Trading Strategy Statement and a Position Statement. EuropeFX may be taken to have admitted that the statement at row 29 had been correctly characterised by ASIC. That may again give rise to a potential issue concerning the number of contraventions that flow from the findings as to whether the statements constituted personal advice.
I will generally refer to the statements in the 108 rows of Annexure A.1 in respect of which ASIC pressed the Court to make findings as the disputed personal advice statements. It should perhaps be emphasised that in narrowing its case to the disputed advice statements in those 108 rows, ASIC did not abandon its allegation that the other approximately 2,000 statements particularised in Annexure A.1 to the SOC were personal advice statements. Rather, it did not press the Court to make specific findings that those statements gave rise to contraventions of s 911A(5B) of the Corporations Act. ASIC continued to press its allegation that EuropeFX representatives routinely gave personal advice to the EFX30 for the purposes of its allegation that EuropeFX engaged in unconscionable conduct.
The particulars of ASIC's narrowed case in respect of the alleged personal advice statements were recorded in a document entitled "Plaintiff's Statement of Narrowed Case in respect of the Second Defendant". That document confirmed that, in addition to narrowing its case to disputed personal advice statements (being those statements the characterisation of which was not in dispute), ASIC also narrowed its case in two other important respects.
First, ASIC did not press the allegation that the disputed personal advice statements were intended to influence the relevant customers in making a decision in relation to a particular financial product ([29(a)(i)] of the SOC; s 766B(1)(a) of the Corporations Act). Rather it only pressed the allegation that the statements could reasonably be regarded as having been intended to influence the relevant customer in making a decision in relation to a particular financial product ([29(a)(ii)] of the SOC; s 766B(1)(b) of the Corporations Act).
Second, ASIC did not press the allegation the makers of the disputed personal advice statements (the EuropeFX account managers) had in fact considered one or more of the relevant customer's objectives, financial situation and needs ([30(a)] of the SOC; s 766B(3)(a) of the Corporations Act). Rather, it only pressed the allegation that each of the statements was made in circumstances where a reasonable person might have expected the EuropeFX account manager to have taken account of the customer's objectives, financial situation and needs ([30(b)] of the SOC; s 766B(3)(b) of the Corporations Act).
The statements in the 108 rows of Annexure A.1 that ASIC pressed the Court to find constituted personal advice statements in contravention of s 911A(5B) of the Corporations Act are as follows:
In respect of Mr Wilson, the statements identified in the following rows of Annexure A.1 to the SOC: row 3 (Deposit Statement); 9 (Deposit Statement); 18 (Position Statement); and 19 (Position Statement).
In respect of Ms Love, the statements identified in the following rows of Annexure A.1 to the SOC: row 25 (Deposit Statement); 29 (Trading Strategy Statement and Position Statement); 34 (Position Statement); 35 (Trading Strategy Statement); 39 (Trading Strategy Statement); 42 (Deposit Statement); and 43 (Trading Strategy Statement and Position Statement).
In respect of Mr Kalusinghe, the statements identified in the following rows of Annexure A.1 to the SOC: row 171 (Signal Provider Statement); and 203 (Deposit Statement).
In respect of Ms Elford, the statements identified in the following rows of Annexure A.1 to the SOC: row 234 (Deposit Statement); 257 (Position Statement); 266 (Deposit Statement); 274 (Position Statement); and 276 (Position Statement).
In respect of Ms Battersby, the statements identified in the following rows of Annexure A.1 to the SOC: row 288 (Deposit Statement); 289 (Deposit Statement); 296 (Position Statement); 301 (Trading Strategy Statement); and 302 (Trading Strategy Statement).
In respect of Ms Nikiforos, the statements identified in row 310 of Annexure A.1 to the SOC (Trading Strategy Statement).
In respect of Mr Bonini, the statements identified in the following rows of Annexure A.1 to the SOC: row 349 (Signal Provider Statement); 356 (Deposit Statement); 364 (Deposit Statement); and 383 (Trading Strategy Statement).
In respect of Ms Sapor, the statements identified in the following rows of Annexure A.1 to the SOC: row 405 (Signal Provider Statement); and 647 (Trading Strategy Statement).
In respect of Ms Boden, the statements identified in the following rows of Annexure A.1 to the SOC: row 725 (Position Statement); 736 (Deposit Statement); 838 (Position Statement); 883 (Trading Strategy Statement); and 946 (Position Statement).
In respect of Mr Singleton, the statements identified in the following rows of Annexure A.1 to the SOC: row 957 (Trading Strategy Statement); 958 (Deposit Statement); 961 (Deposit Statement); 964 (Trading Strategy Statement); 967 (Position Statement); 970 (Signal Provider Statement); 1016 (Deposit Statement); 1019 (Deposit Statement); 1021 (Position Statement); and 1033 (Position Statement).
In respect of Mr Isaacs, the statements identified in the following rows of Annexure A.1 to the SOC: row 1486 (Deposit Statement); 1520 (Deposit Statement); 1530 (Deposit Statement); 1539 (Trading Strategy Statement); and 1545 (Trading Strategy Statement).
In respect of Mr Ayoub, the statements identified in the following rows of Annexure A.1 to the SOC: row 1549 (Deposit Statement); 1551 (Deposit Statement); 1556 (Deposit Statement); 1559 (Deposit Statement/Trading Strategy Statement); 1560 (Deposit Statement); and 1563 (Deposit Statement).
In respect of Ms Robinson, the statements identified in the following rows of Annexure A.1 to the SOC: row 1572 (Deposit Statement); 1585 (Trading Strategy Statement/Deposit Statement); 1601 (Trading Strategy Statement/Deposit Statement); 1626 (Position Statement); 1630 (Deposit Statement); 1635 (Signal Provider Statement); and 1660 (Position Statement/Trading Strategy Statement).
In respect of Mr Stubna, the statements identified in the following rows of Annexure A.1 to the SOC: row 1673 (Trading Strategy Statement); 1684 (Deposit Statement Only); 1694 (Deposit Statement); 1697 (Deposit Statement); 1703 (Trading Strategy Statement); and 1707 (Position Statement).
In respect of Ms Curtin, the statements identified in row 1724 of Annexure A.1 to the SOC (Trading Strategy Statement).
In respect of Mr Grubb, the statements identified in the following rows of Annexure A.1 to the SOC: row 1730 (Position Statement); 1737 (Signal Provider Statement); 1745 (Position Statement); 1784 (Deposit Statement); 1804 (Trading Strategy Statement); 1806 (Signal Provider Statement/Trading Strategy Statement); 1807 (Deposit Statement Only); and 1810 (Trading Strategy Statement).
In respect of Mr Lapham, the statements identified in the following rows of Annexure A.1 to the SOC: row 1891 (Trading Strategy Statement/Deposit Statement); 1900 (Trading Strategy Statement); 1907 (Deposit Statement); 1909 (Position Statement); 1916 (Deposit Statement/Position Statement); 1922 (Deposit Statement); and 1926 (Position Statement).
In respect of Mr Chircop, the statements identified in the following rows of Annexure A.1 to the SOC: row 2043 (Deposit Statement Only); 2048 (Deposit Statement); and 2052 (Trading Strategy Statement Only).
In respect of Ms Larsen, the statements identified in the following rows of Annexure A.1 to the SOC: row 2090 (Deposit Statement Only); 2096 (Signal Provider Statement); 2101 (Signal Provider Statement); 2104 (Deposit Statement); 2105 (Trading Strategy Statement); and 2109 (Signal Provider Statement Only). In respect of Ms Larsen's brother, the statements identified in the following rows: row 2119 (Position Statement/Deposit Statement); and 2120 (Deposit Statement).
In respect of Mr Hillier, the statements identified in the following rows of Annexure A.1 to the SOC: row 2201 (Trading Strategy Statement); 2207 (Position Statement); 2210 (Deposit Statement); and 2211 (Deposit Statement).
In respect of Ms Sofer, the statements identified in the following rows of Annexure A.1 to the SOC: row 2240 (Position Statement); 2247 (Position Statement); 2258 (Position Statement); and 2260 (Trading Strategy Statement).
In respect of Ms Scott, the statements identified in row 2276 of Annexure A.1 to the SOC (Deposit Statement).
In respect of Mr Costa, the statements identified in the following rows of Annexure A.1 to the SOC: row 2378 (Deposit Statement); 2389 (Deposit Statement); and 2397 (Deposit Statement).

[143]

Did each of the statements amount to a recommendation or statement of opinion?

The principles that must be applied in determining whether a statement made by a EuropeFX account manager to a customer amounted to a recommendation or statement of opinion were discussed at length earlier.
As has already been noted, EuropeFX admitted or conceded that each of the disputed 108 statements had been correctly characterised by ASIC as either a Position Statement, a Signal Provider Statement, a Deposit Statement or a Trading Strategy Statement. As also discussed earlier, each of the categories of statements was defined in ASIC's pleading as involving, in general terms, a statement by a EuropeFX representative that the customer with whom they were dealing should take some type of action in relation to their trading or their trading account.
A Position Statement, for example, was defined as a statement by the account manager to a customer that the customer should take (that is, open, close or leave open) specific CFD or Margin FX Contract positions identified by the account manager. A statement which is admitted or conceded to fall within that category of statement would clearly amount to a recommendation or statement of opinion as to what the customer should do in respect of the CFD or Margin FX Contract to which the statement related - that is, open, close or leave a position open in respect of that CFD or Margin FX Contract.
Similarly, a Signal Provider Statement was defined as a statement by an account manager to a customer to the effect that a customer should take (that is, open, close or leave open) CFD or Margin FX Contract positions in accordance with indicators on third-party websites. A statement which is admitted or conceded as being correctly characterised as a Signal Provider Statement so defined would plainly constitute a recommendation or statement of opinion as to what the customer should do in respect of the CFD or Margin FX Contract to which the statement related having regard to the information on the website referenced in the statement.
The same reasoning applies in respect of Deposit Statements and Trading Strategy Statements.
A Deposit Statement was defined as a statement to the effect that customers should deposit further funds to, or not withdraw funds from, the customer's trading account. A statement which is admitted or conceded as being correctly characterised as a Deposit Statement so defined would plainly constitute a recommendation or statement of opinion to the effect that the customer should deposit further funds to, or not withdraw funds from, the customer's trading account.
A Trading Strategy Statement was defined as a statement to the effect that customers should adopt a trading strategy as advised by the account manager in relation to Margin FX Contracts or CFD positions. A statement which is admitted or conceded as being correctly characterised as a Trading Strategy Statement so defined would plainly constitute a recommendation or statement of opinion to the effect that the customer should adopt a trading strategy as advised by the account manager in relation to Margin FX Contracts or CFD positions.
It follows that EuropeFX's admissions to the effect that the 108 disputed statements were all correctly classified as being either a Position Statement, a Signal Provider Statement, a Deposit Statement or a Trading Strategy Statement, in effect amounts to an admission that the statements were all recommendations or statements of opinion. I have nevertheless given close consideration to each of the disputed statements and have had regard to the context in which they were made.
It is unnecessary to set out all the disputed personal advice statements in these reasons. They are all clearly identified in Annexure A.1 to the SOC and ASIC's Statement of Narrowed Case. While some of the statements might, at least at first blush, appear to be somewhat oblique or even obscure, particularly if considered in isolation, I am comfortably satisfied that, when considered in context, each of the statements amounted, directly or indirectly, to a recommendation or statement of opinion by the EuropeFX account managers who made them. At the very least, each of the statements implied that the account manager favoured or commended a particular course of action or had a belief or view concerning the merits of that course of action.
An example of a Position Statement made by a EuropeFX account manager was given earlier. It clearly amounted to a recommendation or statement of opinion by the account manager. The same can be said in respect of the other Position Statements within the disputed personal advice statements.
An example of a Signal Provider Statement made by a EuropeFX account manager was given earlier. It clearly amounted to a recommendation or statement of opinion by the account manager. The same can be said in respect of the other Signal Provider Statements within the 108 disputed statements.
An example of a Deposit Statement made by a EuropeFX account manager was given earlier. It clearly amounted to a recommendation or statement of opinion by the account manager. The same can be said in respect of the other Deposit Statements within the disputed personal advice statements.
An example of a Trading Strategy Statement made by a EuropeFX account manager was given earlier. It clearly amounted to a recommendation or statement of opinion by the account manager. The same can be said in respect of the other Trading Strategy Statements within the 108 disputed statements.

[144]

Could each of the statements reasonably be regarded as having been intended to influence the EuropeFX customer to whom it was made in relation to a CFD or Margin FX Contract?

I am also comfortably satisfied that each of the disputed personal advice statements could, considered in context, reasonably be regarded as having been intended to influence the EuropeFX customer to whom the statement was made to act in accordance with the recommendation or statement of opinion.
The relevant context included that each of the disputed personal advice statements was made in the course of an ongoing relationship between the EuropeFX account manager and the customer. As the earlier summary of the evidence of and concerning the EFX30 revealed, the relationship between the EuropeFX account managers and the relevant customers was one in which the account manager had held himself or herself out to be experienced in trading in CFDs and Margin FX Contracts, as well as being a person upon whom the customer could rely on for recommendations and advice in respect of trading in those financial products. In each case the customer was, and was known by the account manager to be, inexperienced, or relatively inexperienced, in respect of trading in CFDs and Margin FX Contracts. The account managers invariably assured the customers that they would guide and assist them in their trading activities. The statements were also made during one-on-one communications between the account manager and the customer in circumstances where the account manager generally had access to the customer's trading screen and trading position.
It is again unnecessary to set out all the disputed personal advice statements and separately analyse whether the statements could reasonably be regarded as having been intended to influence the EuropeFX customer to whom it was made in relation to a CFD or Margin FX Contract. That is particularly so in circumstances where EuropeFX did not advance any submissions concerning any of the disputed statements and did not submit that the statements could not reasonably be regarded as having been intended to influence the customers in question. I have nevertheless given close consideration to each of the statements, as identified in Annexure A.1 to the SOC and ASIC's Statement of Narrowed Case. I have also given some consideration to the context in which each of the statements were made, including the surrounding discussions between the account managers and customers in question. In my view, the terms of each of the statements, and the manner and circumstances in which each of the statements was conveyed, strongly supports the conclusion that each of the statements could reasonably be regarded as having been intended to influence the customers to whom the statements were made.

[145]

Were the statements made in circumstances where a reasonable person might expect that the EuropeFX representative had considered one or more of the EuropeFX customer's objectives, financial situation and needs?

The principles that must be applied in determining whether a statement made to a customer by a EuropeFX account manager was made in circumstances where a reasonable person might expect that the EuropeFX representative had considered one or more of the EuropeFX customer's objectives, financial situation and needs were discussed at length earlier.
It is possible to answer this question in a global way, without separately considering each of the disputed personal advice statements. That is because, as the preceding discussion concerning the evidence and circumstances of the EFX30 revealed, each of the disputed personal advice statements was made in relevantly similar, if not almost identical, circumstances. Those circumstances included, in summary, that: as part of the onboarding or account opening procedures, EuropeFX representatives asked the customers to provide information about their personal and financial circumstances; the EuropeFX account managers who engaged with the customers also routinely asked the customers questions about their personal and financial circumstances, as well as their financial objectives and targets and their reasons for trading with EuropeFX; the EuropeFX representatives led the customers to understand or believe that the representative would guide and assist the customer in relation to their trading; the statements were invariably made in the context of one-on-one telephone communications between the EuropeFX account managers and the customers, and in the context of an ongoing relationship between the representative and the customer; and the statements, almost by definition (given that EuropeFX did not dispute ASIC's characterisation of them), concerned, in general terms, what the customer should or should not do in respect of their trading.
The starting point is that every EuropeFX customer was required, as part of the onboarding procedure, to provide EuropeFX with personal and financial information. That information included the customer's: annual income; employment status; liquid net worth and source of funds; and trading experience. It may be accepted that that information may have been sought by EuropeFX for purposes associated with the opening of the customer's trading account, though EuropeFX did not adduce evidence from any of its officers about the onboarding process or the questionnaire which was generally completed as part of that process. Nevertheless, a reasonable person might expect that the information about the customer's financial situation might also have been sought so that EuropeFX's account managers might, in due course, consider that information when making recommendations or expressing opinions to customers in the context of their trading. There was no evidence to the effect that the information provided as part of the onboarding process was not provided to the account managers.
It is true that the questionnaire required the customer to acknowledge that he or she had read a disclaimer that included the following statement: EuropeFX provides general advice only. This won't take into account any individual financial situation, needs or investment objectives, and the advice may not be appropriate at the time of providing the advice.
As discussed in detail earlier, however, the general effect of the evidence of the EFX8 in relation to this disclaimer was that, while the box indicating that they had read the disclaimer had been ticked, they either did not read it, or did not really understand or appreciate the disclaimer. Even putting that evidence to one side, the fact that the onboarding procedure required the customer to read the disclaimer would hardly cause a reasonable person to change their views or expectations about the actual nature or circumstances of advice which was given to customers much later in the piece by account managers in the context of the customer's trading. Disclaimers that the provision of advice was general and not personal in nature have been held to be insufficient to alter the character of the advice where the circumstances would otherwise indicate to a reasonable person that the customer's circumstances were in fact likely to have been considered.
After the questionnaire was completed and the customer's account was opened, the evidence relating to the EFX30 indicated that the EuropeFX account managers who dealt with those customers invariably asked the customer about their financial circumstances and needs. They also asked about the customer's objectives and reasons for trading with EuropeFX and assured the customer that they would assist and advise the customer in respect of their trading. It suffices to give but a few examples.
In Mr Wilson's case, the account manager with whom he primarily dealt, Jacob, told Mr Wilson that he was going to be the person that was "going to be with you step-by-step, to understand what you want". In that context, he asked Mr Wilson a "couple of financial questions … just to know you better". Those questions included what investments Mr Wilson had made in the past, what Mr Wilson's current savings were, how much interest he was earning on those savings, whether he had a mortgage and what his mortgage payments were. Jacob also asked Mr Wilson what he wanted to accomplish with EuropeFX and what his goal was. That prompted Mr Wilson to tell Jacob what his financial objectives were. Having heard Mr Wilson's objectives, Jacob said: "I believe we have good potential to move forward together". Those statements by Jacob, together with the questions he asked Mr Wilson, and the information Mr Wilson gave in response, would clearly cause a reasonable person in Mr Wilson's position to expect that, when Jacob later made recommendations or statements of opinion to Mr Wilson, Jacob had considered Mr Wilson's objectives, financial situation and needs.
Similar statements were made, or questions asked, by EuropeFX representatives with whom Ms Love conversed. Shortly after she first opened her trading account with EuropeFX, a EuropeFX representative asked her what she was "looking to achieve out of this account". The representative also said: "I'm sure you are close to the stage where you want to retire, start looking into building yourself a nice, healthy retirement plan". One of Ms Love's account managers, Benjamin, told Ms Love that he would build her a "business plan" for her retirement. Those statements would most likely cause a reasonable person in Ms Love's position to expect that, when Benjamin later made recommendations or statements of opinion to Ms Love, Benjamin had considered Mr Wilson's objectives, financial situation and needs.
Very similar statements were made to, and very similar questions were asked of, Mr Kalusinghe by the EuropeFX representatives with whom he dealt. For example, one EuropeFX representative, having asked Mr Kalusinghe a series of questions about his occupation, income and financial position, said: "is it any outcome you have, you need to pay maybe loans, house loan, car loan or anything like that?". Then, having asked Mr Kalusinghe about one of his loans, the representative said: "if you can manage to get the account up to 400K, for example, that will be the ultimate place for you, right?"; and "obviously we will try the best as possible with that kind of volume like we have at the moment it might be very difficult to get it up to 400K but obviously we will try the best as possible, right mate?".
The same can be said in respect of exchanges between EuropeFX representatives and the EFX22 customers. For example, the following exchanges occurred between a EuropeFX representative and Ms Battersby (EFX5): ELAY YOTAM: Now tell me, Miriam, first of all, who are you? Tell me a little bit about yourself, can you? MIRIAM BATTERSBY: Okay. I am semi-retired. I have a business that I make websites. I'm a website consultant. …Part time. And I'm also doing some agency work. And I'm taking the aged pension and so I need to supplement my income with other sources because the aged pension's not much. … ELAY YOTAM: Okay, so tell me, you said that your father passed away. Right now you have money that you look to invest. What kind of investment experience do you have? MIRIAM BATTERSBY: I don't. None. None at all. ELAY YOTAM: Never invested before. Okay, so I'm going to treat you like a really beginner.
Another example is the following exchange occurred between a EuropeFX representative and Mr Bonini (EFX7): ALAN A MATATOF: I want to know, first of all, do you have any sort of previous experience in trading, if you ever did something like this before? PAUL BONINI: Oh, very, very basic. ALAN A MATATOF: Very - what do you mean by that, "basic"? PAUL BONINI: A little bit of shares, yeah, years back. And then I've dabbled a bit with Bitcoin - but not a lot. … PAUL BONINI: -- 30 years back. ALAN A MATATOF: Oh, 30 years back. … ALAN A MATATOF: Are you - would you call yourself an aggressive trader or more conservative now? (Indistinct) PAUL BONINI: No, aggressive - no, a bit more aggressive I think. … ALAN A MATATOF: Let me ask you a question and I need to know what is your goal? What do you want from this account? PAUL BONINI: Look, same as everyone, make money. ALAN A MATATOF: I know. Okay, it would be great to make a million dollars, but realistically what are you looking to make every month - 5K, 10K, 20K, 1K? PAUL BONINI: I suppose if I could - if I could get to I suppose making 5 or 6K a month, I'd be pretty happy.
Similar exchanges occurred between EuropeFX representatives and the other EFX30 customers. I do not propose to refer to and extract every exchange in respect of every customer. In Annexure B.1 to the SOC, ASIC extracted passages from the recorded telephone conversations between EuropeFX representatives and each of the EFX30 which it contended supported the conclusion that a reasonable person might expect that EuropeFX representatives might have considered the customer's objectives, financial situation and needs when making recommendations and statements of opinion about their trading. I have read each of the extracts in Annexure B.1. I have also considered each of the statements in the context in which they were made, including by reference to the surrounding exchanges between the EuropeFX representative and the customer as recorded in the relevant telephone call transcripts.
In my view, the exchanges extracted in Annexure B.1 provide overwhelming support for ASIC's case that each of the disputed personal advice statements was made in circumstances where a reasonable person might expect the EuropeFX representative who made the statement to have considered the objectives, financial situation and needs of the customer to whom the statement was made. I refer in particular to the following rows in Annexure B.1: row 2 (in respect of Mr Wilson); rows 5, 6 and 7 (in respect of Ms Love); rows 9, 10 and 11 (in respect of Mr Kalusinghe); rows 13, 14, 15, 16 and 17 (in respect of Ms Elford); rows 19 and 20 (in respect of Ms Battersby, referred to earlier); row 21 (in respect of Ms Nikiforos) rows 23, 24, 25 and 26 (in respect of Mr Bonini, some of which were referred to earlier); rows 28 and 29 (in respect of Ms Sapor); rows 31, 32, 33, 35, 37, 38 and 39 (in respect of Ms Boden); rows 43 and 44 (in respect of Ms Kuhn); rows 47, 48, 50, 51, 52, 53, 54, 55, 56, 57, and 59 (in respect of Ms Liu); rows 72, 75, 78, 80, 82, and 87 (in respect of Ms Aldous); rows 91, 92, 93, and 94 (in respect of Mr Isaacs); rows 99, 100, and 102 (in respect of Mr Ayoub); rows 104 and 105 (in respect of Ms Robinson); rows 107 and 108 (in respect of Mr Stubna); row 111 (in respect of Ms Curtin); row 113 (in respect of Mr Grubb); rows 115, 117, 118, and 128 (in respect of Mr Geering); row 131 (in respect of Mr Lapham); rows 133, 134, 135, and 137 (in respect of Mr Cartwright); row 140 and 141 (in respect of Mr Chircop); row 143, 144 and 145 (in respect of Ms Green); row 147, 148, 149 and 152 (in respect of Ms Larsen and Ms Larsen's brother); row 153 and 155 (in respect of Mr Hillier); row 157 and 159 (in respect of Ms Sofer); row 163, 165, 167, and 171 (in respect of Ms Scott); row 172 (in respect of Mr Dand; and row 175, 176, 177, 178, 179, and 180 (in respect of Mr Costa).
The exchanges between EuropeFX representatives and the EFX30 to which reference has just been made also reveal other important contextual circumstances in respect of which all the disputed personal advice statements were made. Those circumstances include: first the EuropeFX representatives almost invariably made statements which would have led their customers to understand or believe that the representative would guide and assist the customer in relation to their trading; second, the statements were invariably made in the context of one-on-one telephone communications between the EuropeFX representative and the customer and in circumstances of an ongoing relationship between the representative and the customer; and third, each of the disputed personal advice statements was made in the context of the customer's trading and in circumstances where, to the customer's knowledge, the EuropeFX representative was able to see what was on the customer's trading screen at the time and was able to access information about, for example, the customer's account balance, equity and margin. The customer's account balance, equity and margin at the time were aspects of, or plainly relevant to, their objectives and financial situation.
The circumstances in which the disputed statements were made were far removed from, for example, the circumstances which exist when a representative of a financial service provider made recommendations or statements of opinion to a group of customers in circumstances where the representative knew little about, or had no ongoing relationship with, those customers.
I am, in all the circumstances, comfortably satisfied that all the disputed personal advice statements that were made to the EFX30 were made in circumstances where a reasonable person might expect that the EuropeFX representative who made the statement had considered one or more of the objectives, financial situation and needs of the particular customer to whom the statement was made.

[146]

Summary of findings and conclusions in relation to EuropeFX personal advice contraventions

As discussed earlier, EuropeFX admitted that it contravened s 911A of the Corporations Act on at least 177 occasions when its representatives gave personal advice to customers.
As for the disputed personal advice statements, I have found that each of those statements: first, amounted to a recommendation or statement of opinion by the representative; second, could reasonably be regarded as having been intended to influence the EuropeFX customer to whom the statement was made to act in accordance with the recommendation or statement of opinion; and third, was made in circumstances where a reasonable person might expect that the EuropeFX representative had considered one or more of the EuropeFX customer's objectives, financial situation and needs. Each of the 108 statements accordingly constituted or comprised personal advice for the purposes of s 766B of the Corporations Act.
EuropeFX did not dispute that it was not authorised or permitted to provide personal advice to customers. It follows that EuropeFX contravened s 911A of the Corporations Act on at least each of the 108 occasions that it provided personal advice to customers, through its account managers or representatives, in circumstances where it was not licensed to do so.
As was the case in respect of the admitted contraventions, there is again a potential issue that arises in respect of the number of contraventions flowing from the making of the disputed personal advice statements. That issue arises because 10 of the 108 rows Annexure A.1 identify statements that were characterised by ASIC as comprising statements which fell into two of the defined categories of personal advice statements. If the correct position is that the making of a statement that comprised two of the defined categories gives rise to two contraventions, EuropeFX may be found to have contravened s 911A on 118 occasions as a result of making the 108 disputed personal advice statements.
As was the case in respect of the admitted personal advice contraventions, I will entertain further submissions in respect of this issue at the relief stage. At this stage, however, I will proceed on the basis that the making of the disputed personal advice statements (in the 108 identified rows of Annexure A.1) gives rise to 108 contraventions of s 911A of the Corporations Act.
EuropeFX accordingly contravened s 911A of the Corporations Act on at least 285 occasions (177 being the subject of admissions, together with the 108 statements found to have constituted personal advice).

[149]

Findings

For the reasons given earlier in the context of ASIC's personal advice case against EuropeFX, statements that fall within those categories of statements almost by definition constitute recommendations or statements of opinion for the purposes of s 766B(1) of the Corporations Act.
I have considered each of the 20 statements. I am satisfied that each of them was correctly categorised by ASIC as identified in Annexure A.2. I am also satisfied that each of them constituted recommendations or statements of opinion. I have also considered the 20 statements in the context in which they were made and am comfortably satisfied that each of them could reasonably be regarded as having been intended to influence the relevant TradeFred customer in making a decision in relation to particular financial products or classes of financial products, namely CFDs or Margin FX Contracts. Each of the 20 statements therefore constituted "financial product advice" as defined in s 766B of the Corporations Act.
The remaining issue is whether each of the 20 statements was made in circumstances where a reasonable person might expect the provider (the TradeFred account manager) to have considered the "objectives, financial situation and needs" of the person to whom the statement was made (the TradeFred customer): s 766B(3)(b) of the Corporations Act.
In the same way as it did in its personal advice case against EuropeFX, ASIC prepared a table in which it extracted recorded exchanges between TradeFred account representatives and TradeFred customers (each of the TF20) in which the account managers asked questions about the customers objectives, financial position and needs. That table is Annexure B.2 to the SOC.
I have considered the statements extracted in Annexure B.2. I have also read them in the context in which they were made. Having considered each of the impugned 20 statements in the context of the statements extracted in Annexure B.2, I am comfortably satisfied that each of the 20 statements was made in circumstances where a reasonable person might expect the TradeFred account manager who made the statement to have considered the "objectives, financial situation and needs" of the TradeFred customer to whom the statement was made.
It follows that each of the 20 impugned statements constituted personal advice.
TradeFred's ability to provide financial product advice as a corporate authorised representative of USG was subject to the terms of USG's AFSL. That AFSL authorised USG to, among other things, provide "general financial product advice". USG was not authorised to provide personal financial product advice. It follows that TradeFred contravened s 911A(5B) on each of the 20 occasions that its account managers made personal advice statements to TradeFred customers.

[152]

Statutory provisions and relevant principles

Prohibitions against the making of false or misleading representations, and prohibitions against engaging in conduct that is misleading or deceptive, are provided for, in slightly differing terms, in ss 1041E and 1041H of the Corporations Act and ss 12DA and 12DB of the ASIC Act. There is no material difference between the terms of each provision in their legal application: ASIC v MLC Nominees Pty Ltd [2020] FCA 1306; (2020) 147 ACSR 266 at [47]; Mayfair Wealth Partners Pty Ltd v ASIC [2022] FCAFC 170; (2022) 292 FCR 106 at [20] (Jagot, O'Bryan and Cheeseman JJ). Since ASIC ultimately limited its case to alleged contraventions of s 12DA and s 12DB of the ASIC Act, the following discussion will focus primarily on those provisions.
Sections 12DA and 12DB of the ASIC Act relevantly provide: 12DA Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. … 12DB False or misleading representations (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services: (a) make a false or misleading representation that services are of a particular standard, quality, value or grade; or … (e) make a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits; or … (h) make a false or misleading representation concerning the need for any services; or (i) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including an implied warranty under section 12ED); or … Note: Failure to comply with this subsection is an offence (see section 12GB). (1A) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation of a kind referred to in paragraph (1)(c) or (d), the representation is taken to be misleading unless evidence is adduced to the contrary. (1B) To avoid doubt, subsection (1A) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the representation is not misleading; or (b) have the effect of placing on any person an onus of proving that the representation is not misleading. …
The central question in determining whether a representation was false or misleading, or whether the conduct involved in making the representations was misleading or deceptive, or likely to mislead or deceive, is "whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error (that is, to form an erroneous assumption or conclusion about some fact or matter)": Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd [2019] FCA 1932; (2019) 140 ACSR 561 at [98] (O'Bryan J).
Conduct is likely to misled or deceive "if there is a real or not remote chance or possibility of doing so": Bing! Software v Bing Technologies [2009] FCAFC 131; (2009) 180 FCR 191 at [50] (Kenny J); Dover Financial at [98]. It is, however, unnecessary to prove that the representor, or the person who engaged in the impugned conduct, had an intention to mislead or deceive, or that the representation or conduct in question actually deceived or misled anyone. The relevant question is objective: whether the conduct has a sufficient tendency to induce error: Dover Financial at [99].
Where the impugned representation or conduct is directed at a particular individual, the Court is to consider whether the representation or conduct is likely to mislead or deceive that individual having regard to the objective circumstances, including the known characteristics of the individual and what he or she knew or is taken to have known: Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [37] (Gleeson CJ, Hayne and Heydon JJ); Dover Financial at [99].
The impugned representation or conduct must be considered in context. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, Gibbs CJ said at 199 that "[i]t is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words": see also Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; (2023) 277 CLR 186 at [82].
Some of the representations made by EuropeFX representatives which ASIC alleged to be misleading or deceptive were, or were alleged to be, representations pertaining to future matters. A future matter means anything that is to occur in the future and includes a prediction or projection. Section 12BB of the ASIC Act relevantly provides as follows in relation to representations with respect to future matters: 12BB Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of Subdivision D (sections 12DA to 12DN), to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
Section 12BB(2) of the ASIC Act imposes an evidential burden on a respondent. It does not impose on a respondent the legal or persuasive burden of proving that reasonable grounds existed for making the representation alleged: see North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60; (2010) 269 ALR 262 at [29], where the Full Court addressed the equivalent provision in s 51A(2) of the Trade Practices Act 1974 (Cth). The deeming effect of s 12BB(2) arises only when the respondent (the representor) does not adduce any "evidence … to the contrary"; that is, some evidence which is capable of supporting an inference that it had reasonable grounds for making the representation. Once the respondent discharges that evidential burden, the obligation is on the applicant to establish that the respondent did not have reasonable grounds for making the representation: North East Equity at [33]; see also North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; (2012) 285 ALR 217 at [28]-[34]; SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) [2014] FCAFC 50; 314 ALR 35 at [71]-[73].
The evidential burden imposed by the deeming provision in s 12BB(2) of the ASIC Act essentially requires the respondent (representor) to show each of the five following matters: first, the existence of some facts or circumstances; second, that those facts or circumstances existed at the time of the representation; third, the representor in fact relied on those facts or circumstances; fourth, those facts or circumstances were objectively reasonable; and fifth, those facts or circumstances support the representation made: Sykes v Reserve Bank of Australia [1988] FCA 1405; (1998) 88 FCR 511 at 513; Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94; [2001] ATPR 46-210 at [84]; Australian Securities and Investments Commission v Get Swift Limited (Liability Hearing) [2021] FCA 1384 at [2185]. The "section effectively require[s] the representor to identify the facts or circumstances (if any) actually relied upon [proposition (3)] before turning it over to the trier of fact to decide whether they were objectively reasonable [proposition (4)] and whether they support the representation made [proposition (5)]": Jazabas at [85].
It is ultimately a matter for the Court to determine if the evidence adduced by the representor tends to establish, or admits of the inference, that there were reasonable grounds for the making of the representation: McGrath; in the matter of Pan Pharmaceutical Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230 at [191]-[192]; Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [128]; Get Swift at [2159]-[2161]. If the Court is not satisfied that the evidence adduced tended to establish reasonable grounds, the evidence is not evidence to the contrary, and the deeming provision in s 12BB(2) applies.
It will "generally be a formidable task to prove what in fact was relied upon in making a future representation when the person or persons responsible for making the representation … are not called": Get Swift at [2163].
Whether or not there were reasonable grounds for making the representation is ultimately a question of fact to be judged at the time that the representation was made: Australian Securities and Investments Commission v Forex Capital Trading Pty Limited [2021] FCA 570 at [64].

[155]

Revenue Representations

Revenue Representations were defined in the SOC as representations to the effect that: (i) USG would not make a market for any CFD or Margin FX Contract positions opened by the customer; (ii) EuropeFX (or TradeFred, as the case may be) would generate revenue when the customer made money; (iii) EuropeFX (or TradeFred) would generate revenue based solely on commissions or fees which applied when a customer opened a CFD or Margin FX Contract position (such as spread or commission) and/or when a customer kept open a CFD or Margin FX Contract position (swap charges); (iv) EuropeFX (or TradeFred) would not make money when a customer lost money; (v) the account managers would earn commission based solely on commissions or fees which applied when a customer opened a CFD or Margin FX Contract position (such as spread or commission) and/or when a customer kept open a CFD or Margin FX Contract position (swap charges).
The general or common theme of the different types of Revenue Representations was that the customer's financial interests were aligned with the financial interests of EuropeFX (or TradeFred, as the case may be), or in some cases with the financial interests of the representative making the representation.
By way of example, a EuropeFX representative, Jacob, made the following representation to Mr Wilson on 25 September 2019 (row 22 in Annexure C.1 to the SOC): JACOB: …And believe me, in the end of the day when you were trading, remember whenever we traded your opening, we are getting commission because you are paying to the platform. If you think that this is - BENJAMIN WILSON: Yeah, I know. JACOB: -- the fact that you lost is doing good to anyone in the company, you're wrong.
ASIC contended that Jacob's representation to Mr Wilson was properly characterised as a Revenue Representations as defined. EuropeFX ultimately conceded that to be the case.
ASIC alleged that Revenue Representations were representations as to future matters and that EuropeFX and TradeFred did not have reasonable grounds to make those representations. ASIC also alleged that representations that were properly characterised as Revenue Representations were false or misleading because the customer's financial interests could not in any relevant sense be said to be aligned to the financial interests of EuropeFX or its representatives. EuropeFX ultimately admitted that the representation that Jacob made to Mr Wilson was false or misleading.

[158]

Loss Recovery Representations

Loss Recovery Representations were defined as representations to the effect that: (i) positions that had moved against a customer represented only "temporary" losses, and that it was reasonably likely, or that there was a reasonable prospect, that such positions would become profitable; or (ii) that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, profits sufficient to recover realised and unrealised losses suffered by the customer from their trading.
By way of example, on 30 October 2018, a EuropeFX representative, Robbie, made the following representations to Mr Kalusinghe (row 127 of Annexure C.1 to the SOC): ROBBIE: I'm saying that right now if you want, I can help you, okay? We do have the potential to start recover that loss, but we do need to work with the right way, with the right capital in the account and with the right strategies. This is what I'm saying. Listen, Prasana, I don't want to waste your time and I don't want to waste my time. The main question is if you care about those funds, if you care about the money, if you do want to recover that money back. That is the main question. PRASANA KALUSINGHE: Okay. Yes, I want to recover that money. But, okay, how -- ROBBIE: So let me help you. PRASANA KALUSINGHE: Okay, please, okay. ROBBIE: Do you know another way that you can recover 80,000 in a very short period of time? I'm sure that's "No", right? PRASANA KALUSINGHE: No way (indistinct). ROBBIE: And I'm sure that you already know what is the potential in that market and you know that we do have the potential to start recover that loss, especially with the events that we have this week, okay? So I know that you think that maybe 80,000 it's a lot of money, but believe me, you know, it's nothing, okay, in this market? So we do have the potential to start recover this loss maybe by this week, okay, maybe the next one, two, or today.
ASIC contended that Robbie's representations were properly characterised as Loss Recovery Representations as defined. EuropeFX ultimately conceded that to be the case, but did not concede that the representations were misleading or deceptive.
ASIC alleged that representations that fell within the Loss Recovery Representations were representations as to future matters and that EuropeFX (or TradeFred, as the case may be) did not have reasonable grounds to make them. Specifically, ASIC alleged that the representatives who made Loss Recovery Representations had no reasonable basis for suggesting that, when a position moved against a customer, the loss was only temporary, or was only a "paper" loss, or that the customer would be able to generate profits sufficient to recover the loss.

[159]

Equities Representations

Equities Representations were defined as representations to the effect that, by reducing investments in equities (including those held in a superannuation account), and increasing investment in the derivative products offered by EuropeFX (or TradeFred as the case may be): (i) customers would reduce their exposure to risk; or (ii) it was reasonably likely, or that there was a reasonable prospect, that the customer would increase their returns.
By way of example, on 1 August 2019, a EuropeFX representative, Leo, made the following statements to Mr Isaacs (row 886 in Annexure C.1 to the SOC): LEO: When I - when - when Jacob talked to me, he told me that you have other kinds of investments right? You have investments with the bank? You have shares? …You have like a shares portfolio? JOHN ISAACS: Yes, I do. LEO: Are you holding shares? Okay. Now tell me what is the annual return from this shares? What is the return of it that you're getting? JOHN ISAACS: Some of them are good shares. Seven and a half to eight percent. LEO: Seven to - seven and a half to eight percent yearly right? JOHN ISAACS: Yes. LEO: And what is the estimated value of all of your shares? JOHN ISAACS: Little more than 100,000. LEO: A little more than 100,000? Let me ask you a question. Are you with me John? JOHN ISAACS: Yes. LEO: Okay. Let's say you get out of this situation okay? You're going to be happy right? JOHN ISAACS: I we can - if I can get out of this, I'll be very happy. … LEO: Okay. Now let me ask you a question. Be honest with me. Let's say you get out of this situation. On the process you made as you can see $40,000 which is like what? 40 percent of your whole capital. 30 percent of your whole capital to date. Which is far better than what you're doing with the shares over there right? You're saying you're getting what? …Seven percent, eight percent yearly? Right? …So, let's say you get out of this situation okay? And everything is good. Would you consider moving your portfolio there, moving your funds there over here so it can work better for you? JOHN ISAACS: If you can get me out of this mess. …I will consider that.
ASIC contended that the representations made by Leo during this exchange were properly characterised as constituting an Equities Representation as defined. EuropeFX ultimately conceded that to be the case, but did not concede that the representations were misleading and deceptive.
ASIC alleged that representations that fell within the Equities Representations category were representations as to future matters and that EuropeFX (or TradeFred, as the case may be) did not have reasonable grounds to make them. ASIC also alleged that these representations were misleading or deceptive because CFDs and Margin FX Contracts were not relevantly comparable to equities and the representatives had no reasonable grounds for making such comparisons.

[160]

Bank Account Representations

Bank Account Representations were representations to the effect that it was reasonably likely, or there was a reasonable prospect, that the customer would generate greater returns by investing the customer's money with EuropeFX (or TradeFred, as the case may be) by trading CFDs or Margin FX Contracts than by keeping it in a bank account (i.e. an account with an Australian deposit taking institution).
By way of example, on 9 November 2018, a EuropeFX representative, Jovanni, made the following representation to Ms Boden (row 458 in Annexure C.1 to the SOC): JOVANNI: …Do you have a savings account, do you use that one, do you want to increase that one? JULIE BODEN: There's kind of money in another account, which I don't know if I can get my hands on. JOVANNI: How much the return from that accounts? JULIE BODEN: How much is there? JOVANNI: The return. Nothing, right? JULIE BODEN: What -- JOVANNI: The money's just sitting there and collecting dust. JULIE BODEN: Yeah, but it's in like a - like a fixed account. JOVANNI: What do you mean "fixed account"? JULIE BODEN: Fixed, it's like I can't access it. JOVANNI: Why? It not belong to you? JULIE BODEN: Because that's the way they work. JOVANNI: With other trading company? JULIE BODEN: No, no, like with the bank and stuff. JOVANNI: Okay, okay. Now I'm understanding. JULIE BODEN: Yeah, like a fixed term. JOVANNI: You need to understand that that is very, very wise to do, because here with me right now with us, your money is not collecting dust, your money is getting fatter. It's a fact.
ASIC contended that the representations made by Jovanni during this exchange were properly characterised as constituting a Bank Account Representation as defined. EuropeFX ultimately agreed that to be the case, but did not concede that the representations were misleading or deceptive.
ASIC alleged that representations that fell within the Bank Account Representations category were misleading or deceptive, and that the representatives had no reasonable grounds for making them, because the prospect of a customer who was inexperienced in CFD or Margin FX Contract trading generating returns that exceeded the interest returns generated from a deposit in a bank was very low.

[162]

Regulation Representations

Regulation Representations were defined as representations to the effect that EuropeFX (or TradeFred, as the case may be) was "regulated" by ASIC, such that the customer was exposed to less risk than would otherwise be the case.
By way of example, on 18 June 2019, a EuropeFX representative, Leo, made the following representation to Ms Robinson (row 907 Annexure C.1 of the SOC): LEO: Thank you very much. So, part of my thank you very much for being, you know, honest, and by the end of the day, you need to understand that the most important part is to make you feel comfortable, to make you feel safe, and to make you understand that what you're doing is, of course, right for you. Because, by the end of the day, we work under ASIC regulations. I'm sure that you know. ANNE MAREE ROBINSON: Yes. LEO: ASIC is the Australian Security Investment Commission, right. The same institution that regulates every other bank in Australia, regulates our company as well. So, when it comes to security - - - ANNE MAREE ROBINSON: Okay. LEO: - - - of your trading account, you can be sure that, if you trust your bank you should also trust our company, because we are being regulated by the same institution, governmental institution. That's number one. ANNE MAREE ROBINSON: Well, that's - - - LEO: Number - - - ANNE MAREE ROBINSON: That's very, very assuring. Thank you.
ASIC contended that Leo's representations to Ms Robinson were properly characterised as constituting a Regulation Representation as defined. EuropeFX ultimately conceded that to be the case.
ASIC alleged that representations that fell within the Regulation Representations category were misleading or deceptive because, while EuropeFX and TradeFred were corporations registered in Australia, were providing financial services on behalf of USG in Australia, and were therefore subject to regulation by ASIC, there was no guarantee that they would comply with the applicable requirements of the ASIC Act or Corporations Act. EuropeFX ultimately admitted that Leo's representations to Ms Robinson concerning EuropeFX being regulated were false or misleading.

[167]

ASIC's narrowed false, misleading or deceptive statements case against EuropeFX

As was the case in respect of the personal advice contravention allegations, the Court pressed ASIC to explain the utility in requiring the Court to engage in the massive task of determining whether EuropeFX contravened one or other of ss 1041E and 1041H of the Corporations Act or ss 12DA and 12DB of the ASIC Act on another approximately 1,400 separate occasions. ASIC was asked to explain how that could be consistent with the overarching purpose of the Court's civil practice and procedure provisions, which includes facilitating the just resolution of disputes "as quickly, inexpensively and efficiently as possible", the "efficient use of judicial resources" and the "efficient disposal of the Court's overall caseload": s 37M of the FCA Act.
In the face of the Court's concerns in that regard, ASIC again agreed to narrow its case against EuropeFX in respect of its allegations that EuropeFX representatives made false, misleading or deceptive representations to the EFX30. Specifically, ASIC agreed to limit its case by only pressing the Court to make contravention findings in respect of the representations made on 127 further occasions (identified by reference to 127 rows in Annexure C.1 to the SOC) in addition to the representations that EuropeFX admitted were false, misleading or deceptive. While EuropeFX disputed that the representations made on those 127 occasions were false, misleading or deceptive, it admitted (with some minor qualifications) ASIC's characterisation of those representations. In other words, it admitted that the representations made on those 127 occasions were correctly characterised by ASIC as being a Profit Representation, a Revenue Representation, a Money Risk Representation, a Withdrawal Representation, a Loss Recovery Representation, an Equities Representation, a Bank Account Representation, a Plan Representation, a Regulations Representation or a Location Representation as defined in the SOC. As adverted to earlier, however, ASIC alleged, and EuropeFX appeared not to dispute, that some of the representations fell within more than one of the defined categories. I will generally refer to the representations in respect of which ASIC pressed the Court to make contravention findings as the disputed representations.
ASIC also agreed to narrow its case by not pressing its allegation that the making of each of disputed representations also constituted contraventions of ss 1041H(1) and/or 1041E of the Corporations Act (including by virtue of s 769C of the Corporations Act). In other words, ASIC only alleged that the making of those representations constituted or gave rise to contraventions of ss 12DB(1) or 12DA(1) of the ASIC Act, though ASIC did not allege that the making of some of the representations (the Revenue Representations and the Location Representations) constituted contraventions of s 12DB(1) of the ASIC Act. ASIC submitted that the Court should first determine whether the making of the disputed representations constituted or gave rise to contraventions of s 12DB(1) of the ASIC Act and need only go on to consider s 12DA(1) of the ASIC Act in respect of those representations that the Court found (or ASIC conceded, in the case of the Revenue Representations and Location Representations) did not constitute or give rise to contraventions of s 12DB(1) of the ASIC Act. The precise scope of ASIC's narrowed case in respect of the alleged false, misleading or deceptive representations was recorded in the Statement of Narrowed Case.
The disputed representations in respect of which ASIC pressed the Court to find constituted or gave rise to contraventions of s 12DB(1) or s 12DA(1) of the ASIC Act may conveniently be grouped together by reference to the admitted category of representation (that is, the defined category of representation that EuropeFX admitted the representation fell within - noting also that some representations fell within more than one of the defined categories) and identified by reference to the rows in Annexure C.1 to the SOC where the particulars of the representations are provided. The disputed representations were:
Profit Representations: rows 30 (Ms Love), 46 and 78 (Mr Kalusinghe), 165 173, 175, 199 (Ms Elford), 260 (Ms Battersby), 285, 291, 297 (Mr Bonini), 370, 391 (Ms Sapor), 437 (Ms Boden), 634, 733, 750 (Ms Liu), 795, 804, 807, 816, 825, 847 (Ms Aldous), 868 (Mr Isaacs), 896 (Mr Ayoub), 975, 990 (Mr Stubna), 1099, 1106 (Mr Geering), 1138, 1153 (Mr Lapham), 1175, 1180 (Mr Cartwright), 1245, 1249, 1253 (Mr Chircop), 1271 (Ms Green), 1320, 1326, 1333, 1337 (Mr Hillier), 1399, 1405, 1421 (Ms Scott), 1424 (Mr Dand), 1443, 1445 (Mr Costa).
Revenue Representations: rows 149 (Mr Kalusinghe), 231 (Ms Battersby), 302 (Mr Bonini), 323, 359 (Ms Sapor), 665 (Ms Liu), 784, 825 (Ms Aldous), 1167 (Mr Cartwright).
Money Risk Representation: rows 31 (Ms Love), 69 (Mr Kalusinghe), 221 (Ms Elford), 259 (Ms Battersby), 317, 329 (Ms Sapor), 636 (Ms Liu), 810, 836 (Ms Aldous), 868 (Mr Isaacs), 894 (Mr Ayoub), 947 (Ms Robinson), 975 (Mr Stubna), 1014 (Mr Grubb), 1053, 1086, 1103, 1105, 1114 (Mr Geering), 1142 (Mr Lapham), 1180, 1223 (Mr Cartwright), 1249 (Mr Chircop), 1271, 1272 (Ms Green), 1280 (Ms Larsen), 1405 (Ms Scott), 1450 (Mr Costa).
Withdrawal Representations: rows 4 (Mr Wilson), 52 (Mr Kalusinghe), 233 (Ms Battersby), 299 (Mr Bonini), 336 (Ms Sapor), 437 and 479 (Ms Boden), 620, 639, 652, 715 (Ms Liu), 784, 786, 795, 825, 836, 847 (Ms Aldous), 908 (Ms Robinson), 961 (Mr Stubna), 992 (Ms Curtin), 1055, 1086, 1103, 1114 (Mr Geering), 1172, 1180, 1223 (Mr Cartwright), 1249 (Mr Chircop), 1262 (Ms Green), 1280, 1295 (Ms Larsen), 1380, 1391, 1405 (Ms Scott), 1445 (Mr Costa).
Loss Recovery Representation: rows 21 (Mr Wilson), 78, 127, 133, 137 (Mr Kalusinghe), 259 (Ms Battersby), 393 (Ms Sapor), 435 (Ms Boden), 810, 847 (Ms Aldous), 1096, 1118 (Mr Geering), 1138, 1142 (Mr Lapham), 1192, 1223 (Mr Cartwright), 1272 (Ms Green), 1336 (Mr Hillier), 1365 (Ms Sofer), 1399 (Ms Scott), 1478 (Mr Costa).
Equities Representation: rows 886 (Mr Isaacs), 896 (Mr Ayoub), 1424 (Mr Dand).
Bank Account Representation: rows 280 (Mr Bonini), 458 (Ms Boden), 588 (Ms Kuhn), 866, 871 (Mr Isaacs), 1424 (Mr Dand), 1443, 1445, 1452 (Mr Costa).
Plan Representation: NIL.
Regulation Representation: rows 4 (Mr Wilson), 241(Ms Battersby), 302 (Mr Bonini), 501 (Ms Boden), 716 (Ms Liu), 870 (Mr Isaacs), 909 (Ms Robinson), 984 (Mr Stubna), 1380 (Ms Scott), 1448 (Mr Costa).
Location Representation: rows 24 (Ms Love), 304 (Ms Sapor), 984 (Mr Stubna), 1169, 1173 (Mr Cartwright), 1431 and 1448 (Mr Costa).
As can be seen, none of the disputed representations were Plan Representations. That was largely a product of the fact that EuropeFX admitted that all the statements that it agreed were properly characterised as Plan Representations were false, misleading or deceptive and therefore constituted or gave rise to contraventions.

[168]

Contraventions admitted by EuropeFX

EuropeFX admitted the entirety of ASIC's pleaded allegations concerning the following representations that were made by EuropeFX representatives:
Profit Representations: rows 417 (Ms Boden), 658 (Ms Liu), 773 (Ms Aldous), 863 (Mr Isaacs), 1080 (Mr Geering), 1140 (Mr Lapham), 1203, 1207, 1210, 1231 (Mr Cartwright), 1242 (Mr Chircop), 1412 (Ms Scott).
Revenue Representations: rows 22 (Mr Wilson), 1413 (Ms Scott).
Money Risk Representation: row 1080 (Mr Geering).
Withdrawal Representations: rows 336 (Ms Sapor), 520 (Ms Boden), 616, 658 (Ms Liu), 1080 (Mr Geering), 1231 (Mr Cartwright).
Loss Recovery Representation: rows 41 (Ms Love), 849 (Ms Aldous), 1072, 1102, 1122 (Mr Geering), 1140 (Mr Lapham), 1203, 1231 (Mr Cartwright), 1396, 1419 (Ms Scott).
Equities Representation: rows 861 (Mr Isaacs), 1263 (Ms Green).
Bank Account Representation: rows 658 (Ms Liu), 863 (Mr Isaacs), 1242 (Mr Chircop), 1263 (Ms Green).
Plan Representation: rows 26, 27, 34, 38, 41 (Ms Love), 163, 172, 177, 183 (Ms Elford), 305, 363 (Ms Sapor), 411, 469 (Ms Boden), 610 (Ms Kuhn), 661, 676, 681 (Ms Liu), 773 (Ms Aldous), 861, 863, 864, 865 (Mr Isaacs), 903, 904 (Ms Robinson), 1122, 1123 (Mr Geering), 1263 (Ms Green), 1275 (Ms Larsen), 1316 (Mr Hillier), 1419 (Ms Scott).
Regulations Representation: rows 907 (Ms Robinson), 1166 (Mr Cartwright), 1306 (Mr Hillier), 1373 (Ms Scott).
Location Representation: NIL.
There was and is an element of ambiguity in relation to EuropeFX's apparently unqualified admission of the "entirety" of ASIC's pleaded allegations in respect of these representations. On one view, EuropeFX may be taken to have admitted that, with some limited exceptions, the making of each of those representations by EuropeFX representatives constituted, or gave rise to, each of the contraventions pleaded by ASIC in the SOC, which would include contraventions of not only ss 12DA and 12DB of the ASIC Act, but also ss 1041E and 1041H of the Corporations Act. That would, however, be somewhat inconsistent with the way ASIC ultimately pressed its case in respect of the disputed representations.
The parties did not squarely address this issue in their respective submissions. I propose at this stage to proceed on the basis that EuropeFX's admissions be treated as being admissions to the effect that, by making those representations, it contravened s 12DB or s 12DA of the ASIC Act. I will hear further from ASIC and EuropeFX at the relief stage as to whether the admissions should also be treated as admissions that, by making those representations, EuropeFX also contravened ss 1041E and 1041H of the Corporations Act.
There is also an element of uncertainty as to whether the making of representations which ASIC alleged, and EuropeFX admitted, fell within more than one of the defined categories of representations, constituted or gave rise to multiple contraventions (that is, separate contraventions in respect of each of the admitted categories) or only one contravention. For example, the representations made by the EuropeFX account manager which are particularised at row 658 of Annexure C.1 of the SOC are alleged (and admitted by EuropeFX) to include not only a Profit Representation, but also a Withdrawal Representation and a Bank Account Representation. Do the statements at row 658 give rise to one or three contraventions of the relevant provisions of the ASIC Act?
The parties again did not squarely address this issue in their submissions. The answer to that question would appear to me to be that, because the representations made by the EuropeFX representative at row 658 may be properly construed as involving three separate representations (a Profit Representation, a Withdrawal Representation and a Bank Account Representation), they therefore give rise to three separate contraventions. In other words, EuropeFX's admission in relation to row 658 may be taken to be an admission of three contraventions: one in respect of the Profit Representation, one in respect of the Withdrawal Representation, and one in relation to the Bank Account Representation. That appears to have been the way the parties proceeded. It is also the way I propose to proceed at this stage in respect of each of the rows in Annexure C.1 which involve representations that ASIC characterised as involving representations that fall within two or more of the defined categories. Given the ambiguity and uncertainty, however, I will, if necessary, entertain further submissions at the relief hearing in respect of this issue.
EuropeFX's admissions may therefore be taken to be admissions in respect of representations that fall within all the defined categories that are particularised in the 53 rows of Annexure C.1 referred to earlier. There are 71 such representations. Two of those representations - being representations referred to at rows 22 and 1413 - were Revenue Representations. ASIC did not allege that the making of a Revenue Representation constituted or gave rise to a contravention of s 12DB(1) of the ASIC Act, though it did allege that the making of such a representation would constitute or give rise to a contravention of s 12DA(1) of the ASIC Act. It follows that the Revenue Representations at rows 22 and 1413 constituted contraventions of s 12DA(1) of the ASIC Act. The remaining 69 representations constituted contraventions of s 12DB(1) of the ASIC Act. As noted earlier,
As I have already noted, I will hear further from the parties at the relief stage as to whether EuropeFX's unqualified admissions in respect of those representations support findings that EuropeFX also contravened ss 12DA(1) of the ASIC Act (in respect of the 69 representations that I have found gave rise to contraventions of s 12DB(1) of the ASIC Act) and ss 1041E and1041H of the Corporations Act. I will also entertain further submissions as to whether, in making false, misleading or deceptive representations that ASIC characterised as falling within more than one of the defined categories, EuropeFX may be taken to have made a false, misleading or deceptive representation in respect of each of those defined categories.

[170]

Profit Representations

ASIC pressed the Court to make findings in respect of 47 alleged Profit Representations that were made to the EFX30, being: representations made to Ms Love (row 30 of Annexure C.1 to the SOC); Ms Elford (row 46), Mr Kalusinghe (row 78), Ms Elford (rows 165, 173, 175 and 199), Ms Battersby (row 260); Mr Bonini (rows 285, 291 and 297); Ms Sapor (rows 370 and 391); Ms Boden (row 437); Ms Liu (rows 634, 733 and 750); Ms Aldous (rows 795, 804, 807, 816, 825 and 847); Mr Isaacs (row 868); Mr Ayoub (row 896); Mr Stubna (rows 975 and 990); Mr Geering (rows 1099 and 1106); Mr Lapham (rows 1138 and 1153); Mr Cartwright (rows 1175 and 1180); Mr Chircop (rows 1245, 1249 and 1253); Ms Green (row 1271); Mr Hillier (rows 1320, 1326, 1333 and 1337); Ms Scott (rows 1399, 1405 and 1421); Mr Dand (row 1424); and Mr Costa (rows 1443 and 1445).
EuropeFX denied that those 47 representations were false or misleading, though it admitted that each of them was properly characterised as Profit Representations as defined by ASIC in the SOC. It will be recalled that the definition of a Profit Representation was: a representation to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts: (i) profits consistent with a specific figure or percentage return on investment stated by the account manager; (ii) income sufficient for the customer's trading to be their main source of income; or (iii) income sufficient to constitute a "secondary income". Given EuropeFX's admissions concerning the characterisation of the 47 disputed Profit Representations, each of those representations may be taken to be a representation to the effect of one of those defined subcategories of Profit Representation.
It was common ground that a representation that was properly characterised as a Profit Representation was a representation as to a future matter for the purposes of s 12BB of the ASIC Act. It follows that the first question that must be asked and answered in respect of each of the Profit Representations is whether EuropeFX has discharged its evidential burden of proving that reasonable grounds existed for making the representation alleged. That burden requires EuropeFX to establish: first, the existence of some facts or circumstances; second, that those facts or circumstances existed at the time of the representation; third, that the EuropeFX representative who made the representation in fact relied on those facts or circumstances; fourth, those facts or circumstances were objectively reasonable; and fifth, those facts or circumstances supported the representation. If EuropeFX does not discharge its evidential burden in that regard, will be taken not to have had reasonable grounds for making the representation. If EuropeFX discharges its evidential burden, ASIC bears the onus of establishing that the EuropeFX representative did not have reasonable grounds for making the representation.
As has already been noted, EuropeFX did not adduce evidence from any of the EuropeFX account managers who made any of the Profit Representations. It essentially relied on two categories of evidence which it submitted discharged the evidential burden imposed on it by s 12BB of the ASIC Act. The first category of evidence comprised statements made during the telephone conversations in which the Profit Representations were made. The second category of evidence was expert opinion evidence from Mr Dowd, though as events transpired, only two of the 47 disputed Profit Representations were directly addressed in Mr Dowd's evidence. Those two Profit Representations were: first, the representation made to Ms Battersby by Elay on 13 September 2019 (row 260 in Annexure C.1 to the SOC); and second, the representation made to Ms Sapor by David on 13 August 2019 (row 360 in Annexure C.1 to the SOC). Those two representations were also addressed in the expert evidence of Mr Blundell. The representation made to Ms Battersby was referred to in the expert evidence as Profit Representation 5 and the representation made to Ms Sapor was referred to as Profit Representation 7.
I will first consider the evidence relating to Profit Representations 5 and 7. I will then address the balance of the disputed Profit Representations. It will also then be necessary to consider whether the Profit Representations, if found to be misleading, constituted representations that the financial services in question (providing financial product advice or dealing in financial products) were of a particular standard or quality, or had certain performance characteristics, for the purposes of s 12DB(1)(a) or (e) of the ASIC Act.

[171]

Profit Representation 5

Profit Representation 5 was as follows: ELAY YOTAM: Think for a second. It's 36,000 AUD. It's a lot of money. Thirty-six thousand AUD. It's not winning a lottery, right? This is the expectation, right? It's not a gambling, it's the expectation. It's the strategy, okay? I'm not selling you right now the dream, okay? This is the expectation, okay?
It may be accepted, based on EuropeFX's concession or admission that this representation was properly characterised as a Profit Representation as defined, that it amounted to a representation by Elay that it was reasonably likely, or that there was a reasonable prospect, that Ms Battersby would derive a profit of AUD$36,000 from trading the CFD that was the subject of the discussion. Even putting EuropeFX's concession to one side, I am in any event satisfied that that was the effect of what Elay was saying. The representation accordingly fell within the first subcategory of Profit Representations, being a representation by Elay that Ms Battersby would generate profits consistent with the specific figure or percentage return on investment stated by Elay.
It was common ground that that it was necessary to read and consider the representation in its appropriate context, including in the context of the conversation between Elay and Ms Battersby that preceded and followed the representation. It is unfortunately very difficult to follow much of what Elay said during his conversation with Ms Battersby. It was, however, essentially common ground, at least between Mr Dowd and Mr Blundell, that the conversation between Elay and Ms Battersby, or at least the statements made by Elay which surrounded the relevant representation, involved the following facts or circumstances: first, the conversations related to a gold CFD; second, one gold CFD represented 100 ounces of gold; third, general market information sources, such as Investing.com and Trading Central, were expecting that the price of gold would reach $1,564 per ounce; and fourth, Elay anticipated that Ms Battersby's account would realise a profit of $36,000 if the price of gold reached $1,564 per ounce.
I am prepared to proceed on that basis of the factual assumptions or inferences upon which Mr Blundell and Mr Dowd proceeded, though not without some reservations. My main reservation is that, while Elay referred to third-party sources including Investing.com and Trading Central having an expectation that the price of gold would go up, it is not entirely clear that those sources in fact had stated that they expected the price of gold to reach $1,564. Though Elay does state that $1,564 was the "target price" to reach, it is not entirely clear that the third-party sources were the source for that target price. The third-party reports were not in evidence.
Mr Dowd expressed the opinion, based on various assumptions and other information, that it was "very likely" that Ms Battersby would generate a profit of $36,000 from trading in a gold CFD as Elay had represented to her. One of the assumptions relied on by Mr Dowd was that "the price of Gold subsequently traded in the direction anticipated by third-party sources Investing.com and Trading Central". Another assumption was that that there would be a "holding period of greater than one week" - in other words, the position taken by Ms Battersby in the gold CFD would be held open for more than a week.
The information upon which Mr Dowd's opinion was based included: the "Daily Range" for gold in the 10-days prior to September was $22.20 per ounce; the "Average True Range" for gold in the 10 days prior to 13 September 2019 was $21.61; and the closing price of gold on 13 September 2019, was $1,488.27. Mr Dowd also noted that "with the benefit of hindsight", it could be observed that during the period from 1 August to 13 August 2019, there had been a total price change of over $132.04 in nine trading days. The essence of Mr Dowd's opinion was that, based on those assumptions and that information, the "price volatility" of gold was "sufficient to support the potential for a market price move of the magnitude described" by Elay. In other words, his opinion appeared to be that if the price target was within the volatility range, there was a reasonable likelihood that the target would be achieved at some point.
It should also be noted that Mr Dowd's conclusion in respect of Profit Representation 5 was prefaced by the following statement: It is unclear what the anticipated holding period for this trade was expected to be. As a result, it is difficult to determine the reasonableness or likelihood of the price target being achieved.
There are several problems with EuropeFX's reliance on Mr Dowd's opinion as constituting evidence to the contrary for the purposes of s 12BB of the ASIC Act. There are in my view also problems with Mr Dowd's opinion. Before addressing those problems, however, I should briefly address Mr Blundell's opinion in respect of Profit Representation 5.
Mr Blundell's opinion was that there was "little to no prospect" that the profits suggested by Elay to Ms Battersby would be reached. He stated that in his experience "to make $36,000 on any single trade would take a large position to be held" and that "the larger the position … the higher the risk involved given the large margin required and the possibility that prices may not move in the direction expected". In expressing his opinion, Mr Blundell had regard to the state of Ms Battersby's trading account on the day the representation was made. He noted that at the time the representation was made to Ms Battersby, she only had two small positions open, one of which was a buy position in 1.5 gold CFDs. In his opinion, the "chances of those remaining small volume positions earning the profit suggested by the Account Manager is extremely small". He also noted that Ms Battersby had only deposited $17,500 in her trading account, which "would not have been enough to post as a margin for a position large enough to make the suggested profit in one or two days".
In reply to Mr Dowd's opinion, Mr Blundell noted that Mr Dowd had used daily and average true range values to assess price volatility and the likelihood of a price expectation being realised in the future. He agreed that those values can be used as a measure of volatility, however disagreed that it was appropriate to use those values to estimate the likelihood of a price expectation being realised in the context of a "retail", as opposed to an "institutional" investment setting. His opinion was that: Whilst the use of such tools is valid for institutional investors who can fund the margin on positions until the volatility in the market results in the prices moving in their favoured direction, often retail investors do not have the funds to keep positions open (by which I mean having sufficient free margin in the trading account to avoid margin call and forced liquidation) whilst prices in volatile markets are moving in the opposite direction to their expectation.
Mr Blundell also noted that the use by Mr Dowd of daily range and average range measures to support his conclusion was flawed because those measures do not necessary indicate that prices will move in any particular direction. He observed in that regard: The daily range and average true range as measure of volatility are agnostic as to direction. Simply because prices have moved in a daily range and average true range in the previous days does not mean they will continue to do so, but certainly does not mean they will continue to do so in a particular direction.
Mr Blundell was also critical of the fact that Mr Dowd had assumed that the market would trade in the direction anticipated by a third-party information provider. In his opinion, "it is inaccurate to assume that the third-party providers will always be correct".
Putting Mr Blundell's opinion to one side for the moment, as I have already noted, there are, in my opinion, several fundamental problems with EuropeFX's reliance on Mr Dowd's opinion.
The first and most substantial problem is that Mr Dowd's opinion is based on assumed facts and information that it cannot be inferred were facts or information that were in fact relied on by the EuropeFX account manager who made the representation in question. In particular, Mr Dowd's opinion was substantially based on his calculation of the daily range and average true range of gold prices. As Mr Dowd conceded in cross-examination, albeit in the context of his use of those values in his opinion in respect of a different representation, the figure for the daily range would not be known until the end of trading on the day in question. He also agreed that the figure he used for the average true range was the average of the 10 days inclusive of the day that the representation was made. Those figures could not have been known by the EuropeFX account manager at the time he made the representation. Mr Dowd's reliance on the daily range and average true range in my view involved a degree of hindsight reasoning.
In any event, there is no evidence whatsoever to suggest, or support any inference, that the account manager in fact relied on those figures, or relied on any figures representing the daily range or average true range for gold prices, when he made the representation. Nor is there any basis for inferring that the account manager had regard to some of the other information relied on by Mr Dowd, including the closing price of gold on 13 September 2019, or the fact that there had been a total price change of over $132.04 in nine trading days between 1 August and 13 August 2019.
The second problem with Mr Dowd's opinion, and EuropeFX's reliance on it, is that he simply assumed that the "directional call" made by Investing.com and Trading Central in respect of the price of gold was correct. He did not analyse the soundness or reasonableness of that directional call, and in effect accepted that it would have been difficult for him to analyse the reasonableness of the assumption because of the inherent uncertainty in making such directional predictions. Mr Dowd also simply assumed that the price of gold subsequently traded in the direction anticipated by the third-party sources. I accept Mr Blundell's opinion that Mr Dowd's analysis was flawed because "it is inaccurate to assume that the third-party providers will always be correct".
I should also add in this context that, as noted earlier, it is entirely unclear from the evidence whether Investing.com or Trading Central in fact identified the "target price" of $1,564 which was referred to by the account manager and was central to Mr Dowd's analysis. Even if that target price was identified by the third-party information providers, it is tolerably clear that Mr Dowd simply assumed that the target price was correct and did not analyse the soundness or reasonableness of that figure. The objective reasonableness of that assumption cannot be determined and is at best unclear.
A third problem with Mr Dowd's analysis is that he appears to have assumed, or proceeded on the basis, that the price of gold would continue to move in one direction - upwards - over a period of time until it eventually reached the target price. He also appears to have accepted that it would have taken more than a week for the price to reach the target price, which is why he assumed a "holding period of greater than a week". He appears to have discounted any possibility that the volatility of the price of gold was such that its movement would not be uniform and that there might be periods during which the price might drop. The basis of, or justification for, Mr Dowd's assumption in that regard is at best unclear. The reasonableness of the assumption is even less clear.
Mr Dowd's apparent assumption that the price of gold would continue to move upwards without any deviation in my view materially undermines his opinion. That is because Ms Battersby may not have been able to keep her position in gold CFDs open for up to or greater than a week if there were days during which the price dropped. As Mr Blundell observed in his report, often retail investors, like Ms Battersby, "do not have the funds to keep positions open (by which I mean having sufficient free margin in the trading account to avoid margin call and forced liquidation) whilst prices in volatile markets are moving in the opposite direction to their expectation".
A fourth and related problem with Mr Dowd's analysis and opinion is that he did not take into account that a customer like Ms Battersby, who kept a CFD position open for a lengthy period of time - Mr Dowd assumed that the position would have to be kept open for more than one week - would be liable for swap fees. The evidence in respect of the EFX30, including Ms Battersby, indicated that it was often the large commissions and swap fees that led to them incurring losses.
I would finally add, in relation to Mr Dowd's opinion in respect of Profit Representation 5, that even he acknowledged that it was difficult to determine the reasonableness or likelihood of the price target being achieved in circumstances where the "anticipated holding period" for the trade recommended by the account manager was unclear.
In all the circumstances, I would reject Mr Dowd's opinion concerning the reasonableness of Profit Representation 5. I do not accept that Mr Dowd's opinion provides any basis for inferring or concluding that there were reasonable grounds for the representation in question.
I am also not otherwise satisfied that EuropeFX discharged the evidential burden imposed on it by s 12BB of the ASIC Act.
As discussed earlier, to discharge that evidential burden, it is necessary, but not sufficient, for a representor to identify facts and circumstances which existed at the time the representation was made that they in fact relied on in making the representation. The representator must also show that the identified facts and circumstances that were relied on were both objectively reasonable and supported the representation. If the Court is not satisfied of either of those matters, the evidence would not tend to establish that there were reasonable grounds for the representation and therefore would not be evidence to the contrary for the purposes of s 12BB(2) of the ASIC Act.
As noted earlier, EuropeFX relied on the conversations between its account managers and the customers as being evidence to the contrary for the purposes of s 12BB(2) of the ASIC Act. When closely analysed, it is readily apparent from the transcript of the telephone call between Elay and Ms Battersby on 13 September 2019 that the only real fact or circumstance that Elay relied upon as the grounds for Profit Representation 5 was the asserted fact that Investing.com and Trading Central expected the price of gold to increase, possibly (subject to the reservation I expressed earlier) to the target price of $1,564.
The difficulty for EuropeFX is that they did not tender the reports of either Investing.com or Trading Central upon which Elay supposedly relied. It is, in those circumstances, difficult, if not impossible, for the Court to be satisfied that the information in the reports supposedly relied upon by Elay was objectively reasonable and supported the representation he made to Ms Battersby. Indeed, such evidence as there was in respect of the content of Investing.com reports indicated that the reports contained no more than buy or sell recommendations in respect of certain CFDs or Margin FX Contracts. To make matters worse, the evidence suggested that Investing.com reports contained the following disclaimer: Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data. Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information
The most that could be said about Investing.com reports in this context is that they might have provided a reasonable basis for a buy or sell recommendation in respect of a CFD or Margin FX Contract. They could not, however, be said to provide reasonable grounds for a representation by an account manager to a customer that it was reasonably likely, or that there was a reasonable prospect, that the customer would derive a specified profit as a result of trading in the CFD or Margin FX Contract.
In all the circumstances, I am not satisfied that EuropeFX adduced any "evidence … to the contrary" for the purposes of s 12BB(2) of the ASIC Act in respect of Profit Representation 5. I am not satisfied that EuropeFX adduced any evidence, or was able to point to any evidence, that tended to establish, or admitted of the inference, that there were reasonable grounds for the making of Profit Representation 5. As a result, EuropeFX must be taken not to have had reasonable grounds for making the representation.
I should also emphasise that I would, in any event, have found, on the basis of the evidence as a whole, that the EuropeFX account manager in question did not have reasonable grounds for making Profit Representation 5. I accept Mr Blundell's evidence that there were no reasonable grounds for making the representation. I am also unable to accept that a mere buy or sell recommendation by a third-party information provider such as Investing.com or Trading Central, or a view expressed by such a provider that the price of a particular commodity, index, or exchange pairing, was likely to move in a particular direction, will alone provide reasonable grounds for a representation that it is reasonably likely that a customer will make a specified profit from opening a position on a CFD or Margin FX Contract. Mr Dowd and Mr Blundell agreed that it is very hard to make a prediction of the exact amount of profit that will be made on any one position. Mr Dowd also accepted there is always a high degree of uncertainty involved in predicting which way an underlying market will move.
As there were not reasonable grounds for making Profit Representation 5, the representation is, by virtue of s 12BB(1) of the ASIC Act, taken to be misleading.

[172]

Profit Representation 7

Profit Representation 7 was as follows: DAVID: We are trying to make in the next - follow me and listen carefully to the figures. We are planning to make potentially from that particular event with that particular group with the limited funds, it will be (indistinct) lines only that are being reserved for those terms and conditions, to make at least -- SANDRINE SAPOR: Yeah. DAVID: -- 75,000 Australian dollar as a return, okay? SANDRINE SAPOR: Okay. DAVID: Now, I'm telling you this event, if you're going to make it, you're going to gain it. Do not expect to make it daily, weekly or monthly. It's not going to happen. We don't have these events -- SANDRINE SAPOR: No. DAVID: -- so oftenly [sic]. I told you already yesterday that big things are about to come. We just wait for the approval for - that that information is the reality and not a false one, okay? Now the clock is ticking. SANDRINE SAPOR: Yeah. DAVID: We have 14 minutes. So, that's the potential, the profit 75,000 AUD. If you make 72,000 AUD, your balance will be 300,000 over here. In addition to that, if the NASDAQ will go down, you will have enough capital in the account in advance to close the sell to wait for the buy or maybe even to re-buy. Make sense? SANDRINE SAPOR: Yeah. … DAVID: Your net profit potentially will, be on coming Friday, normal trade as long as that everything going to work according to the plan, 157,691, which mean after you will take the entire amount of money that you transfer from your bank back to your bank, you will still have -- SANDRINE SAPOR: Yeah. DAVID: -- 157,000 in EuropeFX account as a return. You follow me? And then you can stick with the profit, and there is nothing that can be better than doing trading with your profit, because you will feel more safe in advance and you will be a bit more of a risk-taker and the best (audio cuts out) -- SANDRINE SAPOR: Yeah.
It may be accepted, based on EuropeFX's concession or admission, that this representation was properly characterised as a Profit Representation as defined, that it amounted to a representation by David that it was reasonably likely, or that there was a reasonable prospect, that Ms Sapor would derive a profit of $75,000 from trading a CFD that was the subject of the discussion. Even putting EuropeFX's concession to one side, I am in any event satisfied that that is the effect of what David was said to Ms Sapor. The representation accordingly fell within the first subcategory of Profit Representations, being a representation that Ms Sapor would generate profits consistent with the specific figure or percentage return on investment stated by David.
It was again common ground that that representation had to be read in context, including in the context of the conversation between David and Ms Sapor that preceded and followed the representation. It is difficult to follow much of what David said during his conversation with Ms Sapor. It was, however, essentially common ground, at least between Mr Dowd and Mr Blundell, that the conversation between David and Ms Sapor, or at least the statements made by David, which surrounded the relevant representation, concerned or involved the following facts or circumstances: first, the conversation related to a GBPUSD Margin FX Contract; second, the GBPUSD Margin FX Contract size was 100,000 GBPUSD; third, the value of a 0.0001 price change in 1 GBPUSD Margin FX Contract was worth USD$10; fourth, the trade recommendation referred to by David came from a third-party source, Investing.com; fifth, the position size that was discussed was 15 contracts of GBPUSD; sixth, a "200-300 point drop" in the price of GBPUSD would generate profits between USD$30,000 and $45,000 on a 15-contract short position in GBPUSD; seventh, a "1,000 point drop" in the price pf GBPUSD would generate profits of USD$150,000 on a 15-contract short position in GBPUSD; and eighth, the strategy that was the subject of discussion was premised on the occurrence of an event which would have resulted in an increase in market volatility. Mr Dowd appears to have somehow divined from the conversation that the "event" adverted to by David was a "hard" or "soft" Brexit.
Mr Dowd expressed the opinion, based on certain "information, assumptions and general comments", that "it would have been reasonable for an investor to expect a potential price move of 200-1000 points in the GBPUSD market" and it was "likely that the profit representation of 1,000 points in the GBPUSD would have been achieved; which would have generated profits, on a 15-contract position, of between $30,000 and $150,000 USD".
The assumptions upon which Mr Dowd's opinion was based included that "the anticipated event occurred, that it led to the anticipated increase in market volatility, and that the GBPUSD market moved in the direction of anticipated by third-party Investing.com." The information upon which that opinion was based included: first, the "movements of GBPUSD in the days leading up to, and following", 13 August 2019 (the day the representation was made) were as depicted in a chart extracted in Mr Dowd's report; second, the chart recording the movements both before and after the representation demonstrated "the volatility in the market"; and third, the holding period for the proposed trade was "a few weeks".
Mr Dowd's opinion and conclusion was prefaced by the following statements which appear to qualify his opinion: It is difficult to precisely quantify the likelihood or prospect of the EuropeFX customer generating the profits or income referred to in the representation. Price predictions, price targets and potential profit predictions … are reliant on a number of factors which are predictive in nature and which can be affected by future events.
Despite those apparently qualifying statements, the essence of Mr Dowd's opinion would appear to be that it was reasonable, or very likely, that the postulated "price move" that would produce the profits referred to in the representation would occur simply because the expected "event" would generate an increase in market volatility and because price movements 90 days before and after the date the representation was made indicated "numerous price moves in excess of 200 points, 300 points, and greater".
Mr Blundell's opinion evidence was that, in his experience reviewing trading accounts, and in his observations of market events and CFD trading, he had "never seen such amounts [of profits - namely $75,000] being made in such a short amount of time" and "[a]ccordingly, the likelihood of this client [Ms Sapor] making the profit suggested in the manner suggested by the Account Manager is extremely low". Mr Blundell also disagreed with Mr Dowd's opinion with respect to the reasonableness of the representation. His general criticisms of Mr Dowd's methodology and reasoning were referred to earlier in the context of Profit Representation 5. In short, Mr Blundell pointed out that Mr Dowd had simply assumed that the market would move in the direction anticipated by the third-party information provider in circumstances where third-party information providers are not always correct. Mr Blundell also pointed out that Mr Dowd had "used the benefit of hindsight analysis" which, in Mr Blundell's opinion was "not a useful way of determining what was the likelihood or prospect of the EuropeFX customer generating the profits … at the time the representation was made".
For essentially the same reasons as those given above in the context of Profit Representation 5, I reject Mr Dowd's opinion. I am not satisfied that his opinion tended to establish, or supported the drawing of the inference, that there were reasonable grounds for the making of Profit Representation 7. I am also not satisfied that EuropeFX otherwise discharged the evidential burden imposed on it by s 12BB(2) of the ASIC Act.
As for Mr Dowd's opinion in respect of Profit Representation 7, in my view Mr Dowd's opinion was flawed for at least three reasons.
First, as was the case with Profit Representation 5, Mr Dowd simply assumed, without any consideration or analysis, that the "directional call" made by Investing.com in respect of the Margin FX Contract in question was reasonable and correct. He also simply assumed, without consideration or analysis, that "the anticipated event" would have occurred, would have led to the anticipated increase in market volatility, and that the GBPUSD market would have moved in the direction anticipated by Investing.com. He also appears to have again assumed that the price would uniformly move only in a single direction during the period in which the trade was open, which he assumed or determined would be "a few weeks". In my view those various assumptions were neither justified nor demonstrably reasonable, particularly in circumstances where Mr Dowd had not seen the Investing.com report and was not aware of either the basis of Investing.com's recommendation or the information upon which it was based.
Second, I agree that Mr Dowd's opinion was influenced and distorted by hindsight reasoning. Mr Dowd assumed that the anticipated event would have resulted in an increase in market volatility. His opinion as to the extent of the market volatility, however, was plainly based in part on price movements which occurred after the date on which the representation was made. That information could not have been available to the EuropeFX account manager who made the representation at the time the representation was made.
Third, Mr Dowd's analysis and opinion again failed to take into account the fact that a customer, like Ms Sapor, who kept a CFD position open for a "a few weeks" would be liable for significant swap fees. As mentioned previously, the evidence in respect of the EFX30, including Ms Sapor, indicated that it was often the large commissions and swap fees that led to them incurring losses. Similarly, as was the case with Profit Representation 5, Mr Dowd appears to have given no consideration to whether Ms Sapor could possibly have maintained an open position in respect of the Margin FX Contract under consideration given the state of her account. As already noted, he appears to have simply assumed that the price movements would have been all in one direction during the weeks that the position remained open.
I am, in all the circumstances, entirely unpersuaded that Mr Dowd's reasoning based on market volatility provided a sound or reasonable basis for his opinion.
For essentially the same reasons as given earlier in the context of Profit Representation 5, I am also not satisfied that EuropeFX adduced any evidence, or was able to point to any evidence, that tended to establish, or admitted of the inference, that there were reasonable grounds for the making of the representation in question. Putting Mr Dowd's evidence to one side, the only evidence that EuropeFX was able to point to was the evidence of the statements made during the conversation between the EuropeFX account manager and Ms Sapor during which the representation was made. The only relevant fact or circumstance identified in that conversation was the recommendation by Investing.com.
EuropeFX did not adduce any evidence from the account manager in question or tender the Investing.com report that supposedly formed the central basis for the account manager's representation. Even if the Investing.com report could be said to have been capable of providing objectively reasonable grounds for a representation that Ms Sapor should open a position in a Margin FX Contract, I am not satisfied that it can be inferred that the Investing.com report was capable of providing any objectively reasonable grounds for a representation to the effect that there was a reasonable prospect that Ms Sapor would derive a particular profit as a result of trading in the relevant Margin FX Contract. In all the circumstances, I am not satisfied that EuropeFX adduced any "evidence … to the contrary", for the purposes of s 12BB(2) of the ASIC Act, in respect of Profit Representation 7.
I am accordingly not satisfied that EuropeFX adduced any evidence, or was able to point to any evidence, that tended to establish, or admitted of the inference, that there were reasonable grounds for the making of the representation in question. As a result, EuropeFX must be taken not to have had reasonable grounds for making the representation.
As was the case with Profit Representation 5, I should again make it plain that I would, in any event, have found, on the basis of the evidence as a whole, that the EuropeFX account manager in question did not have reasonable grounds for making the representation in question. I accept Mr Blundell's evidence that there were no reasonable grounds for making the representation. I am also unable to accept that a mere trade recommendation found on Investing.com could provide reasonable grounds for a representation that a customer was likely to make specified profits from a Margin FX Contract, even accepting that the market in question may have been volatile and there may have been some expectation of an event that was likely to increase volatility.
As there were not reasonable grounds for making Profit Representation 7, the representation is, by virtue of s 12BB(1) of the ASIC Act, taken to be misleading.

[173]

The remaining 45 contested Profit Representations

The remaining 45 contested Profit Representations were not the subject of any specific opinion evidence from Mr Dowd. Nor were those Profit Representations the subject of any, or any, detailed submissions by EuropeFX. Rather, they were addressed by EuropeFX in a global fashion. In those circumstances I also propose to address them in a global fashion.
As has already been made clear, EuropeFX admitted that each of the remaining 45 representations was properly characterised as a Profit Representation as defined by ASIC. Most of the 45 representations were representations that fell within the first subcategory of Profit Representations, being representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, profits consistent with a specific figure or percentage return on investment stated by the account manager. Some of the representations, however, fell within the second or third subcategories of Profit Representations, being representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, either income sufficient for the customer's trading to be their main source of income, or income sufficient to constitute a "secondary income". Either way, each of the representations was a representation in relation to a future matter. The critical question therefore is whether the EuropeFX account managers who made the representations had reasonable grounds for making them.
EuropeFX accepted that it bore the onus of adducing, or pointing to, some evidence which tended to establish, or was capable of supporting an inference, that there were reasonable grounds for making the representations. The only evidence that EuropeFX relied on in that regard was the references, in some of the transcripts of the conversations between account managers and customers during which the Profit Representations were made, which may have tended to suggest that the grounds for the representations were views expressed by third parties, in particular Investing.com and Trading Central. EuropeFX's submissions did not, however, descend into any detail in respect of the supposed views expressed by Investing.com or Trading Central. It simply submitted, in the most general terms, that ASIC had not "sought to challenge the veracity of that data or the trends being discussed".
There are a number of significant problems with that very general submission.
First, as has already been noted, EuropeFX did not adduce any evidence from any of the EuropeFX account managers who made the Profit Representations in question. As discussed earlier, it will generally be a formidable task to prove what in fact was relied upon in making a future representation when the person or persons responsible for making the representation are not called.
Second, in the case of some of the contested Profit Representations, there is no indication in the transcripts of the telephone calls during which the representations were made that the representations were in fact based on any views expressed by Investing.com, Trading Central, or any other third-party information provider. Nor is there any indication in many of the relevant transcripts that the representations were based on any "data" reported by third-party information providers. That is particularly the case where the Profit Representations in question were to the effect that the customers would generate, from trading CFDs or Margin FX Contracts, income that was sufficient to be the customer's main source of income, or a secondary income for the customer. The following Profit Representations are examples of those representations where there was no apparent reference to views or data derived from third-party sources: rows 165, 634, 795, 868, 896, 990, 1099, 10106, 1138, 1443, 1445.
Third, in the case of those representations where there is some indication in the transcripts that the representation was based on views expressed by Investing.com, Trading Central, or any other third-party source, EuropeFX did not tender any of the specific Investing.com or Trading Central reports that were said to contain the views or data upon which the representations were said to be based. It is, in those circumstances not possible for the Court to be satisfied that the information in the reports supposedly relied upon by the account managers was either objectively reasonable, or supported the representation.
As discussed in detail earlier, it is ultimately a matter for the Court to determine if the evidence adduced or pointed to by the representor, here EuropeFX, tended to establish, or admits of the inference, that there were reasonable grounds for the making of the representation. I am not satisfied from the transcripts alone that the often very general or oblique references by EuropeFX account managers to the views expressed by third-party information providers tend to establish, or are capable of supporting inferences, that there were reasonable grounds for making any of the contested Profit Representations.
In all the circumstances, I am not satisfied that EuropeFX adduced any "evidence … to the contrary", for the purposes of s 12BB(2) of the ASIC Act, in respect of any of the remaining 45 contested Profit Representations. I am not satisfied that EuropeFX adduced any evidence, or was able to point to any evidence, that tended to establish, or admitted of the inference, that there were reasonable grounds for the making of any of those Profit Representations. As a result, EuropeFX must be taken not to have had reasonable grounds for making any of those representations. I am, in any event, not satisfied that there were reasonable grounds for making any of the 45 representations for the same reasons as those given earlier in the context of Profit Representations 5 and 7. I am accordingly satisfied that each of the 45 contested Profit Representations were misleading.
Finally, I should also make the following additional point in relation to the representations which were to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, income sufficient for the customer's trading to be their main source of income, or income sufficient to constitute a "secondary income". Mr Dowd expressed the very general opinion, albeit in the context of a representation that was not one of the 45 disputed Profit Representations, that it was "possible" that trading in Margin FX Contracts and CFDs could be like a secondary income. Mr Blundell disagreed. His opinion was that the prospects of a retail CFD or Margin FX Contract client earning a secondary income from trading in those products was "very low". In his considerable experience, CFDs and Margin FX Contracts are not financial products that can be used to provide any sort of reliable income stream. I prefer Mr Blundell's opinion to Mr Dowd's opinion in that regard, particularly in circumstances where, unlike Mr Dowd, Mr Blundell had extensive experience analysing the trading of CFD and Margin FX Contracts by retail customers in Australia. I reject any suggestion that there were reasonable grounds for any representation by a EuropeFX account manager to the effect that there was a reasonable prospect that the customer would earn a secondary income, let alone a primary income, from trading in CFDs or Margin FX Contracts.

[176]

Revenue Representations

ASIC pressed the Court to make findings in respect of nine Revenue Representations, being representations made to Mr Kalusinghe (row 149 of Annexure C.1 to the SOC), Ms Battersby (row 231), Mr Bonini (row 302), Ms Sapor (rows 323 and 359), Ms Lui (row 665), Ms Aldous (rows 784 and 825) and Mr Cartwright (row 1167).
EuropeFX denied that those nine representations were false or misleading, though it admitted that each of them was correctly characterised by ASIC as a Revenue Representation as defined. It follows that each of the representations may be taken to be a representation to the effect that: (i) EuropeFX would generate revenue when the customer made money; or (ii) would generate revenue based solely on commissions or fees which applied when a customer opened or kept open a CFD or Margin FX contract position; or (iii) would not make money when a customer lost money; or (iv) that EuropeFX's account managers would earn commission based solely on the commissions or fees which applied when a customer opened or kept open a CFD or Margin FX contract position.
Most of the nine disputed Revenue Representations fell within the last-mentioned subcategory of Revenue Representation (rows 231, 302, 323, 784 and 825). The balance fell within the second and third subcategories of Revenue Representation.
The sole issue is whether representations to that effect were false, misleading or deceptive.
Given EuropeFX's admissions concerning the characterisation of the representations, it is unnecessary to have regard to the precise terms of the representations made to the customers in question. Neither party's submissions descended to that level of particularity.
There could be no doubt that representations that constituted Revenue Representations as defined, including the nine contested Revenue Representations, were at the very least misleading, if not false.
The general theme of the Revenue Representations as defined was that EuropeFX would generate revenue, or its account managers would derive income, when the client made money and continued to trade, or that the financial interests of EuropeFX and its account managers were aligned with the financial interests of the client. That was plainly not the case.
As discussed in detail earlier, the evidence overwhelmingly supported the inference that EuropeFX's revenue was primarily, if not entirely, derived from and calculated by reference to the aggregate net losses incurred by its customers. That inference was supported by the terms of EuropeFX's CAR with USG and by EuropeFX's own financial records. It necessarily follows that it was at the very least misleading for EuropeFX account managers to represent to customers that EuropeFX: generated revenue when the customer made money; or generated revenue based solely on the commissions or fees paid by the customer when he or she opened or kept open a position; or would not make money when a customer lost money
EuropeFX submitted that representations that were correctly characterised as Revenue Representations were not false or misleading because EuropeFX's revenue depended on how USG managed its A Book and B Book strategy. I reject that submission for the reasons given in detail earlier when considering the basis upon which EuropeFX's fees were calculated. The evidence indicated that all, or almost all, of EuropeFX's customers were allocated to USG's B Book and there was no reliable evidence to suggest that USG engaged in any hedging strategy in respect of customers in its B Book. USG derived profit from the trading losses incurred by EuropeFX's customers in its B Book, and EuropeFX's fees were based on the profits derived by USG from the losses incurred by those customers. That was clearly reflected in EuropeFX's own financial statements.
EuropeFX also submitted that a representation that EuropeFX made income from commissions was not misleading because it was not an exhaustive statement of the ways in which EuropeFX made money. That submission ignores the fact that a Revenue Representation, as defined, included a representation that EuropeFX generated income solely from commissions. In any event, in circumstances where EuropeFX's income was almost entirely derived from the net losses made by its customers, a representation that EuropeFX made its income from commissions would be at best a half-truth, and therefore misleading.
As also discussed earlier, the account managers who interacted with customers on behalf of EuropeFX earned commission based on the amount of money that their customers deposited into their trading accounts. It necessarily follows that representations by case managers to the effect that they would earn commission based solely on the commissions or fees which applied when a customer opened or kept open a CFD or FX Contract position were plainly misleading, if not false.
It should finally be noted that representations pleaded in very similar terms to the Revenue Representations were found to be misleading in AGM Markets at [277]-[279] in almost identical circumstances.
ASIC did not contend that the making of the contested Revenue Representations gave rise to contraventions of s 12DB(1) of the ASIC Act. It did, however, contend that the making of those representations constituted misleading and deceptive conduct in contravention of s 12DA(1) of the ASIC Act. I agree with and accept that contention. I find that by making each of the nine contested Revenue Representations, each of which I have found was misleading, EuropeFX engaged in misleading and deceptive conduct and contravened s 12DA(1) of the ASIC Act.

[177]

Money Risk Representations

ASIC pressed the Court to make findings in respect of 28 Money Risk Representations, being representations to: Ms Love (row 31 of Annexure C.1 to the SOC); Mr Kalusinghe (row 69); Ms Elford (row 221); Ms Battersby (row 259); Ms Sapor (rows 317 and 329); Mr Lui (row 636); Ms Aldous (rows 810 and 836); Mr Isaacs (row 868); Mr Ayoub (row 894); Ms Robinson (row 947); Mr Stubna (row 975); Mr Grubb (row 1014); Mr Geering (rows 1053, 1086, 1103, 1105 and 1114); Mr Lapham (row 1142); Mr Cartwright (rows 1180 and 1223); Mr Chircop (row 1249); Ms Green (rows 1271 and 1272); Ms Larsen (row 1280); Ms Scott (row 1405); and Mr Costa (row 1450).
EuropeFX denied that those 28 representations were false or misleading, though it admitted that each of those representations was correctly characterised by ASIC as a Money Risk Representation as defined. It follows that each of the representations may be taken to be, relevantly, a representation to the effect that, with regards to the risk associated with depositing money to a trading account: (i) by increasing the amount of money in the customer's trading accounts, customers would reduce the level of risk to which they were exposed; or (ii) the risk associated with transferring additional funds to the customer's trading account would carry an equivalent risk to holding money in a bank account; or (iii) only those funds in a customer's trading account used to open CFD or Margin FX contract positions would be exposed to adverse movement in the price of the asset underlying the relevant position.
The sole issue is whether representations to that effect were false, misleading or deceptive.
Given EuropeFX's admissions concerning the characterisation of the Money Risk Representations, it is unnecessary to have regard to the precise terms of those representations made to the customers in question. EuropeFX's submissions did not address the precise terms of any of the 28 disputed Money Risk Representations. Most of those representations fell within the third subcategory of Money Risk Representation, though a number fell within the first subcategory. Only a few of the disputed representations fell within the second subcategory.
On one view at least, the Money Risk Representations were representations as to future matters. The EuropeFX account manager was representing, in effect, that if the customer deposited further funds, the customer (or their trading account) would be exposed to less risk in the future. EuropeFX did not adduce or point to any evidence that tended to establish, or admitted the inference, that there were reasonable grounds for the making of any of the Money Risk Representations. It follows that, by virtue of s 12BB(1), the representations must be taken to be misleading.
In any event, in my view the disputed representations which fell within any of the three subcategories of Money Risk Representations were misleading. The position is perhaps the clearest in relation to the second and third subcategories, so I will consider those subcategories first.
Representations which fell within the second subcategory of Money Risk Representations - that the risk associated with transferring additional funds to the customer's trading account would carry an equivalent risk to holding money in a bank account - were in my view plainly misleading. Mr Blundell's evidence was that money held in an Australian bank account (that is, an account with an authorised deposit-taking institution) was exposed to significantly less risk than funds deposited in a EuropeFX trading account. I accept that opinion in preference to the opinion expressed by Mr Dowd, which was to the effect that, while holding funds in a EuropeFX trading account carried certain risks, so too did holding money in a bank carried certain risks. The risks that Mr Dowd saw as adhering to money in a bank account included the possibility of a depreciation in the Australian dollar without an ability to hedge that risk in the foreign exchange market.
In his oral evidence, Mr Dowd appeared unwilling to confirm that he was of the opinion that the risks associated with holding money in a EuropeFX account were less than the risks associated with holding funds in a bank account. Nor did he clearly or explicitly express the opinion that the risks were equivalent. To the extent that he did, I would reject that opinion. With the greatest respect to Mr Dowd, it is, in my view, ridiculous to equate the theoretical risks faced by a person holding funds in a bank account due to the possibility of a significant depreciation in the Australian dollar, with the real and ever-present risks faced by a EuropeFX trading account holder - that risk being that they might lose the entirety of the funds in their trading account as a result of adverse movements in the assets underlying their open CFD or Margin FX Contract positions.
Representations which fell within the third subcategory of Money Risk Representations - representations to the effect that only those funds in a customer's trading account used to open CFD or Margin FX Contract positions would be exposed to adverse movement in the price of the asset underlying the relevant position - were in my view also plainly misleading, if not false. In their joint report, Mr Blundell and Mr Dowd agreed that, when a EuropeFX customer deposited funds into their trading account, all those funds were exposed to adverse price movements in the underlying asset of the customer's open positions. While in their oral evidence Mr Blundell and Mr Dowd were asked about a hypothetical or theoretical scenario where that might not be the case, that scenario was in my view unrealistic and far-removed from the trading circumstances of each of the relevant customers.
The position in respect of the first subcategory of Money Risk Representation - that by increasing the amount of money in the customer's trading accounts, customers would reduce the level of risk to which they were exposed - is slightly more difficult. EuropeFX submitted that a representation to that effect was not false or misleading because, when a customer increased the amount of money in their trading account, they increased their capacity to satisfy their margin requirements in respect of their open positions. They also reduced the risk of their open positions being subject to early liquidation if the price of the underlying assets of the open positions turned against them.
It may be accepted that, by depositing further funds in their trading account, customers reduced the risk of their open positions being subject to early liquidation. Mr Blundell and Mr Dowd essentially accepted that to be the case. That, however, is only half the story. As Mr Blundell explained in his evidence, by depositing further funds into their trading account, the customer was putting all those additional funds at risk because all the funds in the trading account were exposed to adverse price movements in the underlying assets of the open positions. In those circumstances, it was, in my view, misleading for a EuropeFX account manager to simply represent to a customer that by depositing further funds they would reduce the risk to which they were exposed, if the account manager did not also tell the customer: that the reduced risk to which reference was being made was the reduced risk of forced liquidation; and that all the additional funds deposited by the customer were at risk if the customer's open positions turned against them.
EuropeFX's submissions concerning the first subcategory of the Money Risk Representation also ignored the context in which some of the representations were made. In many cases, the representation was made in the context of the EuropeFX account manager recommending that the customer deposit further funds so the customer would have sufficient margin to open further positions. For example, the Money Risk Representation made to Ms Larsen (row 1280) was made in the context of the account manager saying that what Ms Larsen had to consider was to "rise up the balance in [her] account a bit more so [she would] have a bit more free capital to trade with and be able to take some more gold". It was in that context that the account manager said: "[n]ow the second that you will add some money to this account does not mean whatsoever that you are taking a bigger risk in the account". Similarly, in the case of the Money Risk Representation made to Ms Scott (row 1405), the account manager said "[s]o, you want to add a little bit to your investment account just for safety and then you'll be able to … open these two - these two positions".
Mr Blundell's evidence was that, when a customer deposits additional funds into their trading account and then opens new positions, the result is that a proportion of the additional funds is used as margin against those new positions. Mr Dowd agreed in his oral evidence that, in those circumstances, depending on the size of the new positions, the client may be at risk of forced liquidation if the price of the underlying assets of the new positions moves against the customer. It follows that, in that context at least, the depositing of further funds could not be said to reduce the risk of forced liquidation.
In my view, representations that fall within the first category of Money Risk Representations were, in all the circumstances, misleading.
I am accordingly satisfied that each of the 28 disputed Money Risk Representations was misleading.
I am also satisfied that the making of each of the 28 disputed Money Risk Representations amounted to a contravention of s 12DB(1) of the ASIC Act. Each of the Money Risk Representations was made in connection with the supply of financial product advice, or the dealing in financial products, and was therefore made in connection with the supply of financial services. Each of the Money Risk Representations can also properly be characterised as representations that the financial services in question had certain performance characteristics or benefits, namely the financial risk to which the customer would or might be exposed.

[178]

Withdrawal Representations

ASIC pressed the Court to make findings in respect of 34 Withdrawal Representations, being representations to Mr Wilson (rows 4), Mr Kalusinghe (row 52), Ms Battersby (row 233), Mr Bonini (row 299), Ms Boden (rows 437 and 479), Ms Lui (rows 620, 639, 652 and 715), Ms Aldous (rows 784, 786, 795, 825, 836 and 847), Ms Robinson (row 908), Mr Stubna (row 961), Ms Curtin (row 992), Mr Geering (rows 1055, 1086, 1103 and 1114), Mr Cartwright (rows 1172, 1180 and 1223), Mr Chircop (row 1249), Ms Green (row 1262), Ms Larsen (rows 1280 and 1295), Ms Scott (rows 1380, 1391 and 1405), and Mr Costa (row 1445).
EuropeFX admitted that each of those representations was correctly characterised by ASIC as a Withdrawal Representation as defined, though it denied that they were false or misleading. There were two subcategories of Withdrawal Representations as defined. The first subcategory comprised representations to the effect that customers would be able to withdraw money deposited to their trading accounts in the same manner as money held in an Australian bank. Only three of the 34 disputed Withdrawal Representations fell within that category. The second subcategory of Withdrawal Representation was that customers would be able to withdraw money deposited to their trading accounts within a particular period of time as specified by the relevant account manager, including immediately or at any time.
It is convenient to first address those representations that fell within the first subcategory of Withdrawal Representation. Representations that properly fell within that subcategory were plainly misleading. The evidence plainly indicated that the process involved in withdrawing funds from a EuropeFX trading account was far more complex and involved than was the case in respect of withdrawing funds from a bank account with an Australian bank. EuropeFX conceded as much, or at least did not dispute that to be the case.
I have considered the terms of the three representations that were said to fall within this subcategory. Two of them - a representation made to Ms Aldous (row 786) and a representation made to Ms Green (row 1262) - can be said to fall within this category and were in my view plainly misleading. The third, a representation made to Mr Geering (row 1086), while admitted by EuropeFX to fall within this subcategory, does not appear to actually do so. Nor am I persuaded that this representation was misleading. All that the account manager said to Mr Geering was that Mr Geering could close a trade and "take at any time". Even accepting that the statement related to the ability to withdraw, I am not persuaded that it amounted a representation that Mr Geering would immediately receive the money he wanted to withdraw.
While EuropeFX admitted that the remaining 31 disputed Withdrawal Representations were properly characterised as falling within the second subcategory of Withdrawal Representation, it is nevertheless necessary to consider the terms of each of the 31 representations to ascertain whether the account manager specified a period of time, or said that the customer could withdraw funds immediately or at any time. There is also an ambiguity in the definition of this category of representation. To say that a customer may withdraw funds from a trading account immediately, or at any time, does not necessarily mean that the customer will receive their money immediately, or at the time they made the withdrawal request. Each of the representations must be considered in context. I should note, however, that neither party's submissions descended to that level of particularity. Neither party advanced any specific submissions in respect of any of the disputed Withdrawal Representations.
All but six of the 31 representations which fell within the second subcategory of Withdrawal Representation did not involve the account manager specifying a period of time within which they would actually receive the funds that they wanted to withdraw. Rather, considered in context, they amounted to no more than a representation that the customer could request a withdrawal immediately or at any time. I am not satisfied that those representations were false, misleading or deceptive. There was no evidence that customers were not able to request a withdrawal immediately or any time, so long as their trading account had sufficient margin to cover any open trades at the time. I should also note that ASIC submitted that these were representations as to future matters. I do not agree. A statement that a customer could request a withdrawal of funds is a statement as to the terms upon which the funds were held in the trading account.
The remaining six representations involved the EuropeFX account manager specifying a time within which the withdrawal request would be processed, or in some cases the time within which the customer would receive the funds that he or she had requested to be withdrawn. ASIC contended that representations that fell within this subcategory of representation were false or misleading because there were examples in the evidence of customers who wished to withdraw funds "encountering difficulties from EuropeFX representatives in doing so". The main example relied on by ASIC in that regard involved the evidence of Ms Boden. It is unnecessary to consider that evidence in any detail. I accept that there was evidence, both evidence from Ms Boden herself, as well as evidence in the transcripts of conversations between Ms Boden and her account managers, which established that Ms Boden's account managers actively sought to dissuade her from making or pursuing withdrawal requests and on occasion pressured her to reverse withdrawal requests. There was also evidence that the other EuropeFX customers were on occasion subject to the same sort of push-back or pressure in respect of withdrawals. I do not, however, consider that to be a sound basis upon which to infer or conclude that every representation made to every EuropeFX customer concerning the period within which they could withdraw funds from their trading account was false or misleading.
Of the six representations which involved a representation specifying a time within which the withdrawal request would be able to withdraw money from their account, only four involved one of the EFX8. One such representation was made to Mr Wilson (row 4), however I was not taken to any evidence that indicated that Mr Wilson encountered any difficulties in withdrawing funds from his trading account. I am not persuaded that the representation made to Mr Wilson was false or misleading. Another such representation was made to Mr Kalusinghe (row 52). That representation was to the effect that Mr Kalusinghe would receive the money the subject of his withdrawal request within "up to 7 days". The evidence revealed that Mr Kalusinghe received some push back or pressure when he made withdrawal requests, but he was ultimately able to successfully withdraw money from his trading account. Mr Kalusinghe evidence included that he recalled that on one occasion it took 8 or 9 days for him to receive his money. It is, however, unclear whether those were working days. In any event, I am not persuaded that that evidence, or any other evidence, established that the Withdrawal Representation made to Mr Kalusinghe was false or misleading.
That leaves Ms Boden, who was the only other EFX8 witness to whom a disputed Withdrawal Representations within this category was made. The representation made to Ms Boden (row 479) was that if she opened a withdrawal "on a VIP procedure, that … withdrawal [would] be approved on the same day". I am satisfied, based on the evidence concerning the difficulties encountered by Ms Boden when it came to withdrawing funds from her trading account, that that representation was at the very least misleading.
The remaining representations within this subcategory were made to Ms Battersby, Ms Aldous and Mr Geering. None of them gave evidence. I was not directed to any evidence that suggested that the Withdrawal Representations within this subcategory that were made to them were false or misleading. I am not persuaded that they were.
If follows that, of the 34 Withdrawal Representations that ASIC pressed the Court to find were false or misleading, I am only persuaded that three of the representations were false or misleading: the representation made to Ms Boden (row 479); the representation made to Ms Aldous (row 786); and the representation made to Ms Green (row 1262).
I am satisfied that the Withdrawal Representations made to Ms Boden, Ms Aldous and Ms Green were representations that financial services (involving dealing in financial products), if provided, had particular characteristics or benefits, namely characteristics relating to the ability to withdraw funds from an associated trading account. It follows that I am satisfied that the three misleading Withdrawal Representations amount to contraventions of s 12DB(1) of the ASIC Act.

[179]

Loss Recovery Representations

ASIC pressed the Court to make findings in respect of 21 Loss Recovery Representations, being representations made to Mr Wilson (row 21), Mr Kalusinghe (rows 78, 127, 133, 137), Ms Battersby (row 259), Ms Sapor (row 393), Ms Boden (row 435), Ms Aldous (rows 810, 847), Mr Geering (rows 1096, 1118), Mr Lapham (rows 1138, 1142), Mr Cartwright (rows 1192, 1223), Ms Green (row 1272), Mr Hillier (row 1336), Ms Sofer (row 1365), Ms Scott (row 1399) and Mr Costa (row 1478).
EuropeFX admitted that each of those representations was correctly characterised by ASIC as a Loss Recovery Representation as defined, though it denied that they were false or misleading. Given EuropeFX's admissions, each of the representations may be taken to be a representation to the effect that: (i) positions that had moved against a customer represented only "temporary" losses, and that it was reasonably likely, or that there was a reasonable prospect, that such positions would become profitable; or (ii) that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, profits sufficient to recover realised and unrealised losses suffered by the customer from their trading. Eight of the disputed Loss Recovery Representations fell within the first subcategory and 13 fell within the second subcategory.
Both subcategories of Loss Recovery Representations comprised representations in respect of future matters for the purposes of s 12BB of the ASIC Act. It follows that the first question that must be asked and answered in respect of each of the Loss Recovery Representations is whether EuropeFX had discharged its evidential burden of proving that reasonable grounds existed for making the representation alleged. If EuropeFX did not discharge its evidential burden, it is to be taken not to have had reasonable grounds for making the representation.
Given EuropeFX's admissions concerning the characterisation of the 21 disputed Loss Recovery Representations, it is unnecessary to have regard to the precise terms of those representations to determine whether EuropeFX discharged its evidential burden in respect of the grounds for making them, or to determine the broader question of whether ASIC had demonstrated that EuropeFX did not have reasonable grounds to make the representations. EuropeFX's submissions did not address the precise terms of any of the 21 disputed Loss Recovery Representations.
EuropeFX did not identify any facts or circumstances that existed at the time that any of the 21 disputed Loss Recovery Representations were made which provided an objectively reasonable basis for the representations. I am not persuaded that any such facts or circumstances existed. Nor did EuropeFX adduce any evidence capable of establishing that the account manager who made any of the 21 disputed Loss Recovery Representations relied on any such facts or circumstances. None of the relevant account managers gave evidence and there was no objective evidence to suggest that any of them relied on any particular facts or circumstances when they made the representations in question. In those circumstances, all of the 21 disputed Loss Recovery Representations must be taken to be misleading by virtue of s 12BB(1) of the ASIC Act.
EuropeFX relied on the evidence of Mr Dowd in relation to some alleged Loss Recovery Representations, however none of the 21 disputed Loss Recovery Representations were the subject of any specific evidence given by Mr Dowd. For more abundant caution, however, I should briefly consider Mr Dowd's more general evidence concerning the Loss Recovery Representations, as well as Mr Blundell's general evidence on that topic.
Mr Dowd's opinions in respect of the Loss Recovery Representations that he specifically addressed, particularly those that fell within the first subcategory of such representations, relied on a number of assumptions. Those assumptions included: first, that the market relevant to the CFDs or Margin FX Contracts which were the subject of the relevant account manager's representations, was exhibiting "mean-reverting tendencies"; second, that the customers in question were deliberately employing a "mean reversions strategy"; and third, that when the customers had opened their CFD or Margin FX contract positions, they had done so at the correct time, or at the correct price, in accordance with that strategy. A market which exhibits mean reverting tendencies is one which periodically reverts to an average price or trend. A mean revisions strategy is a strategy where the customer buys near the bottom of the range and sells near the top of the range. A customer who successfully adopts or applies that strategy is one who is able to correctly predict when to buy or sell having regard to the range.
I am not persuaded that it was open or appropriate for Mr Dowd to make those assumptions in the case of any of the circumstances relevant to any of the Loss Recover Representations. EuropeFX did not adduce or identify any evidence which suggested that any of the markets relevant to the open positions held by the customers to whom those representations were made had or were exhibiting mean reverting tendencies. Nor did it adduce or identify any evidence which indicated that any of the customers to whom the representations were made were in fact employing a mean reversions strategy, let alone that they had been successfully employing such a strategy. Indeed, I would infer, from the evidence relating to each of the relevant customers, that the customers were not only no employing such a strategy, but had no idea whatsoever what a mean reversion strategy was. Mr Dowd's assumptions were contrary to the evidence and, in my view, inherently implausible. I reject his opinions based on those assumptions.
In any event, as I have already indicated, Mr Dowd did not specifically address any of the 21 disputed Loss Recovery Representations. His general opinions concerning or based on mean reverting markets have not been shown to have any specific relevance or applicability to the any of those representations.
Mr Blundell's evidence was that the mean reversion theory was a simplistic theory which could not be successfully used for short-term CFD trading strategies employed by retail CFD traders, mainly because of the unpredictability and volatility of prices of financial market assets. That unpredictability and volatility was increased or exacerbated, in the case of CFDs and Margin FX Contracts, because both were leveraged securities. Mr Blundell's evidence was that he had not seen that theory widely used for retail CFD trading. Indeed, his evidence was, in effect, that the majority of retail CFD traders did not employ any particular trading strategy other than a "simple" strategy of "directional trading". Mr Blundell's evidence in that regard, which I accept, provides a further basis to reject the validity and applicability of Mr Dowd's assumptions and his opinions based thereon.
When considered in context, the 21 disputed Loss Recovery Representations that fell within the first subcategory of such representations were generally made in circumstances where the EuropeFX account manager was effectively encouraging the customer to keep open a position that was carrying an unrealised loss, rather than close the position and realise the loss in their account balance. The account manager was in effect suggesting that, while the price of the underlying assets had moved against the customer's open position, it was reasonably likely, or there was a reasonable prospect, that at some point that would change, and the price would move in favour of the customer's position if it was left open. Mr Blundell expressed the following general opinion in that context: Having reviewed numerous clients' trading activity during the compliance monitoring process and a number of client complaints regarding losses in my role, more often than not investors that adopt a strategy of leaving loss-making trades on a trading account open until they return to profit, tend to lose more than their original loss and have to keep depositing funds as margin to maintain the position, either until they have no more funds to deposit and the position is forced liquidated, or they decide that they will close the position and take the loss.
Mr Blundell accepted that there may be instances where an investor might see through an unrealised loss by maintaining an open position. He also agreed that he would not suggest that an investor immediately close a position once it had gone into "the minus". I nevertheless accept his general proposition that customers, particularly inexperienced retail customers, who adopt a strategy of leaving loss-making trades open until they return to profit will more likely than not ultimately realise losses which are larger than the losses they would have suffered if they had closed the position earlier. That general proposition was also supported by the actual experience of the customers in question.
As for those of the 21 disputed Loss Recovery Representations that fell within the second subcategory of such representations, Mr Dowd did not analyse or express any opinion concerning whether it was reasonably likely, or there was a reasonable prospect, that the customers to whom such representations were made would generate profits from further trading which would be sufficient to recover realised and unrealised losses suffered by the customer at the time the representation was made. Nor did EuropeFX identify any facts or circumstances which could possibly have provided an objectively reasonable basis for those predictions. While Mr Dowd expressed some opinions in respect of other Loss Recovery Representations which fell within the second subcategory, that reasoning does not assist in respect of any of the 21 disputed Loss Recovery Representations. In any event, in my view Mr Dowd's opinions in respect of those representations suffered from the same deficiencies as those discussed earlier in the context of the Profit Representations.
As indicated earlier, EuropeFX did not discharge the evidential burden under s 12BB(2) of the ASIC Act in respect of any of the 21 disputed Loss Recovery Representations. There was no evidence which tended to establish, or admit the inference, that there were any reasonable grounds for making those representations. Each of those representations must accordingly be taken to be misleading. In any event, I would conclude that there was no reasonable basis for making any of the 21 disputed Loss Recovery Representations and that each of them was misleading.
I am also satisfied that each of the relevant Loss Recovery Representations was made in connection with the supply of financial services and can properly be characterised as a representation that the financial services in question were of a particular standard or quality, or had certain performance characteristics or benefits relating to their profitability. I therefore find that the making of each of the 21 disputed Loss Recovery Representations amounted to a contravention by EuropeFX of s 12DB(1) of the ASIC Act.

[180]

Equities Representations

ASIC pressed the Court to make findings in respect of three Equities Representation, being representations made to Mr Isaacs (rows 886), Mr Ayoub (row 896) and Mr Dand (row 1424).
EuropeFX admitted that each of those representations was correctly characterised by ASIC as an Equities Representation as defined, though it denied that they were false or misleading. Given EuropeFX's admissions, each of the three disputed Equities Representations may be taken to be a representation to the effect that, by reducing investments in equities and increasing investment in the derivative products offered by EuropeFX: (i) customers would reduce their exposure to risk; or (ii) it was reasonably likely, or that there was a reasonable prospect, that the customer would increase their returns.
The Equities Representations made to Mr Isaacs, Mr Ayoub and Mr Dand all fell within the second subcategory of Equities Representation.
I am satisfied that a representation which is correctly characterised as falling within the second subcategory of Equities Representation was misleading. Such a representation is plainly a representation as to a future matter. It involves a prediction that it was likely that the customer would earn better returns from investing in CFDs and Margin FX Contracts than they would if they maintained their investments in equities such as shares. EuropeFX did not adduce or point to any evidence that tended to establish, or admitted the inference, that the EuropeFX account managers who made the representations in question had any reasonable grounds for making such a prediction. In any event, I am satisfied that there were no reasonable grounds for the making of such representations, particularly when those representations were made to customers who had no prior knowledge of, or experience in trading, risky leveraged derivatives like CFDs and Margin FX Contracts. Indeed, the evidence as a whole suggested that retail investors in CFDs were more likely to lose money than increase their returns by investing in CFDs. EuropeFX's own documentation included the following statement: "79.99% of retail investor accounts lose money when trading CFDs with this provider".
I am also satisfied that each of the three disputed Equities Representations was made in connection with the supply of financial services and can properly be characterised as a representation that the financial services in question were of a particular standard or quality, or had certain performance characteristics or benefits, relating to their risk or profitability. I therefore find that the making of each of the three disputed Equities Representations amounted to a contravention by EuropeFX of s 12DB(1) of the ASIC Act.

[181]

Bank Account Representations

ASIC pressed the Court to make findings in respect of nine Bank Account Representations, being representations to Mr Bonini (row 280), Ms Boden (row 458), Ms Kuhn (row 588), Mr Isaacs (rows 866 and 871), Mr Dand (row 1424), and Mr Costa (rows 1443, 1445, 1452).
EuropeFX admitted that each of those representations was correctly characterised by ASIC as a Bank Account Representation as defined, though it denied that they were false or misleading. Given EuropeFX's admissions concerning the characterisation of the disputed Bank Account Representations, each of the those representations may be taken to be a representation to the effect that it was reasonably likely, or there was a reasonable prospect, that the customer would generate greater returns by investing the customer's money with EuropeFX by trading CFDs or Margin FX Contracts than by keeping it in a bank account.
Given EuropeFX's admissions concerning the characterisation of the disputed Bank Account Representations, it is unnecessary to have regard to the precise terms of those representations. That is so particularly given that EuropeFX made no submissions concerning the precise terms of the representations.
I am comfortably satisfied that each of the nine disputed Bank Account Representations was at the very least misleading. Bank Account Representations, by definition, involved representations concerning future matters. They effectively involved a prediction as to the returns that a EuropeFX customer might expect to receive by trading in CFDs or Margin FX Contracts. The EuropeFX account representatives who made those representations did not have any reasonable grounds for making them.
Mr Blundell gave the following evidence relevant to the Bank Account Representations generally: Even with interest rates being offered by ADIs at historically low rates, assuming less than 5% per annum as per Assumption 2, the prospect of a EuropeFX customer who was inexperienced with CFDs and FX contracts, generating returns that exceed that interest is in my view very low. That is because, in my experience reviewing client trading activity very few inexperienced customers earn any profits at all. On the contrary … more often than not inexperienced customers incur large losses (i.e. a majority of any deposited funds, if not all of their deposited funds) within a month of opening their trading account…
I accept that evidence. Nothing that arose in the course of Mr Blundell's oral evidence and cross-examination cast any doubt on it. The customers to whom the relevant Bank Account Representations were made were undoubtedly inexperienced in CFD and Margin FX Contract trading.
EuropeFX did not identify any evidence of any facts, matters or circumstances which were capable of providing reasonable grounds for the representations. The only submission advanced by EuropeFX in respect of these representations was the global submission that some of the customers in fact had some profitable trades in the course of their trading, even though they all ended up losing all, or most, of the money that they invested. I am unable to accept that the fact that some customers on some discreet occasions had some profitable trades is capable of providing any reasonable ground or basis for the Bank Account Representations, or goes any way towards establishing that the representations were not misleading when made. The Bank Account Representations, considered in context, plainly related to returns from trading over time, not returns from individual trades. None of the relevant customers made any return from their trading with EuropeFX over time, let alone a return that was better than the return they would have made if the money they had invested had been deposited in a bank account. In any event, EuropeFX's submission involves impermissible hindsight reasoning.
EuropeFX did not discharge its evidentiary onus in s 12BB(2) of the ASIC Act in relation to any of the disputed Bank Account Representations. The disputed Bank Account Representations must accordingly be taken to have been misleading by reason of s 12BB(1) of the ASIC Act. I am in any event satisfied that there was no reasonable grounds for making the representations.
The Bank Account Representations were made in connection with the supply of financial product advice, or the dealing in financial products, and were therefore made in connection with the supply of financial services. I am also satisfied that the Bank Account Representations can properly be characterised as representations that the financial services in question were of a particular standard or quality, or that the financial products had certain performance characteristics or benefits: cf s 12DB(1)(a) and (e). The representations concerned, in general terms, the returns that a customer was likely to generate by investing in CFDs or Margin FX Contracts. Alternatively, the representations could be said to concern the need for the relevant services, namely the need to transfer funds into the customer's trading account. Accordingly, I am satisfied that the making of each of the nine disputed Bank Account Representations amounted to a contravention of s 12DB(1) of the ASIC Act.

[182]

Regulation Representations

ASIC pressed the Court to make findings in respect of ten Regulation Representations, being representations to Mr Wilson (row 4), Ms Battersby (row 241), Mr Bonini (row 302), Ms Boden (row 501), Ms Lui (row 716), Mr Isaacs (row 870), Ms Robinson (row 909), Mr Stubna (row 984), Ms Scott (row 1380), and Mr Costa (row 1448).
EuropeFX admitted that each of those representations was correctly characterised by ASIC as Regulation Representations as defined, though it denied that they were false or misleading. Given EuropeFX's admissions, each of the disputed Regulation Representations may be taken to be a representation to the effect that EuropeFX was "regulated" by ASIC, such that the customer was exposed to less risk than would otherwise be the case.
ASIC, on the one hand, accepted that EuropeFX was a company registered in Australia, was providing financial services in Australia as a CAR of USG and was therefore subject to regulation by ASIC. It submitted, however, that the disputed Regulation Representations were nevertheless false, misleading or deceptive because the fact that EuropeFX was regulated by ASIC "was no guarantee as to EuropeFX's compliance with the applicable requirements of the ASIC Act and the Corporations Act."
EuropeFX, on the other hand, submitted that the disputed Regulation Representations went no further than to indicate to the customers that it was authorised to provide CFDs to retail clients and, in being so authorised, was regulated by ASIC. In EuropeFX's submission, the representations did not constitute guarantees to the customers that it had complied, or would comply, with the ASIC Act and the Corporations Act.
EuropeFX's submissions ignore the fact that it admitted, in the case of the ten disputed Regulation Representations, that the representations not only conveyed that it was regulated by ASIC, but also that, as such, "the customer was exposed to less risk than would otherwise be the case". When each of the disputed Regulation Representations is read fairly and in context, it is tolerably clear that the representation conveyed to the customers, at least to some extent, that, because EuropeFX was regulated by ASIC, the customers were somehow exposed to less risk of losing their money than that to which they would be exposed if they traded CFDs or Margin FX Contracts through or with a company that was not so regulated.
In my view, it was misleading for EuropeFX account managers to convey to customers that they were exposed to less risk when they traded CFDs or Margin FX Contracts with EuropeFX simply because it was regulated by ASIC, in the broad sense that EuropeFX was an Australian registered company that was permitted to provide financial services as the CAR of the holder of an AFSL. Of course, the fact that EuropeFX provided financial services as a CAR of the holder of an AFSL meant that a customer might lodge a complaint with ASIC, and that EuropeFX might be subject to recourse, at the suit of ASIC, if it contravened provisions in the ASIC Act. As events transpired, that is essentially what occurred in this case. It does not necessarily follow, however, that the customer was exposed to less risk in any real or practical sense. A customer could equally lodge a complaint with ASIC concerning the activities of a company, and that company might be subject to recourse, at the suit of ASIC, in relation to its provision of financial services, even if that company was not authorised to provide those financial services.
The point is that the mere fact that EuropeFX was, in a broad sense, subject to regulation by ASIC, provided no real assurance to a customer that EuropeFX would necessarily comply with the laws that regulated the provision of financial services by CARs. Nor did it provide any real assurance that ASIC would necessarily engage in any proactive regulation which could or would prevent EuropeFX from failing to comply with those laws. It follows that the fact that EuropeFX was regulated by ASIC in that broad sense provided no basis for any suggestion or intimation that the customer was exposed to less risk than would be the case if EuropeFX was not so regulated.
To make matters worse, some of the disputed Regulation Representations went well beyond simply representing that EuropeFX was regulated by ASIC. In some instances, the EuropeFX account manager represented, either expressly or impliedly, that because EuropeFX was regulated by ASIC, ASIC actively supervised and scrutinised EuropeFX's activities, much like a bank or other financial institution would be supervised. In other instances, the EuropeFX account manager represented that EuropeFX was itself licenced by ASIC, which was false, or implied that because EuropeFX was regulated, it was required to do certain things in certain ways. It suffices to give a few examples.
In one instance, a EuropeFX case manager told Ms Boden that: "you don't really want to work with unregulated company because when you are working with an unregulated company there is no financial institute that actually supervise the company" (row 501).
In another instance, a EuropeFX account manager told Mr Isaacs (row 870): We are regulated ASIC. As you know, ASIC is an entity that gives you regulation and basically keeping the rules of the Australian people, okay because, of a lot fraud companies that used to work in Australia and to scam a lot of clients there. So, Australian government decide to open and build an entity that will give regulation to investment companies. Okay. What does this mean? What - it under supervision of the Australian government. Everything we're doing here, everything we're saying, everything is recorded in order to give you that full confidence that you need, first of all, okay … I mean we have licence … We are licenced… by ASIC.
Yet another EuropeFX account manager told Ms Robinson (row 909): EuropeFX is a fully licenced and fully regulated brokerage firm by ASIC, the Australian Security and Investments Commission. By the way, it's the same institution - government institution that regulates every other bank in Australia …when it comes to your security and your safety, you need to understand that your money is being secured on the highest - on the highest level. Everything that you're going to do on the platform, you know, from this day on, also will be recorded, and everything is being documented, and everything is fully transparent when it comes to your trading account.
The account manager went on to refer to EuropeFX's licence number and to state that it was "basically our driving … licence when it comes to dealing on the capital market".
In the final example, a EuropeFX account manager told Ms Scott that because EuropeFX was working under "ASIC regulation", her withdrawal request would be processed within three business days (row 1380).
It may be accepted that some of the disputed Regulation Representations are somewhat more equivocal or ambiguous. Ultimately, however, I am satisfied that all the disputed Regulation Representations were misleading because the mere fact that EuropeFX was an Australian registered company which, as a CAR of the holder of an AFSL, was authorised to provide financial services on behalf of the AFSL holder, did not mean that the customer was exposed to less risk in any real or practical sense. I note that similar representations that were made in a similar context were found to be misleading or deceptive in AGM Markets at [316]-[317] and [356]. I also note that USG told EuropeFX in July 2019 that "avoiding using the licence as a sales pitch is always advisable". EuropeFX representatives nevertheless continued to use its supposed status as a regulated company as part of their sales pitch to customers and prospective customers.
I am also satisfied that each of the ten disputed Regulation Representations was made in connection with the supply of financial services and can properly be characterised as a representation that the financial services in question were of a particular standard or quality, being a standard or quality relating to the risk to which the customer was exposed, or had approval, namely the approval of ASIC. I therefore find that the making of each of the 9 contested Regulation Representations amounted to a contravention by EuropeFX of s 12DB(1) of the ASIC Act

[183]

Location Representations

ASIC pressed the Court to make findings in respect of seven Location Representation, being representations made to Ms Love (row 24), Ms Sapor (row 304), Mr Stubna (row 984), Mr Cartwright (rows 1169 and 1173), and Mr Costa (rows 1431 and 1448).
EuropeFX admitted that each of those representations was correctly characterised by ASIC as a Location Representation as defined, though it denied that they were false or misleading. Given EuropeFX's admissions, each of the disputed Location Representations may be taken to be a representation to the effect that: (i) EuropeFX had main offices, headquarters, or offices from which it conducted a substantial part of its business, located in Australia; or (ii) the account managers were located in Australia.
Each of the seven disputed Location Representations fell within the first subcategory of Location Representations. The issue, therefore, is whether it was false or misleading for a EuropeFX representative to represent to a customer that EuropeFX's main office, headquarters, or the office from which it conducted a substantial part of its business, was located in Australia. In my view any such representation was false, misleading and deceptive.
As has already been discussed, while EuropeFX was a company that had its registered office in a suburb of Sydney, virtually no aspect of its day-to-day business was conducted in Australia. It effectively sub-contracted all its day-to-day business operations to companies and persons located outside Australia. While its directors, Mr Martin (until 30 April 2019) and Mr Sasso, were Australian residents, the evidence indicated that the individual or individuals who effectively managed and controlled the conduct of its business were located overseas. EuropeFX did not adduce evidence from either Mr Sasso or Mr Martin. I would, in all the circumstances, infer from the evidence as a whole that Mr Sasso was no more than a mere puppet director. Similarly, while the shares in EuropeFX were held by an Australian company, the shares in that company were beneficially owned for a foreign company. I reject EuropeFX's submission that EuropeFX was "headquartered" in Sydney simply because that is where its registered office, director and bank account were located.
While it is true that, on those occasions that they were pressed by customers about whether they were located, EuropeFX account managers would ultimately disclose that they were based in Israel. It was often at that point that they represented that EuropeFX had its headquarters or main offices in Australia, or that a substantial part of EuropeFX's business was conducted in Australia. I would infer from the evidence as a whole that, like the Regulation Representations, those representations were made to reassure its Australian-based customers that they were dealing with an Australian operated business. That was in my view manifestly and intentionally misleading.
ASIC did not allege that the making of the Location Representations gave rise to contraventions of s 12DB(1) of the ASIC Act. It did, however, contend that the making of those representations constituted conduct that was misleading or deceptive, or that was likely to mislead or deceive, in contravention of, relevantly, s 12DA(1) of the ASIC Act. I agree with and accept that contention. I therefore find that the making of each of the seven contested Location Representations amounted to a contravention by EuropeFX of s 12DA(1) of the ASIC Act.

[184]

Summary of findings in relation to EuropeFX false, misleading or deceptive representations

As discussed earlier, EuropeFX admitted, or may be taken to have admitted, that it contravened s 12DB(1) on 69 occasions and contravened s 12DA(1) on two occasions by making false, misleading or deceptive representations to customers.
In relation to the disputed representations, as discussed earlier in the context of the admitted false, misleading or deceptive representations, I propose to proceed at this stage on the basis that EuropeFX contravened either s 12DB(1) or s 12DA(1) of the ASIC Act by making each of the disputed representations that I have found were false, misleading or deceptive. That is the case even in respect of those rows of Annexure C.1 that refer to representations that fall within two or more categories of the defined representations. I will, however, entertain further submissions at the relief stage in respect of the number of contraventions flowing from the findings that I have made.
I have, in summary, made the following findings in relation to the disputed false, misleading or deceptive representations. (1) EuropeFX made 47 Profit Representations (as defined), each of which was misleading and amounted to a contravention of s 12DB(1) of the ASIC Act. (2) EuropeFX made nine Revenue Representations (as defined), each of which was misleading or deceptive and amounted to a contravention of s 12DA(1) of the ASIC Act. (3) EuropeFX made 28 Money Risk Representations (as defined), each of which was misleading and amounted to a contravention of s 12DB(1) of the ASIC Act. (4) EuropeFX made three Withdrawal Representations (as defined), each of which was misleading and amounted to a contravention of s 12DB(1) of the ASIC Act. (5) EuropeFX made 21 Loss Recovery Representations (as defined), each of which was misleading and amounted to a contravention of s 12DB(1) of the ASIC Act. (6) EuropeFX made three Equities Representations (as defined), each of which was misleading and amounted to a contravention of s 12DB(1) of the ASIC Act. (7) EuropeFX made nine Bank Account Representations (as defined), each of which was misleading or deceptive and amounted to a contravention of s 12DB(1) of the ASIC Act. (8) EuropeFX made ten Regulation Representations (as defined), each of which was misleading and amounted to a contravention of s 12DB(1) of the ASIC Act. (9) EuropeFX made seven Location Representations (as defined), each of which was misleading or deceptive and amounted to a contravention of s 12DA(1) of the ASIC Act.
I accordingly have found that, in addition to the admitted contraventions of s 12DB(1) and s 12DA(1) referred to earlier, EuropeFX contravened s 12DB(1) on 121 occasions and s 12DA(1) on 16 occasions as a result of their representatives making the misleading or deceptive representations. That makes a total of 192 contraventions of s 12DB(1) and 18 contraventions of s 12DA(1) of the ASIC Act.

[185]

MISLEADING OR DECEPTIVE REPRESENTATIONS - TRADEFRED

ASIC's case against TradeFred in respect of misleading or deceptive representations was in many ways similar to its case against EuropeFX in respect of misleading or deceptive representations. That is in large part because the evidence revealed that TradeFred account managers adopted or used many of the same sales or advisory tactics to persuade customers to sign-up, trade and deposit funds into their trading accounts.
ASIC categorised the alleged TradeFred misleading or deceptive representations into various defined categories. Those categories were defined in the same terms as the categories in ASIC's case against EuropeFX and included: Profit Representations, Revenue Representations, Money Risk Representations, Withdrawal Representations, Loss Recovery Representations, Equities Representations, Bank Account Representations, Plan Representations and Regulation Representations. The definitions of those categories of representations were outlined earlier in these reasons. As noted earlier, ASIC's case against TradeFred involved an additional category of representations referred to as Bonus Representations.
ASIC alleged that representations made by TradeFred account managers that fell within those defined categories or representations were misleading or deceptive for essentially the same reasons as those referred to earlier in respect of the similar representations made by EuropeFX account managers to their customers. Significantly, eight of the defined categories of representations - Profit Representations, Revenue Representations, Money Risk Representations, Withdrawal Representations, Loss Recovery Representations, Equities Representations, Bonus Representations and Plan Representations - were alleged to be representations as to future matters. ASIC alleged that the TradeFred representatives who made those representations had no reasonable basis to make them.
The misleading or deceptive representations that ASIC alleged were made by TradeFred account managers to TradeFred customers are set out in Annexure C.2 to the SOC. ASIC ultimately pressed the Court to make findings in respect of only 60 of those representations - three representations in relation to each of the TF20. Those representations are identified in rows 8, 15, 21, 31, 63, 74, 88, 94, 124, 140, 156, 165, 189, 202, 231, 251, 267, 268, 274, 276, 288, 306, 323, 341, 377, 378, 396, 402, 418, 448, 449, 459, 460, 490, 519, 521, 531, 537, 544, 566, 602, 608, 619, 631, 636, 657, 661, 685, 699, 711, 735, 765, 772, 789, 824, 840, 842, 868, 875 and 905 of Annexure C.2. Some of those representations are alleged to contain or consist of two or more of the defined representations. For example, the representation at row 88 is alleged to consist of a Profit Representation, a Withdrawal Representation and an Equities Representation.
ASIC also narrowed its case in respect of the TradeFred misleading and deceptive representations, as it did in its misleading or deceptive representations case against EuropeFX, by relying only on ss 12DA and 12DB of the ASIC Act.
The applicable legal principles in respect of contraventions of ss 12DA, 12DB and 12BB of the ASIC Act were discussed earlier. I have applied those principles in considering the alleged TradeFred misleading or deceptive representation contraventions.
I do not propose to provide detailed reasons in respect of each of the 60 allegedly misleading and deceptive representations made by TradeFred account managers. TradeFred did not file a defence and eventually filed a submitting appearance. No evidence was adduced by or on behalf of TradeFred. Moreover, ASIC did not advance any detailed written or oral submissions in respect of this aspect of its case against TradeFred. It certainly did not descend into any detail in respect of the individual representations.
There was no issue as to whether the representations were made by TradeFred account managers. They were recorded and reproduced in transcripts. The main issue in respect of the representations is whether they were accurately or correctly characterised by ASIC. That issue was not always easy to resolve because many of the representations are rambling, convoluted, confused and obscure, sometimes to the point of being almost nonsensical.
In any event, in the case of those representations which are found to have been properly or accurately characterised, it is generally not a large leap to find that they were misleading and deceptive, mainly because of the way the representations were framed or defined. That is particularly the case in respect of those representations which ASIC alleged were representations in respect of future matters. TradeFred did not adduce any evidence. It follows that, by reason of s 12BB of the ASIC Act, the TradeFred account managers who made the impugned representations concerning future matters may generally be taken not to have had reasonable grounds for making the representations and the representations may accordingly be taken to be misleading.

[192]

Bank Account Representations

Only two of the representations pressed by ASIC involved what were said to be Bank Account Representations, being rows 288 and 341 of Annexure C.2 to the SOC.
The representation at row 288 could fairly be said to comprise a Bank Account Representation as defined. The gist of the representation was that the customer would generate greater returns by investing their funds with TradeFred and trading in CFDs and Margin FX Contracts than they would by keeping their funds in a bank account. The effect of Mr Blundell's evidence was that the prospect of a TradeFred customer who lacked relevant trading experience generating greater returns by trading in CFDs and Margin FX Contracts than they would by keeping their money in the bank was very low. The vast majority of TradeFred customers had no experience trading in CFDs or Margin FX Contracts. It essentially follows that the representation at row 288 was misleading or deceptive.
I am also satisfied that that representation was misleading or deceptive for the reasons given in respect of similar representations made by EuropeFX account managers.
I am not satisfied that the representation at row 341 could fairly be said to comprise a Bank Account Representation as defined. While the representation does involve the account manager drawing a comparison between the rate of earnings an investor may earn from a bank account, the comparison drawn between that and the earnings the investor may expect to earn from instead investing with TradeFred is not sufficiently clear to rise to the level of a Bank Account representation.
ASIC alleged that, by making a misleading or deceptive Bank Account Representation, TradeFred contravened s 12DB(1) of the ASIC because such a representation comprised either a representation concerning the standard or quality of a financial product, or a representation that financial services had particular performance characteristics, uses or benefits: cf s 12DB(1)(a) and (e) of the ASIC Act. I accept that submission. I am accordingly satisfied that by making, through its account manager, the misleading or deceptive Bank Account Representation at row 288, TradeFred contravened s 12DB(1) of the ASIC Act.

[197]

MISLEADING OR DECEPTIVE REPRESENTATIONS - USG

ASIC's case concerning false, misleading or deceptive representations made by USG sales representatives differed somewhat from its cases against EuropeFX and TradeFred in respect of false, misleading or deceptive representations. Ultimately, ASIC pressed the Court to make findings in respect of 30 representations made by USG sales representatives which fell into one or more of three categories. Those categories of representations were referred to as the USG Profit Representations, the Rob Clayton Report Representations and the Rob Clayton Representations. ASIC alleged that representations that fell into any of those categories were false, misleading or deceptive.
USG Profit Representations were defined as representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers trading CFDs or Margin FX Contracts: (i) would make a profit, either by reference to a specific figure or percentage return on investment; or generally, (ii) would earn "income" of $100 to $200 per week; or (iii) would be able to close 90% or more of their trades in a profitable position.
Rob Clayton Report Representations were defined as being representations to the effect that an analyst engaged by USG named Rob Clayton prepared reports (Rob Clayton Reports) which would be emailed to the customer and: (i) would provide the customer with advice regarding opening particular positions, including details such as when to buy or sell particular assets, or details such as the stop loss or take profit which should be used on particular positions; and/or (ii) would result in an accuracy or success rate of 80% or greater if followed; and/or (iii) were circulated to the major Australian banks.
Rob Clayton Representations were defined as being representations to the effect that an analyst engaged by USG named Rob Clayton was (i) in his previous role at Westpac, the head, or the head technical analyst, of Westpac and/or responsible for advising or directing Westpac as to what the bank should trade; and/or (ii) paid by USG millions of dollars a year to write the Rob Clayton Reports.
The 30 representations pressed by ASIC are referred to in rows 3, 5, 13, 15, 16, 18, 20, 26, 30, 31, 36, 41, 44, 57, 58, 61, 62, 63, 66, 67, 68, 72, 76, 103, 104, 105, 106, 107, 112 and 114 of Annexure C.3 to the SOC.
The main issue in determining ASIC's case against USG in relation to the alleged misleading or deceptive representations is determining whether the 30 representations pressed by ASIC fell within one or other of the defined categories of representations. The unchallenged evidence demonstrated that representations that fell within those categories were false, or at least misleading or deceptive.

[198]

USG Profit Representations

Of the 30 representations made by USG sales representatives that ASIC pressed, 22 were alleged to comprise or contain USG Profit Recommendations. Those representations are in rows 3, 5, 13, 15, 16, 36, 44, 57, 62, 63, 66, 67, 68, 72, 76, 103, 104, 105, 106, 107, 112 and 114 of Annexure C.3 to the SOC.
ASIC alleged that representations which conveyed the USG Profit Representations were false, misleading or deceptive, because they were representations in respect of future matters - essentially predictions about the likely profitability of trades placed in the future by the customer - and the sales representatives who made them did not have any reasonable grounds for making the representations. Mr Blundell's unchallenged and unanswered evidence in respect of the USG Profit Representations was, in short summary, that: the majority of retail customers will lose money trading in CFDs and Margin FX Contracts; it is highly unlikely that a customer would close 90% of their trades in a profitable position; and CFDs and Margin FX Contracts were not financial products that could be used to provide a reliable income stream.
I have considered the terms of each of those 22 USG Profit Representations pressed by ASIC. I am satisfied that all but two of them (those in rows 13 and 107) are properly characterised as USG Profit Representations as defined. The representation at row 13 appears to be simply a representation as to what USG would teach the prospective customer to do. The representation at 107 is so unclear and ambiguous that I am unable to conclude that it falls within the defined category.
The 20 representations that I have found to be USG Profit Representations all concerned future matters - predictions concerning profits. USG did not adduce any evidence. It follows that, by reason of s 12BB of the ASIC Act, the sales representatives may generally be taken not to have had reasonable grounds for making the representations and the representations may accordingly be taken to be misleading. I am in any event satisfied that each of the 20 representations was misleading or deceptive given the unchallenged opinion evidence of Mr Blundell.
ASIC alleged that the making of a misleading or deceptive USG Profit Representation constituted a contravention of s 12DB(1) of the ASIC. I agree, essentially for the reasons given earlier in respect of the EuropeFX Profit Representations. I am accordingly satisfied that by making, through its sales representatives, each of the 19 misleading or deceptive USG Profit Representations, USG contravened s 12DB(1) of the ASIC Act.

[199]

Rob Clayton Report Representations

Of the 30 representations made by USG sales representatives that ASIC pressed, 22 were alleged to comprise or contain Rob Clayton Report Representations. Those representations are in rows 3, 5, 15, 16, 18, 20, 26, 30, 31, 41, 57, 58, 61, 62, 63, 66, 67, 72, 76, 104, 106 and 112 of Annexure C.3 to the SOC.
ASIC alleged that representations which conveyed the Rob Clayton Report Representations were false, misleading or deceptive because: (i) the reports that Mr Clayton prepared for USG only provided general market commentary and did not contain any advice regarding the opening of particular positions, or details such as when to buy or sell particular assets, or details such as the stop loss or take profit which should be used on particular positions; (ii) did not have any particular accuracy or success rate because they did not contain any advice or recommendations about particular positions; and (iii) were not circulated to the major Australian banks. Each of those facts was established by the unchallenged affidavit evidence of Mr Clayton.
I am satisfied that all the 22 alleged Rob Clayton Report Representations pressed by ASIC are accurately characterised or categorised as Rob Clayton Report Representations. I am also satisfied, based on the evidence of Mr Clayton, that each of those 22 representations was false, misleading or deceptive.
ASIC alleged that the making of a misleading or deceptive Rob Clayton Report Representation constituted a contravention of s 12DB(1) of the ASIC. It alleged, in that regard, that the Rob Clayton Report Representations constituted false or misleading representations that the financial product advice provided by USG, through the provision of the reports, was of a particular standard or quality, or had certain performance characteristics, uses or benefits: cf 12DB(1)(a) and (e) of the ASIC Act. I agree that that is an available characterisation of the nature of the Rob Clayton Report Recommendations. I am accordingly satisfied that by making, through its sales representatives, each of the 22 misleading or deceptive Rob Clayton Report Representations, USG contravened s 12DB(1) of the ASIC Act.

[200]

Rob Clayton Representations

Of the 30 alleged representations made by USG sales representatives that ASIC pressed, 14 were alleged to comprise or contain Rob Clayton Representations. Those representations are in rows 3, 5, 15, 18, 20, 30, 31, 57, 63, 72, 76, 106, 112 and 114 of Annexure C.3 to the SOC.
ASIC alleged that representations which conveyed the Rob Clayton Representations were false, misleading or deceptive because: (i) in his previous role at Westpac, Mr Clayton was not the head, or the head technical analyst, of Westpac; (ii) in his previous role at Westpac, Mr Clayton was not was not responsible for advising or directing Westpac with respect to what to trade, and was not responsible for the foreign exchange transactions entered into by Westpac; and (iii) USG did not pay Mr Clayton millions of dollars but rather remunerated him on a flat fee basis of $3,150 per month. Each of those facts was established by the unchallenged affidavit evidence of Mr Clayton.
I am satisfied that all the 14 alleged Rob Clayton Representations relied on by ASIC are accurately characterised or categorised as Rob Clayton Representations. I am also satisfied, based on the evidence of Mr Clayton, that each of those 14 representations was false, misleading or deceptive.
ASIC alleged that the making of a misleading or deceptive Rob Clayton Representation constituted a contravention of s 12DB(1) of the ASIC. It alleged, in that regard, that Rob Clayton Representations constituted false or misleading representations that the financial product advice provided by USG, through the provision of the relevant reports, was of a particular standard or quality because the reports were prepared by a person with the experience or credentials stated by the sales representative: cf 12DB(1)(a) of the ASIC Act. I agree that that is an available characterisation of the nature of the Rob Clayton Representations. I am accordingly satisfied that by making, through its sales representatives, each of the 14 misleading or deceptive Rob Clayton Representations, USG contravened s 12DB(1) of the ASIC Act.

[203]

Statutory provisions and relevant principles

Sections 12CB of the ASIC Act relevantly provides as follows: 12CB Unconscionable conduct in connection with financial services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person; or (b) the acquisition or possible acquisition of financial services from a person; engage in conduct that is, in all the circumstances, unconscionable. (2) … (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 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) …
Section 12CC provides a non-exhaustive list of matters to which this Court may have regard in determining whether conduct is unconscionable: 12CC Matters the court may have regard to for the purposes of section 12CB (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; an (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.
There was no significant dispute concerning the applicable principles governing the prohibition of unconscionable conduct under s 12CB of the ASIC Act. The applicable principles have been expounded and explicated in numerous decisions of this Court and the High Court, including decisions concerning the equivalent prohibition in s 21 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (ACL). The leading cases are: Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199 (Paciocco FCAFC), affirmed by the High Court in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525 (Paciocco HCA); Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155; (2018) 266 FCR 631; Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1; Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 388 ALR 577; Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1; Productivity Partners Pty Ltd (trading as Captain Cook College) v Australian Competition and Consumer Commission [2023] FCAFC 54; (2023) 297 FCR 180 (Productivity Partners FCAFC); and Productivity Partners v Australian Competition and Consumer Commission [2024] HCA 27 (Productivity Partners HCA). Reference should also be made to ASIC v AGM Markets Pty Ltd (in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57 (AGM Markets), a case involving similar facts and allegations to the facts and allegations in this case.
It is unnecessary to provide yet another lengthy dissertation in respect of the applicable principles, particularly as there was no material divide between the parties in respect of those principles. It suffices to provide a short summary of the key principles which are likely to be applicable having regard to the case advanced by ASIC and the facts and circumstances of this case. The applicable principles in that regard are as follows.
First, the statutory prohibition of unconscionable conduct is not confined to conduct that is unconscionable within the meaning of the general law and remediable on that basis by a court exercising jurisdiction in equity: Kobelt at [83] (Gageler J), [119] (Keane J), [144] (Nettle and Gordon JJ) and [311] (Edelman J); Quantum at [83]; Productivity Partners FCAFC at [161(a)]; AGM Markets at [362], [365]; Productivity Partners HCA at [60] (Gageler CJ and Jagot J); [97] (Gordon J).
Second, s 12CB of the ASIC Act (and its analogue in s 21 of the ACL) operates to prescribe a normative standard of conduct which the section marks out. The function of a court is to recognise and administer that normative standard of conduct having regard to the totality of the circumstances and taking account of each of the considerations identified in s 12CC of the ASIC Act if and to the extent that those considerations are applicable in the circumstances of the case: Lux at [23], [41] (Allsop CJ); Paciocco HCA at [189] (Gageler J); Kobelt at [87] (Gageler J); Productivity Partners FCAFC at [161(b)]; see also AGM Markets at [367]; [378]. The factors or considerations referred to in s 12CC are not exhaustive, but provide "express guidance as to the norms and values that are relevant to inform the meaning of unconscionability and its practical application" (Paciocco FCAFC at [279]) and assist in "setting a framework for the values that lie behind the notion of conscience identified in s 12CB": Kobelt at [154] (Nettle and Gordon JJ); see also Productivity Partners HCA, [60] (Gageler CJ and Jagot J); [102]-[105] (Gordon J).
Third, the word "unconscionable" is to be understood as bearing its ordinary meaning, being conduct that objectively answers the description of being against conscience: Kobelt at [14] (Kiefel CJ and Bell J), [92] (Gageler J) and [119] (Keane J); Quantum at [87]; Productivity Partners FCAFC at [161(c)]; Productivity Partners HCA at [60] (Gageler CJ and Jagot J).
Fourth, the values that inform the standard of conscience fixed by the statutory prohibition include those identified in Paciocco FCAFC at [296] (Allsop CJ). They include: certainty in commercial transactions; honesty; the absence of trickery or sharp practice; fairness when dealing with customers; the faithful performance of bargains and promises freely made; and the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage: Kobelt at [14] (Kiefel CJ and Bell J) and at [234] (Nettle and Gordon J); see Productivity Partners FCAFC at [161(d)]; AGM Markets at [371].
Fifth, the approach to the application of the prohibition in s 12CB which is required by s 12CC is analogous to the approach of a court of equity which takes a "more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case": The Juliana (1822) 2 Dods 504 at 521; 165 ER 1560 at 1567 (Lord Stowell) and Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118-119 (Dixon CJ, McTiernan and Kitto JJ), referred to by Allsop CJ in Paciocco FCAFC at [271] and in Kobelt by Keane J at [120] and Nettle and Gordon JJ at [150]; see Productivity Partners FCAFC at [161(e)].
Sixth, the essential task is an evaluation of the impugned conduct to assess whether it is to be characterised as a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable: Kobelt at [47] (Kiefel CJ and Bell J), [120] (Keane J) and [153] (Nettle and Gordon JJ); Quantum at [92]; Productivity Partners FCAFC at [161(f)]; Productivity Partners HCA, [60] (Gageler CJ and Jagot J), or conduct that is "so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience": Kobelt [92] (Gageler J). That task obviously requires close consideration of the facts: AGM Markets at [363].
Seventh, whether the impugned conduct was consistent or inconsistent with industry practice may be a relevant consideration: Paciocco HCA at [290] (Keane J); AGM Markets at [374].
Eighth, while taking advantage of a pre-existing disability, vulnerability or disadvantage is a common feature of cases in which conduct has been found to be unconscionable, it is not an essential requirement of the statutory proscription: Quantum at [85], [91]; Productivity Partners FCAFC at [162].
Nineth, the provision for systemic unconscionability in s 12CB(4)(b) of the ASIC Act makes it clear that "the focus of the provisions is on conduct that may be said to offend against good conscience", rather than the specific "characteristics of any possible 'victim' of the conduct (though these may be relevant to the assessment of the conduct)": Productivity Partners HCA at [106] (Gordon J) citing Kobelt at [232] and Stubbings at [55]. The concept of systemic unconscionability in s 12CB(4)(b) of the ASIC Act, which "invokes a de-individualised mode of analysis", reinforces the view that the factors listed in s 12CC of the ASIC Act "provide a framework for the values that lie behind the notion of conscience identified in [s 12CB] and not a mandatory set of factors to be applied in every case": Productivity Partners HCA at [107] (Gordon J).
Tenth, a "system of conduct" in s 12CB(4)(a) of the ASIC Act connotes "an internal method of working" or a "plan of procedure" which may "develop organically as a practice, operate at a level of policy or be a combination of practice and policy": Productivity Partners HCA at [108] (Gordon J), citing Stubbings at [55]; Kobelt at [143] and Bant, "Systems Intentionality: Theory and Practice", in Bant (ed), The Culpable Corporate Mind, Bloomsbury Publishing, (2023) 183 at 190-195. If s 12CB(4)(a) is to be invoked on the basis of a system of conduct, it is the system that must be unconscionable: Unique at [104].
Eleventh, a "pattern of behaviour" in s 12CB(4)(a) of the ASIC Act connotes "the external, observable repetition of events" (Productivity Partners HCA at [109] (Gordon J) citing Stubbings at [55] and Kobelt at [143]) and "may signify a sequence of events on which a prediction of successive or future events may be based": Productivity Partners HCA at [109] (Gordon J) referring to Bant at 191. A pattern may be "manifested without any design or intentional input": AGM Markets at [389].
Twelfth, how a system or a pattern is to be proved in any given case will depend on the facts and circumstances of the case and the nature of the case advanced by the applicant. The types of evidence that may reveal a system of conduct for the purposes of s 12CB(4)(b) of the ASIC Act were identified by Gordon J in Productivity Partners HCA at [110] as follows (albeit referring to the cognate provision in s 21(4)(b) of the ACL): Evidence of a system of conduct can be both internal and external to the corporation. Internally it may include employee testimony, internal scripts, remuneration or promotion criteria, complaint processes and scripts, audit outcomes, and default settings on automated programs. Externally it may include patterns of harm to an identified class of customer, communications, incentives and disincentives provided to a target market, and user experiences. Those lists are not exhaustive. In determining whether an identified system of conduct is unconscionable contrary to s 21 of the ACL, identification, assessment and characterisation of the system of conduct is, by reference to the totality of the circumstances, both internal and external to the corporation.
Thirteenth, in some cases a system of conduct could be said to have produced a pattern of behaviour and in some cases a pattern of behaviour could enable the Court to infer a system of conduct: AGM Markets at [390]. Where, however, the systemic case advanced by the applicant significantly depends on the individual characteristics of consumers, or specific interactions between the respondent and consumers, some evidence concerning the proportionality or representativeness of the sample consumers relied on by the applicant, or evidence about how those sample consumers were selected, may be required: Unique at [153]; Productivity Partners FCAFC [166]-[167]. On the other hand, where the case advanced by the applicant depends more on generic conduct, or generic vulnerabilities of the consumers, and less on specific interactions with certain consumers, or the individual attributes of certain consumers, "the more probative evidence about what happened to a number of consumers may be": Unique at [135].
Fourteenth, "a system of conduct or pattern of behaviour may be unconscionable, even though not every individual affected by the conduct or behaviour is or has been disadvantaged by the conduct or behaviour": Australian Competition and Consumer Commission v Cornerstone Investments Aust Pty ltd (in liq) (No 4) [2018] FCA 1408 at [729], cited with approval in Stubbings at [76] (Gordon J). There does not need to be loss or disadvantage for a system to be unconscionable: Stubbings at [76] (Gordon J). What "can be significant is that the conduct targeted a group to take advantage of their likely, although not certain, vulnerability": Stubbings at [77].

[204]

UNCONSCIONABLE CONDUCT by EUROPEFX - OVERVIEW

As I have already said, ASIC alleged that EuropeFX engaged in a system of conduct or pattern of behaviour (within the meaning in s 12CB(4)(b) of the ASIC Act), in connection with the supply of financial services ,that was, in all the circumstances, unconscionable. It also alleged that EuropeFX engaged in conduct, in connection with the supply of financial services to each of the EFX30, which was, in all the circumstances, unconscionable.
ASIC maintained that its allegation that EuropeFX engaged in an system of conduct, or pattern of behaviour, towards or concerning its customers generally, that was, in all the circumstances, unconscionable, was its primary case. I will at times use the shorthand expression "systemic unconscionability" when describing ASIC's case based on that allegation. While ASIC's systemic unconscionability case relied to some extent on the evidence concerning the experiences of the EFX30 and the way EuropeFX case managers engaged with them, the way ASIC characterised its case in that regard was that the experiences of the EFX30 were illustrations or manifestations of EuropeFX's unconscionable system of conduct or patterns of behaviour. The unconscionable system of conduct or pattern of behaviour was not, however, confined to the EFX30.
EuropeFX submitted that it would be more appropriate to determine ASIC's unconscionable conduct case in respect of each of the EFX30 before considering ASIC's case concerning systemic unconscionability. It submitted that, having regard to the manner in which ASIC's case had been pleaded, as well as the way the case had proceeded at trial, it was illogical and unfair for ASIC to submit that the Court should first determine its systemic unconscionability case and only then consider its unconscionability case in respect of the individual customers. As I understand that submission, the illogicality or unfairness of the positions was said to arise from the fact that ASIC's systemic unconscionability case was largely based on the experiences of the EFX30. In those circumstances, how, it was asked rhetorically, can the Court address the systemic unconscionability case without first addressing the case in respect of the individual customers. That would, to put it in metaphorical or colloquial terms, "put the cart before the horse".
EuropeFX's criticism of ASIC's position that the Court should first consider its systemic unconscionability case, in my view, mischaracterised the way ASIC pleaded and put its case. ASIC's SOC first pleads its case of systemic unconscionability and identifies (at [69]) the features and characteristics of the system of conduct or patterns of behaviour that it contended constituted unconscionable conduct. ASIC's case in respect of unconscionable conduct towards each of the EFX30 is pleaded (at SOC [70]) as being "further, or in the alternative" to its systemic unconscionability case.
It was also clear that the system of conduct or pattern of behaviour alleged by ASIC in its case against EuropeFX was connected with the supply of financial services to EuropeFX's customers in Australia generally, and was not limited to the EFX30. It was equally clear that the circumstances relied on by ASIC in respect of its systemic unconscionability case included, but was by no means limited to, the circumstances relating to the EFX30: see SOC [71] and the particulars thereto. As noted earlier, however, ASIC's unconscionability case relied on the circumstances of the EFX30 as illustrations or manifestations of the systems of conduct or patterns of behaviour towards customers more generally. ASIC's case of systemic unconscionability on the part of EuropeFX relied on evidence that extended well beyond the experiences of the EFX30 and related to systems of conduct and patterns of behaviour that EuropeFX engaged in respect of its entire customer base.
It follows that I do not consider that it was in any respect inappropriate or unfair for ASIC to contend that I should consider and determine ASIC's broader systemic unconscionability case before its case of unconscionable conduct in respect of the individual consumers. Nor do I consider that it would be in inappropriate or unfair for me to proceed in that manner. I also reject EuropeFX's contention that it would be somehow procedurally unfair for me to proceed in that manner. The assertion of procedural unfairness was only made when ASIC narrowed its case by confirming that, if the Court found that it had made out its case of systemic unconscionability, it would not press the Court to make findings concerning unconscionability towards the EFX30 individually. EuropeFX was afforded every opportunity to adduce whatever relevant evidence it wanted to adduce, and put whatever arguments it wanted to put, in respect of both the broader systemic unconscionability case, and the case in respect of each individual customer. ASIC's narrowing of its case only arose when the Court expressed concerns about the enormity of the task involved in addressing all of the many contraventions alleged by ASIC, including the unconscionability contraventions in respect of all of the EFX30. I reject EuropeFX's submission that, by agreeing to narrow its case, including in respect of unconscionability, ASIC somehow or other "overturned the apple cart".
I consider that it is both open to the Court, and appropriate, to first consider ASIC's case of systemic unconscionability on the part of EuropeFX. That will, of course, require the Court to consider and make some findings concerning the evidence of and relating to the EFX8, and the evidence concerning the EFX22. It will not, however, be necessary to make findings, or descend to the same level of detail, in respect of the experiences of the EFX30 as may or will be necessary when considering the case in respect of unconscionable conduct towards those customers individually.
There is another relevant consideration that I have taken into account in determining whether it is appropriate to first address ASIC's systemic unconscionability case. That consideration has already been adverted to. When pressed to explain the utility in requiring the Court to engage in the massive task of determining whether EuropeFX not only contravened s 12CB of the ASIC Act in a systemic way, but also in respect of each of the EFX30, ASIC ultimately clarified its position in respect of its unconscionable conduct case against EuropeFX as follows.
First, ASIC pressed the Court to first make a finding of systemic unconscionable conduct as pleaded at [69] and [71]-[73] (insofar as those paragraphs related to [69]) of the SOC.
Second, ASIC's position was that, if the Court found that EuropeFX had engaged in systemic unconscionable conduct, the Court was not required to determine the individual allegations of unconscionable conduct in respect of each of the EFX30 as pleaded at [70] and [71]-[73] (insofar as those paragraphs related to [70] of the SOC).
Third, ASIC submitted that "to satisfy itself that ASIC's systemic unconscionable conduct case had been made out, the Court should satisfy itself that a cross-section of the circumstances alleged in [71] of the SOC across a number of customers and account managers are proven." I interpret that submission as meaning that, while the Court will need to address and make some findings in respect of the evidence relating to the EFX30 when considering ASIC's systemic unconscionability case, it may not need to examine the individual circumstances of each of the EFX30 to the same extent or degree that it might (or will) have to when addressing ASIC's unconscionability case in respect of each of the EFX30 individually. Rather, the issue in respect of the systemic unconscionability case is whether the evidence relating to each of the EFX30, along with all the other evidence relied on by ASIC, is sufficient to support an inference of the existence of system of conduct, or a pattern of behaviour, that EuropeFX engaged in respect of all or a large proportion of its customer base.
I also note in that context that paragraph [69] of the SOC, which identities the central allegations in ASIC's systemic unconscionability case against EuropeFX, alleges that EuropeFX "engaged in a system of conduct or pattern of behaviour in connection with the supply or possible supply of financial services … to customers in Australia" (my emphasis). While some of the specified elements of the alleged system of conduct or pattern of behaviour involve the EFX30 (for example, giving personal advice to the EFX30 and making misleading or deceptive representations to the EFX30 - see SOC [69(a)(iii) and (iv)]), the alleged system of conduct or pattern of behaviour clearly extended to customers in Australia generally. It was not limited to the EFX30.
Fourth, while ASIC indicated that, if it made out its systemic unconscionability case, the Court was not "required" to consider and determine its case in respect of unconscionability towards each of the EFX30, ASIC nevertheless "asked" the Court to make findings of unconscionable conduct in respect of the EFX8 because that might impact on the penalty ultimately ordered. It did not ask the Court to make findings in respect of the EFX22 for that purpose.
I propose to approach ASIC's unconscionability case largely in accordance with the position ultimately articulated by ASIC in its narrowed case. I will first address ASIC's systemic unconscionability case against EuropeFX. That will necessarily involve the making of some findings concerning EuropeFX's conduct towards the EFX30, particularly to the extent that those findings involve or relate to patterns of behaviour revealed by the evidence concerning the conduct of EuropeFX account managers towards or in respect of the EFX30. I will then address the allegations of unconscionability in respect of each of the EFX8 individually. I do not, however, propose to make findings in respect of the allegations of unconscionability in respect of each of the EFX22 individually, particularly in circumstances where ASIC does not press the Court to make any such findings. In my view, requiring the Court to make those findings in all the circumstances would have limited utility and would not be consistent with the overarching purpose of the Court's civil practice and procedure provisions.

[205]

UNCONSCIONABLE CONDUCT BY EUROPEFX - SYSTEM OF CONDUCT AND PATTERNS OF BEHAVIOUR

ASIC's case that EuropeFX engaged in unconscionable conduct by means of, or by virtue of, a system of conduct or pattern of behaviour relied on a series of what it contended were systemic features of EuropeFX's business generally, along with a pattern of behaviour that could be inferred from, among other things, the common experiences of the EFX30. The alleged pattern of behaviour also supported and provided a basis for inferring a system of conduct that was, in all the circumstances, unconscionable. As has already been noted, while the experiences of the EFX30 comprised an important part of ASIC's case of systemic unconscionability, ASIC principally put its case on the basis that the experiences of the EFX30 were illustrations or manifestations of what was more broadly an unconscionable system of conduct and pattern of behaviour by EuropeFX towards its customers in Australia generally.
The systemic features that ASIC contended could be discerned and inferred from the evidence included, in short summary: the utilisation of online advertising or promotional material which misrepresented the nature of the financial services and financial products offered by EuropeFX; an "onboarding" system that was essentially indiscriminate as to whether prospective customers had any relevant knowledge or experience in respect of CFDs and Margin FX Contracts; the fact that EuropeFX essentially derived its revenue, or the bulk of its revenue, from its customers' trading losses; a system of remuneration for account managers who performed services for EuropeFX which provided an incentive for the account managers to encourage, if not pressure, customers to deposit more funds into their trading account; the provision of inadequate, or inappropriate training to account managers; the failure on the part of management to deal with known misconduct by account managers; and the utilisation of an unfair complaints resolution process which discouraged complainants from lodging or pursuing complaints with ASIC or other external agencies.
The patterns of behaviour that ASIC contended could be discerned or inferred from the evidence primarily, though by no means exclusively, related to the conduct of EuropeFX account managers. While the evidence relied on by ASIC in that regard was predominantly the evidence in respect of the engagement and communications between account managers and the EFX30, and in particular the EFX8, ASIC contended that the inferences that could be drawn from that evidence were supported and corroborated by the evidence of the so-called "quality control" officers, Ms Ajaz and Mr Lui, and by some of the opinion evidence of Mr Blundell. ASIC also contended that it was supported by a raft of documentary evidence, including EuropeFX's own business records.
EuropeFX denied that it had any systems of conduct that were unconscionable and disputed most, if not all, of ASIC specific contentions concerning systemic unconscionable conduct. It also disputed that the evidence supported ASIC's contentions concerning patterns of behaviour. Beyond those denials, EuropeFX contended that the 30 identified customers selected by ASIC provided an inadequate, unreliable and unrepresentative sample and maintained that those 30 customers, the EFX30, were willing participants in the market who made profits during their trading. EuropeFX also maintained that it relied on the quality control systems that USG supposedly had in place, including in respect of the monitoring of telephone calls between EuropeFX account managers and the customers.
EuropeFX also raised a pleading point concerning ASIC's case of systemic unconscionability. Despite having sought detailed particulars of the SOC, and despite several case management and interlocutory hearings during which ASIC's pleading was the subject of some scrutiny, EuropeFX did not substantively raise that pleading issue until the final hearing. The pleading point was that ASIC's case of systemic unconscionability was limited to the EFX30. I made it clear during the course of the hearing that I saw no merit in that point. I remain of that view. While there may be some infelicity in the drafting of paragraph [69] of the SOC, it is tolerably clear from the from the chapeau to that paragraph that ASIC's case was that EuropeFX engaged in a system of conduct or pattern of behaviour towards "customers in Australia", not just the EFX30. In any event, I am far from persuaded that, even if there was some merit in the pleading point, EuropeFX was prejudiced in any material respect, or would or could have conducted its defence differently in any material respect if it had not (in my view mistakenly) construed ASIC's systemic case as having been limited to the EFX30.
I propose to address each of the main heads of systemic conduct and patterns of behaviour relied on by ASIC. As will be seen, I have concluded that the evidence broadly supports all of ASIC's contentions. I am comfortably satisfied that the combination of the systemic features of the conduct of EuropeFX's business and the patterns of behaviour displayed by the evidence relating to the engagement between the account managers and the EFX30, along with other corroborative evidence, supports a finding that EuropeFX engaged in systemic unconscionable conduct.

[206]

Misleading advertising and promotions

As outlined earlier, EuropeFX outsourced its advertising, promotions and marketing to various overseas companies. The evidence adduced by ASIC established the following facts.
EuropeFX had an agreement with Affilimedia, a company apparently based in Belize, the purpose of which, in general terms, was to refer new customers to EuropeFX's website. The agreement provided that Affilimedia would operate internet sites and that it would be paid €700 for each person that came to EuropeFX's website from one of Affilimedia's websites and made a minimum deposit. The evidence revealed that Affilimedia invoiced EuropeFX, and EuropeFX paid Affilimedia, approximately AUD$2 million during 2019 alone. It may readily be inferred that thousands of customers first came to engage with EuropeFX as a result of engaging with websites operated by Affilimedia.
EuropeFX did not adduce any evidence from any officer or employee of Affilimedia, or from Mr Sasso or any other officer, employee or agent of EuropeFX, in relation to the activities of Affilimedia. Nor did EuropeFX produce or discover any documents which revealed the precise nature or content of Affilimedia's websites or other online promotions.
EuropeFX also had an agreement with BAFF, a company apparently incorporated in Cyprus. While EuropeFX ultimately did not call Mr Sasso as a witness, or adduce any evidence from Mr Amar, ASIC tendered parts of an affidavit sworn by Mr Sasso and filed by EuropeFX. In his affidavit, Mr Sasso described the activities of BAFF in the following somewhat obscure, if not baffling, terms: I am informed by Mr Amar and believe that BAFF is an affiliate platform provider. An affiliate platform is a software program in which the affiliate provides an online merchant (such as Europe FX) potential new customers, also known as "traffic", at a cost which is paid for by the online merchant. Europe FX uses BAFF's platform to control, prioritise, customise and track the leads for potential new customers Europe FX received from Affilimedia. The platform assists Europe FX to minimise marketing costs and increase the lead to customer conversion rate and manage billing with providers of leads.
Mr Sasso did not explain precisely how he understood (based on what Mr Amar had told him) EuropeFX used BAFF's "platform" to "control, prioritise, customise and track the leads" in respect of new "traffic". Whatever BAFF may have done for EuropeFX, it was rewarded handsomely. During the latter part of 2019 and early 2020, BAFF issued invoices to EuropeFX for amounts which in total exceeded €1,000,000.
EuropeFX also entered into an agreement with Bolacom, another company apparently incorporated in Cyprus, which provided, among other things, that Bolacom would "[m]anage all marketing activity" of EuropeFX, including "developing strategies and tactics to boost the company's reputation and drive qualified traffic", "deploying successful marketing campaigns from ideation to execution" and "experimenting with various organic and paid acquisition channels". Once again, EuropeFX did not adduce any evidence which addressed exactly what sort of strategies and tactics Bolacom employed to drive "traffic", what marketing campaigns it designed or executed, or what "organic and paid acquisition channels" it experimented with.
While EuropeFX declined or failed to adduce any evidence concerning its advertising, promotional and marketing activities, it is tolerably clear that those activities primarily involved internet or online services. In another affidavit sworn by Mr Sasso, certain paragraphs of which were tendered by ASIC, Mr Sasso described how Mr Amar told him that EuropeFX sourced its customers in the following way: "we have e-marketing, when a customer is looking at FX stuff online they get a pop-up". Needless to say, EuropeFX did not adduce evidence from Mr Amar about the nature and content of the "e-marketing" and "pop-up" advertisements or promotions.
There was, however, a solid body of evidence which indicated that the online advertisements, promotions and marketing that was provided by one or more of Affilimedia, BAFF and Bolacom on behalf of EuropeFX, contained false, misleading or deceptive information concerning the virtues of automated trading systems relating to Bitcoin or other cryptocurrencies. Perhaps the most compelling evidence came from Mr Parry. Mr Parry's evidence was outlined earlier. It is unnecessary to repeat what was said earlier concerning Mr Parry or his evidence, or to rehearse his evidence in painstaking detail. The key points are as follows.
Mr Parry briefly signed up as a customer of EuropeFX and paid a modest deposit, though he never actually traded. Significantly, he created a contemporaneous documentary record of his engagement with EuropeFX. While Mr Parry was cross-examined in relation to that process, in my view nothing in that cross-examination cast any doubt on that process or the reliability of the documentary record.
Mr Parry's evidence, which I accept, was that he came to engage with EuropeFX after he received an email from an anonymous address with the subject line "Andrew Forrest's Latest Investment Has Experts in Awe and Big Banks Terrified". Mr Parry retained the email, a copy of which is reproduced below:
Mr Parry's evidence was that he clicked on a link in that email because he respected both Mr Forrest and the other prominent person referred to in the email, Mr Waleed Aly, and implied from the email that they endorsed the Bitcoin product referred to in the email. When he clicked on the link, he was taken to other websites, including one which promoted a "cryptocurrency auto-trading program called Bitcoin future". Mr Parry reproduced a version of the website he viewed in July 2019. It is unnecessary to detail the steps taken by Mr Parry to reproduce the webpage. I accept his evidence that the webpage reproduced by him was relevantly the same or similar to the webpage he viewed when he first engaged with EuropeFX.
The webpage viewed by Mr Parry included effusive endorsements of that program by Mr Forrest, Mr Aly and other prominent people. The webpage stated that the program let the customer profit from various cryptocurrencies by "[using] artificial intelligence (AI) to automatically handle long and short selling" for the user so the user can "make money around the clock, even while you sleep". The webpage included instructions for registering online and depositing funds. A supposed user of the webpage reported that, as they navigated to the deposit page, they were contacted by an account manager.
Mr Parry's evidence was that he followed the instructions on the webpage by clicking a link which took him to another webpage which contained an online form. He entered his name, address, phone number and email address into the online form. About an hour later, he received a telephone call from a man who identified himself as a representative of EuropeFX. While he was speaking with the man, he received an email from EuropeFX with login details and a link to a website. Mr Parry retained and produced a copy of that email. He received another email which contained details of his trading account. The EuropeFX representative then told Mr Parry to click on a link in the email, which took him to another website. He entered some personal information into the website, including his credit card details so he could pay a $500 deposit. The representative then made an appointment for Mr Parry to speak with a trader the following day.
As events transpired, Mr Parry conducted some internet research which led him to believe that the websites that had led him to EuropeFX were part of a scam. That caused Mr Parry to request the cancellation of his account and the repayment or withdrawal of his deposit when he contacted EuropeFX the following day. It is unnecessary to detail Mr Parry's evidence of what followed. He eventually received his $500 back, albeit after some considerable push-back and delay on the part of EuropeFX.
As discussed earlier, EuropeFX sought to discredit Mr Parry and attack the reliability of his evidence. Its efforts in that regard were unpersuasive. Mr Parry presented as an intelligent, forthright and honest man. EuropeFX did not identify any sound or convincing reason to doubt the reliability of his evidence, which I accept unreservedly.
Mr Parry's evidence, including the documents he produced, provides a compelling basis for concluding that the online advertisements, promotions and marketing that was provided by one or more of Affilimedia, BAFF and Bolacom on behalf of EuropeFX included advertisements or promotions about a program, supposedly endorsed by prominent businesspeople and celebrities, that somehow enabled users to automatically trade in Bitcoin and other cryptocurrencies and make substantial profits. Importantly, Mr Parry's evidence was consistent with, and effectively corroborated by, other evidence which suggested that other customers first came to engage with EuropeFX they had responded to online promotions in respect of cryptocurrency trading.
There was evidence that suggested that Mr Kalusinghe, Ms Elford and Ms Sapor each came to engage with EuropeFX as a result of responding to, or conducting internet searches in relation to, Bitcoin or cryptocurrency trading, or at least that when they first engaged with EuropeFX they thought that they would be trading in Bitcoin. The evidence concerning circumstances in which Mr Kalusinghe, Ms Elford and Ms Sapor came to engage with EuropeFX was discussed earlier. Each of those witnesses was cross-examined at length about their evidence in that regard, particularly in respect of their evidence that tended to link EuropeFX with online promotions concerning Bitcoin. While it may be accepted that their recollection of the circumstances in which they first came to engage with EuropeFX was somewhat vague and equivocal, I am nevertheless satisfied that their evidence provides some support for the proposition that the online advertising, marketing and promotions that was provided on EuropeFX's behalf, presumably by the likes of Affilimedia, BAFF or Bolacom, included online material relating to Bitcoin or cryptocurrency trading.
There was similarly evidence to suggest that some of the EFX22, in particular Mr Hillier, Mr Singleton, Ms Robinson, Mr Ayoub, Ms Curtin and Ms Battersby, were somehow redirected to EuropeFX, or contacted by a EuropeFX representative, after interacting in some way with an online advertisement or website which promoted Bitcoin or cryptocurrency trading. Mr Ayoub, for example, said the following to a EuropeFX representative, Robbie, during one of their conversations: But, I'm not saying I expect to make that in two days, but I'll see, when I get the hang of it, because I - I - I - what made me ring you up in the first place is the most two trusted people in Australia, one of them, Mr Packer- that's Kerry Packer - is a - a - a millionaire. And, David Koch. Kochie is the most famous media and live television personality. He's the most respected, most loved person on the Australian TV channels, and he said he's making millions out of his investment from bitcoin and you guys there, what you're doing. So, I am full-hearted what I'll do well.
Similarly, during one of her conversations with a EuropeFX representative, Ms Curtin said the following to the representative when asked about the advertisements she had seen and responded to prior to being contacted by EuropeFX: The ones that - an advertisement that included, sort of, a statement from Nicole Kidman and then there was another one following that just - it was just recent actually, with - you know, Australian celebrities basically. And, they were saying that, you know, just every ordinary - and we relate ourselves to being quite, you know, just ordinary, everyday people, can actually benefit from looking at the possibility of investing in Bitcoins. And, that nothing, you know, that you'll be guided and, you know, everything can be done for you. And, you know, the outcome was quite positive and so we intended on investing maybe about $5,000 initially. And, we - we responded to the ad and we got a call back from a - a Europe -I presume it would have been a EuropeFX representative.
The EuropeFX representative, Rachel, told Ms Curtin that she was aware of those advertisements.
Ms Battersby told a EuropeFX representative that she had "bought into this whole scheme on … false pretences" because she had understood that she was "trading on Bitcoin automatically." In a conversation that Mr Singleton had with Mr Amsalem after he had lodged a complaint with EuropeFX, Mr Singleton told Mr Amsalem that when he went on the internet to look into trading in Bitcoin, he ended up getting "redirected" to EuropeFX. Mr Amsalem did not take issue with that statement.
It is no doubt correct, as EuropeFX submitted, that Mr Hillier, Mr Singleton, Ms Robinson, Mr Ayoub, Ms Curtin and Ms Battersby were not called as witnesses by ASIC. I accept that I must exercise some caution in accepting what was said by them in the recordings and transcripts of their conversations with EuropeFX representatives. There is, however, no real reason to doubt the reliability of what they are recorded as having told EuropeFX representatives about how they came to engage with EuropeFX.
ASIC also tendered communications, mostly emails or records of telephone communications, between many prospective customers, customers, or former customers, of EuropeFX and EuropeFX which included claims or complaints by those persons that they had engaged with EuropeFX as a result of seeing websites or online advertisements or promotions concerning trading in Bitcoin or cryptocurrency. Some of those claims clearly refer to promotions which were in similar or the same terms as the promotion identified by Mr Parry. For example, one person sent an email to EuropeFX on 21 June 2019 in which they stated: "we registered with company thro (sic) Facebook registration page to your company, advertising that David Koch recommends your company and bitcoin investments with bitcoin revolution software". Another person sent an email to EuropeFX on 14 November 2019 in which they stated: "I signed up on a web page advertising a program called Bitcoin Evolution, which took me to the EuropeFX sign-up page". Yet another sent an email complaint to EuropeFX on 25 August 2018 in which they stated: "on social media I saw an interview with Karl Stephanovic (a well known TV personality) the gist of it was that he made a very large amount of money by putting a small amount of money into Bitcoin, and there was a link to follow if you wanted to do the same" and "I followed that link and it led me to EuropeFX".
EuropeFX submitted that the documentary evidence tendered by ASIC relating to the Bitcoin promotions was deserving of little weight because the authors of those documents did not give evidence. I reject that submission. The contemporaneous accounts in those documents speak for themselves and there is little if any reason to doubt the reliability of the claims. The accounts are also broadly consistent with Mr Parry's evidence.
Finally, several call monitoring reports prepared by Ms Ajaz and tendered by ASIC record that, in their conversations with EuropeFX representatives, EuropeFX customers frequently referred to Bitcoin promotions, or to automatic Bitcoin trading. For example, in a call monitoring report dated 30 August 2018, Ms Ajaz noted that the client "mentioned the reason he joined trading is about the ad, crypto, Bitcoin". Another call monitoring report noted that the client said that "it was through Facebook, Mel Gibson and Nicole Kidman said they said Bitcoin is the way to go so he joined and was EFX". Ms Ajaz's evidence was discussed in more detail earlier in these reasons. For present purposes, it is sufficient to reiterate that I consider Ms Ajaz to have been a credible and reliable witness and that the contemporaneous records that she made as part of her quality control duties were on the whole reliable and probative.
In all the circumstances, I would readily infer and conclude, from the evidence as a whole, that EuropeFX utilised, most likely through its contracts with Affilimedia, BAFF and Bolacom, online advertisements, promotions and marketing techniques which sought to attract customers using the lure of a trading program, supposedly endorsed by prominent businesspeople and celebrities, that somehow enabled users to automatically trade in Bitcoin and other cryptocurrencies and thereby make handsome profits. I would also infer that those advertisements, promotions and marketing strategies were misleading and deceptive. While there was some evidence that EuropeFX may have facilitated trading in Bitcoin CFDs, the promotion identified by Mr Parry, and the promotions referred to by the witnesses and documentary evidence referred to earlier, concerned a program that involved automated Bitcoin trading. Moreover, there was no evidence whatsoever to suggest that any of the celebrities referred to in the promotional material had in fact endorsed EuropeFX's CFD and Margin FX Contract trading. The nature and content of the material would tend to support the inference that there were no such celebrity endorsements. The absence of any evidence from any officer, employee or agent EuropeFX concerning its promotions and marketing makes those inferences all the easier to draw. I am not persuaded by any of the arguments advanced by EuropeFX about why those inferences cannot or should not be drawn.
The nature and content of the misleading advertising and promotional material that EuropeFX utilised, by virtue of having outsourced its advertising, promotional and marketing to the likes of Affilimedia, BAFF and Bolacom, is in my view significant. As already noted, it mischaracterised the nature of the financial services and products offered by EuropeFX, the risk associated with those services, and importantly, the level of involvement, experience and comprehension that a customer would need to have or possess in order to successfully profit from those services and products. The advertisements or promotions, it may be inferred, were likely to attract people who were interested in trading in Bitcoin or other cryptocurrency, but who considered themselves to have insufficient knowledge, experience, skill or time to be able to trade without the assistance of an automated program.
It follows that a natural and likely consequence of the utilisation of the misleading advertising and promotions was that it was most unlikely to attract anyone with knowledge and experience in trading CFDs and Margin FX Contracts. The likelihood was that it would attract people with little or no relevant knowledge or experience in CFDs and Margin FX Contracts. Indeed, I would go so far as to infer that the advertisements and promotional material was likely to attract people who were relatively naïve and even gullible when it came to investing in any sort of financial market. I would also infer that the targeting of such people was systemic and deliberate. The evidence of the complaints and correspondence received by EuropeFX, as well as the contents of some of the call monitoring reports prepared by Ms Ajaz, make it clear that EuropeFX management must have been well aware that there were many people who first came to engage with EuropeFX with the understanding that they would somehow be auto-trading in Bitcoin. There is no evidence whatsoever to suggest that management did anything to change its advertising and marketing systems in response to those complaints.
As the evidence revealed, the utilisation of a promotional or marketing system that effectively targeted relatively naïve and inexperienced traders largely produced what may be inferred to be the desired outcome. As the earlier summaries of the evidence of and concerning the EFX8, and the evidence concerning the EFX22, make tolerably clear, at least some of them came to engage with EuropeFX with the understanding or belief that they could profit from some sort of automated trading in respect of Bitcoin or cryptocurrency. More significantly, the vast majority of them did not have any relevant knowledge or experience in respect of trading in complex financial products. At least a proportion of them could also fairly be said to have been relatively naïve and even gullible when it came to the challenges of trading on financial markets, particularly those involving complex leveraged derivatives. It may also be inferred from the evidence as a whole, that a significant proportion of EuropeFX's customer base were similarly naïve and inexperienced. Indeed, account managers sought to reassure a number of the EFX8 that most of EuropeFX's customers were inexperienced, so they were not alone.
As I have said, the systemic utilisation of the misleading Bitcoin related advertisements and promotions is in my view of considerable significance in ASIC's systemic unconscionability case. The natural and likely consequences those advertisements and promotions was that many prospective customers who came to engage with EuropeFX were likely to be inexperienced and naïve when it came to trading in CFDs and Margin FX Contracts. Such people could fairly be said to be relevantly vulnerable and at a disadvantage when it came to dealing with EuropeFX. Trading in complex financial derivatives, like CFDs and Margin FX Contracts undoubtedly carried a high degree of risk and was not particularly suitable for people with no prior knowledge of or experience in trading in those products. As will be seen, however, the evidence as a whole revealed that EuropeFX's systems in respect of the "onboarding" of prospective customers was at best indiscriminate and did not genuinely attempt to dissuade or prevent such people from opening accounts. Indeed, it may be inferred that such customers were actively encouraged to sign-up and commence trading with EuropeFX.
I should finally address, in this context, a submission advanced by EuropeFX concerning the use of tendency or coincidence reasoning. EuropeFX submitted, in effect, that it would be erroneous for the Court to engage in tendency or coincidence reasoning when considering and making findings concerning customers coming to EuropeFX as a result of Bitcoin related advertisements and promotions. It relied, in support of that submission, on the fact that ASIC had not served any notices under either s 97 or s 98 of the Evidence Act in respect of tendency or coincidence evidence.
There are several responses to that submission.
First, as EuropeFX correctly conceded, that submission did not apply in respect of ASIC's case in respect of systemic unconscionability. There could be no issue about the employment of tendency or coincidence reasoning in considering whether EuropeFX had employed a particular system of conduct, or engaged in a particular pattern of behaviour because, as EuropeFX conceded, that evidence "does not go to the tendency of a person to engage in particular conduct, or the improbability of similar conduct being coincidental, but to proof of the system."
Second, and more fundamentally, the problem for EuropeFX is that when ASIC tendered the Bitcoin related evidence, EuropeFX did not object to the admission that evidence, or seek to limit the use of the evidence in any way pursuant to s 136 of the Evidence Act or otherwise. The evidence, having been tendered and admitted without objection or limitation, is available for use for all purposes: Yammie v Lantrak Holdings Pty Ltd (No 2) [2023] FCA 162 at [235] (Rares J), citing Guthrie v Spence (2009) 78 NSWLR 225 at [75] (Campbell JA, with whom Bastan JA and Handley AJA agreed) and Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 at [149]; Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 at [25]-[26]; Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170 at [30]-[32]; Islam v Director-General, Justice and Community Safety Directorate [2022] ACTSC 124 at [35]-[39]; Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555 at [240].
Third, ASIC did not submit that the Bitcoin related evidence supported, or could support, a finding that all, or even a specified proportion, of EuropeFX's customers came to it as a result of having interacted with a Bitcoin related advertisement or promotion. In particular, it did not submit that the Court should find that all the EFX8, or all the EFX30, came to trade with EuropeFX after responding to a Bitcoin related advertisement or promotion. Nor have I made any such findings. As will be seen, I have found, in the context of ASIC's case, that EuropeFX engaged in unconscionable conduct towards the EFX8, that some of the EFX8 did or may have come to engage with EuropeFX after having responded to online Bitcoin related advertisements or promotions, but only where there was some evidence from the customers themselves to that effect, or where there was some other evidence, such as in the recorded telephone conversations, which suggested that to be the case. Tendency or coincidence reasoning was not employed in making those findings.

[207]

"Onboarding" of inexperienced customers

In its cross-examination of the EFX8, and in its submissions more generally, EuropeFX sought to make much of the fact that its "onboarding" processes required a prospective customer to complete an online questionnaire, which included a risk disclosure notice and supposedly drew the customer's attention to various documents, including EuropeFX's PDS and Terms of Business, as well as the Financial Services Guide. The onboarding process and the questionnaire required the customer to tick a box to acknowledge that they had read those documents, as well as ticking a box to acknowledge that they read and understood the notice which included a warning that trading in CFDs and Margin FX Contracts carried a high degree of risk. In the case of some customers, the risk disclosure notice stated that, given the answers that the customer had provided in the questionnaire, EuropeFX considered that a CFD trading account was not appropriate for the customer. Yet in each of those cases, a CFD trading account was nonetheless opened for the customer and the customer was encouraged to commence trading.
As adverted to earlier in these reasons, the evidence concerning the onboarding of customers supports the inference that it was not genuinely intended or employed to weed out or discourage inexperienced or vulnerable consumers from trading those risky products through EuropeFX. Indeed, the evidence indicated that it was likely that customers were rushed through the process and given little or no opportunity to read, let alone understand, the documents and disclaimers that they were supposed to have read and understood. Rather, they were encouraged to simply tick the boxes and move on through the process.
As with virtually all of EuropeFX's day-to-day business, the onboarding process was outsourced to a foreign corporation. EuropeFX had a contract with Global Win, a company apparently registered in Belize, which operated a call centre and provided "sales services". EuropeFX did not dispute that the sales representatives employed by Global Win communicated with EuropeFX customers by telephone from time to time. Those communications included communications which occurred during or as part of the onboarding process. In one of his affidavits, some paragraphs of which were tendered by ASIC, Mr Sasso said that Global Win called new or potential clients of EuropeFX and was responsible for onboarding those clients and obtaining their first deposit.
Despite being required to produce all documents recording communications with its clients, EuropeFX only produced four recordings of the initial onboarding telephone calls described by Mr Sasso. One of those recordings was of Ms Love's initial telephone call with a EuropeFX representative, or more likely a Global Win employee acting on EuropeFX's behalf. The recordings of the four onboarding calls between Global Win employees, representing EuropeFX, are all very similar and reveal a system or pattern of behaviour in respect of the initial onboarding call. The following common features are particularly significant.
First, the sales representative, while most likely an employee of Global Win, identified themselves as being from EuropeFX.
Second, in each case the sales representative guided the customer through the online questionnaire, including on occasion by suggesting or prompting answers or responses. For example, in three of the recordings, the representative told the customer to write down "12345" as their tax file numbers. Evidence adduced by ASIC indicated that the questionnaires in respect of a significant proportion of EuropeFX's customers included similar responses to the question in relation to the customer's tax file number - that is a series of sequential numbers that were highly unlikely to be the customer's actual tax file number. That evidence provides some support for the inference that a significant proportion of new EuropeFX customers were guided through the questionnaire while on the telephone to a EuropeFX representative, most likely a Global Win employee acting on behalf of EuropeFX.
Third, when it came to the risk disclosure section of the questionnaire, the sales representative invariably did not read the disclaimer or risk disclosure to the customer, or provide any context or explanation of the disclaimer, or say anything that would meaningfully encourage or require the customer to read the disclaimer. The representative did not even ask the customer whether they had in fact read and understood the disclaimer. Rather, the representative simply told the customer that they needed to tick the box. In Ms Love's case, the representative said: "And then you will have a little risk disclosure window that will pop up. We're going to need to click the little square that's inside". In one of the other calls, the representative simply said: "There's a little box inside you need to tick". In two of the other calls, the representative went so far as to minimise the significance of the disclaimer, or to indicate that it did not apply to the customers' circumstances. In one case, the representative said that a "low risk disclosure will pop up" and that there was a "little box inside" which the customer would "need to tick". In another case, the representative said that the risk disclosure would only be valid if the customer was going to go ahead and trade on his own, and that because the customer would not be trading on his own "it doesn't apply to you, so please tick the box".
Fourth, the sales representative similarly prompted or directed the customer to click "yes" in response to the question "do you understand the nature and risk of margined transactions." The representative made no attempt to provide any context or explanation in respect of the question, or to determine whether the customer even understood the question, let alone actually understood the nature and risk of margined transactions. Indeed, in three of the four cases, the representative effectively told the customer that the question was not relevant to them, or that they need not concern themselves with the question, because their account manager would explain it to them. In Ms Love's case, the representative said that the question was "relevant to someone that's going to be trading on their own" and then indicated that Ms Love would be "guided by" a manager who was "going to go over these details with you". She was then told to click "next". In another case, the representative said that "margined transactions is a fancy word for trading" and that his account manager would "go over all this" and explain it to him.
Fifth, likewise, when it came to that part of the questionnaire that referred to EuropeFX's PDS and Terms of Business and the Financial Services Guide, the sales representative effectively dissuaded the customer from actually reading the documents by purporting to summarise and trivialise their contents, or effectively suggested that the customer could read them later if they liked. The representative then directed the customer to simply tick the boxes. The representative certainly did not encourage the customer to open and read the documents or take any steps whatsoever to determine whether the customer had in fact read them.
In Ms Love's case, the following exchange occurred: GAVIN: Beautiful. The terms and agreement of business. Take a look at them. You could also always come back and print them out. Let me know once you reach "account class". MS LOVE: What - so what - okay. Agreement terms. I consent. So I have to say, like, a signature? Yeah. So I have to just tick all of these, obviously, and agree? GAVIN: Correct. Pretty much it's the terms and agreement are saying that you are not obligated to us at any given time. MS LOVE: Okay. Account class is an individual, obviously? GAVIN: Correct. Then we can click "submit". MS LOVE: Yeah.
In one of the other calls, the sales representative said that the documents "state that you have no financial obligations towards us whatsoever, you're not signing a contract, this is not a Catholic marriage". In another, the representative said that the "terms and conditions" meant that "you're not obligated to us" and that "[t]his isn't a Catholic marriage". In the fourth of the calls, the representative simply said as follows when it came to the documents: Agreement to change of business, very standard, stating that you have no obligations towards us, that we're using segregated accounts in the Commonwealth Bank. It also states that you can close the account at any given point. So, please tick all of the boxes, account plus at the bottom would be individual and submit the questionnaire.
I should also emphasise that the inappropriateness, if not impropriety, of the conduct of the representatives who conducted the four onboarding telephone calls and guided the customers through the questionnaire, is even more apparent when one listens to the recordings of those conversations.
EuropeFX submitted, at least impliedly, that no inferences could be drawn in respect of the onboarding process given that there were only four recorded telephone calls and transcripts. I reject that submission. Among other things, it ignores the fact that the four recordings were the only recordings of the initial or onboarding calls with their customers that were produced by EuropeFX. EuropeFX adduced no evidence to justify or explain why it produced only four initial call recordings. It would in any event have been open to EuropeFX to tender evidence of other recording to establish that the four recordings that it produced were not representative of the onboarding calls conducted by Global Win employees on its behalf. It would also have been open to EuropeFX to produce or tender guidelines, training manuals, scripts, or directions that it had provided to Global Win in respect of the onboarding process. No such evidence was adduced.
EuropeFX's submission concerning the four recorded onboarding calls also ignores other evidence which tends to support the inference that many EuropeFX customers completed the online questionnaire while they were on the telephone with a representative, most likely a Global Win agent or employee acting on behalf of EuropeFX. That evidence included the evidence, referred to earlier, that indicated that a large number of completed questionnaires included a series of sequential numbers as the customer's tax file number. That was consistent with the directions given by the representative in three of the four recorded conversations. Moreover, the inference that Global Win or EuropeFX representatives prompted and rushed the customer through the questionnaire without taking appropriate steps to ascertain whether the customer had read and understood the disclaimers and documents referred to in the questionnaire is also supported, at least to some extent, by the evidence of some of the EFX8.
The evidence of the EFX8 concerning the process by which they came to open their accounts with EuropeFX was summarised earlier in these reasons. It is unnecessary to repeat what was said there. The relevant points to note are as follows.
First, it may be accepted that, perhaps not surprisingly, many of the witnesses did not have a particularly good recollection of the onboarding process and the completion of the questionnaire.
Second, while their recollection concerning the opening of their trading accounts may not have been particularly good, most of the EFX8 witnesses gave evidence which tended to suggest that their online questionnaires were completed with the assistance of a EuropeFX representative while they were on the telephone with that representative. Ms Love gave evidence, consistent with the recording of her initial conversation, that she completed the questionnaire while on the telephone to a person who said they were from EuropeFX. Ms Sapor also recalled completing the questionnaire with the assistance of two men while she was on the telephone with them. Mr Wilson's evidence was that he did not himself complete the form online. Rather, he recalled that the representative asked him a series of questions over the telephone and, it would appear, completed the form on his behalf. Mr Kalusinghe's recollection of the account opening process was admittedly fairly sketchy, though it included that he was on the telephone when the questionnaire was completed. Ms Boden recalled receiving telephone calls, including from someone saying that they were from EuropeFX, shortly after clicking on an online advertisement and providing her contact details. She also said that she paid her initial deposit while on the telephone with that representative. That would again tend to suggest that Ms Boden's questionnaire was completed while she was on the telephone with the representative. There was also evidence which tended to suggest that Ms Nikiforos and Ms Elford completed the questionnaire while on the phone to a EuropeFX representative, including the fact that the details of their tax file numbers were both recorded as "123456".
Third, the evidence of Ms Nikiforos, Ms Elford, Mr Kalusinghe, Ms Elford, Ms Kuhn and Ms Boden was that they could not recall either ticking or reading the risk disclosure notice. Ms Love's evidence, which was broadly consistent with the recording of her initial conversation, was that she recalled being guided to the box on the risk disclaimer, but did not recall seeing the text in the box. Mr Kalusinghe's evidence was that, while he could not recall either reading or ticking the risk disclaimer in the questionnaire, he did recall that, at one point when he was on the telephone the EuropeFX representative, "a few things flashed up on [his] computer screen" and the representative said something to the effect of: "without clicking 'accept' you cannot go ahead", so he clicked the boxes and went ahead.
In all the circumstances, I would infer from the evidence as a whole that the four recordings of the initial onboarding telephone call that were produced by EuropeFX broadly reflected the onboarding process that Global Win employees, acting on EuropeFX's behalf, employed when assisting EuropeFX customers to complete the online questionnaire and open their trading accounts. Indeed, given the similarities between the four calls, the available inference is that Global Win employees, acting on behalf of EuropeFX, were effectively following a set procedure, or employing a script, when conducting the onboarding process over the telephone. That inference may all the more readily be drawn given the complete absence of any evidence from EuropeFX in respect of its onboarding processes and procedures.
Perhaps more significantly, I would infer from the evidence that EuropeFX's onboarding or account opening systems and processes paid scant, if any, regard for whether the customer who was being onboarded had any prior knowledge or experience in trading in any of the financial products offered by EuropeFX. The systems and processes also paid scant, if any, regard for whether it was appropriate, in all the circumstances, to permit the customers who were being onboarded, most of whom were known to have no relevant trading experience, to open a trading account without demonstrating that they in fact had any understanding of the nature of the financial products involved and the inherent risks involved in trading in those products. No genuine attempt was made to discourage or prevent inexperienced or vulnerable customers from trading those risky products through EuropeFX. The systems and processes were at best indiscriminate in determining the customers to whom EuropeFX would appropriately provide a trading account. Indeed, consistently with the inference that EuropeFX targeted inexperienced and vulnerable customers, I would go so far as to infer that the onboarding process facilitated, and was intended to facilitate, the opening of trading accounts by inexperienced and vulnerable customers.
The inference that the onboarding systems and processes that EuropeFX employed, through Global Win, did not discourage or prevent inexperienced or vulnerable consumers from opening accounts, but rather facilitated the opening of accounts by such customers, is also supported by the evidence which indicated that about 95% of a selection of 105 of EuropeFX's customers had no previous experience in CFDs and that 76% of those customers had no previous experience in securities, options, commodities, futures, CFDs or Margin FX Contracts. It is also clear that none of the EFX30 had any significant or relevant experience in CFDs and Margin FX Contracts and almost all of them had no relevant knowledge or previous experience in any sort of trading. The Court was not taken to any evidence, aside from the content of the risk disclosure notice itself, that any of the EFX30 were discouraged from opening trading accounts. Indeed, the available inference is that there were all effectively encouraged to do so.
It is also relevant, in this context, to briefly note Mr Blundell's evidence concerning the steps that a corporate authorised representative in the position of EuropeFX, acting reasonably, would take to ensure that customers to which it offered CFDs and Margin FX Contracts understood the operation of those financial products and the risks associated with trading in them. Mr Blundell's evidence, in short summary, was that a corporate authorised representative, acting reasonably, would have required its potential customers to complete an application form which included a "suitability questionnaire" which included "questions regarding the client's experience in trading, what products they have traded in the past, whether they have experience in trading in and knowledge of leveraged products, whether the client had work experience in financial markets, how much funds do the clients have and how much they are looking to trade and whether they understand the risks involved with trading on leverage". It might perhaps be accepted that on its face, EuropeFX's questionnaire may have addressed some of those questions.
Importantly, however, Mr Blundell's evidence was to the effect that a corporate authorised representative, acting reasonably, would have in fact used the prospective customer's answers to the questions in the questionnaire to determine whether the person met its requirements to have a trading account. In particular, a corporate authorised representative, acting reasonably, would use a "points score" in respect of the prospective customer's answers to the questions in order to determine whether the person had a sufficient understanding of "key concepts" such as leverage, margins and volatility, and had the experience required to trade in CFDs and Margin FX Contracts. The use of a points score to assess the answers in a questionnaire was, according to Mr Blundell, "industry standard".
Mr Blundell's evidence was that if, following the application of a points score to the questionnaire answers, the result was that a prospective customer had not demonstrated a sufficient understanding of the key concepts, or had not indicated that they had sufficient trading experience, a corporate authorised representative, acting reasonably, would refuse the prospective customer's account opening application. It would insist that the prospective customer instead use a demonstration account before being permitted to trade using real money. If the prospective customer took that step and used a demonstration account, the trading history of the prospective customer's demonstration account would then be analysed. Only if the trading history indicated that the prospective customer had an adequate understanding of the nature of the products offered and the risks involved would the prospective customer be permitted to reapply. The prospective customer would then be required to complete the suitability questionnaire again. Mr Blundell's evidence was that a corporate authorised representative acting reasonably would take all those steps because they are "reasonable steps to determine that a potential client…does have the necessary knowledge and skills to trade without being exposed to a considerable risk of losing all their funds in a short period of time". Mr Blundell's company employed those steps.
It is abundantly clear from the evidence that EuropeFX did not employ the onboarding systems and processes that, in Mr Blundell's opinion, a corporate authorised representative acting reasonably should employ. While it required customers to complete a questionnaire, the evidence indicated that the questionnaire was little more than a pretence or façade. There was no evidence to suggest that anyone at EuropeFX gave any genuine consideration to the answers that customers provided to the questions in the questionnaire, or employed any points score to analyse the answers, or ever prevented a person from opening a trading account on the basis that the person's answers in the questionnaire demonstrated that they did not have any understanding of the nature of the financial products offered by EuropeFX. I would readily infer from the evidence as a whole, that the questionnaire was not genuinely used to dissuade or prevent inexperienced and vulnerable people who lacked the necessary knowledge and experience to trade in risky leveraged derivatives from opening trading accounts.
EuropeFX relied on Mr Blundell's evidence that his company used the answers given by its customers when completing the onboarding questionnaire, including that they had read and understood the contents of various documents and disclaimers or disclosures. It is, however, abundantly clear that the onboarding systems employed by Mr Blundell's company were far removed from the systems employed by EuropeFX through Global Win. Mr Blundell's evidence was that his company's representatives were not on the telephone with prospective customers when they completed the onboarding questionnaire. It follows that, unlike the onboarding systems and processes employed by EuropeFX, prospective customers of Mr Blundell's company were not rushed through and effectively dissuaded from reading the relevant documentation and disclosures.

[208]

Inadequate training or a deliberate strategy?

The question arises whether the inappropriate, if not improper, procedure employed by Global Win sales representatives, when acting on behalf of EuropeFX in respect of the onboarding of customers, was the product of inadequate training, or was a deliberate strategy.
EuropeFX was ordered to discover "[a]ll call scripts, sales guides, training materials or similar documents which were provided or made available to" the sales representatives or account managers engaged by or on its behalf. That order effectively required EuropeFX to produce any call scripts, sales guides or training materials that it provided, or caused to be provided, to the sales representatives employed by Global Win to act on EuropeFX's behalf. EuropeFX did not produce any such documents. EuropeFX endeavoured to explain the fact that it produced no such documents on the rather dubious, if not disingenuous, basis that that the Global Win sales representatives were engaged not by it, but by Global Win. Even if that provided a credible explanation for the non-production, which is at best highly doubtful, the fact remains that EuropeFX did not produce any scripts, sales guides, or training materials that it provided to Global Win so that Global Win could provide those materials to the representatives it retained to act on EuropeFX's behalf. Nor did it adduce any evidence whatsoever in respect of any training of any sort that it requested or required Global Win to provide to the representatives who conducted the onboarding procedures on behalf of EuropeFX.
The inference most favourable to EuropeFX that might flow from this is that EuropeFX was disinterested or unconcerned about how the Global Win representatives would conduct the onboarding process in respect of EuropeFX customers. That would in turn support the inference that EuropeFX was disinterested or unconcerned with whether the Global Win representatives took any, or any adequate, steps to dissuade or prevent relevantly ignorant, inexperienced and vulnerable customers from opening trading accounts with EuropeFX, at least until they were able to demonstrate an appropriate level of understanding concerning the nature of the relevant financial products, trading concepts and trading risks.
It might equally be inferred, however, that the process employed by the Global Win representatives, acting on EuropeFX's behalf, which included rushing prospective customers through those parts of the questionnaire which would otherwise have prevented or deterred inexperienced and vulnerable prospective customers from opening trading accounts, was part of a deliberate strategy on the part of EuropeFX. That strategy included onboarding customers and allowing them to open trading accounts, even if they were relevantly ignorant, inexperienced or otherwise vulnerable in respect of trading in complex leveraged derivatives. In my view, the evidence as a whole supports the inference that EuropeFX's system of conduct in respect of onboarding was, at best, deliberately indiscriminate in terms of determining the prospective customers to whom it would offer trading accounts. Indeed, the available inference is that EuropeFX was more than happy for relevantly ignorant, inexperienced and vulnerable customers to be signed-up and to commence trading in CFDs and Margin FX Contracts from the get-go.
I should finally note, in the context of the findings that have been made in respect of the onboarding process employed by, or on behalf of, EuropeFX, that EuropeFX advanced a submission concerning the use of tendency and coincidence reasoning in respect of the onboarding process which was similar to the submission it advanced in respect of the findings concerning the employment of Bitcoin advertisements and promotions. In particular, it submitted, in effect, that it would be erroneous for the Court to employ tendency and coincidence reasoning in respect of the evidence which indicated that the onboarding questionnaire in respect to a number of customers recorded that their tax file numbers were "12345" or a similar sequence of numbers. That submission has no merit for the reasons given above in the context of the similar submission made in respect of the evidence concerning the Bitcoin advertisements and promotions. The submission has no application in respect of the findings concerning systems and patterns of behaviour and, in any event, no objection was taken, and no limitation of use sought, when the evidence was tendered.

[209]

Profiting from customers' losses

There is a fairly simple explanation for why EuropeFX's onboarding system was indiscriminate and facilitated, or even encouraged, people who had no previous knowledge and experience in respect of CFDs and Margin FX Contracts to open live trading accounts with it. That explanation is that EuropeFX profited from its customers' trading losses and, as Mr Blundell's evidence made clear, people who have no relevant trading experience and lack any sound understanding of the nature of CFDs and concepts such as margin and leverage will, more likely than not, lose all the funds they deposited into a CFD trading account within a short period. In short, EuropeFX effectively had a financial incentive for allowing, if not encouraging inexperienced and naïve customers to open trading accounts with it.
The evidence which established that EuropeFX's revenue was derived from and determined by the trading losses incurred by its customers was discussed earlier. It is unnecessary to refer at length to that evidence again. In short summary, EuropeFX's CAR agreement with USG provided that EuropeFX was to be paid between 86% and 90% of USG's profits derived from trades by EuropeFX customers who were allocated to USG's "B Book". The overwhelming majority, if not all, of EuropeFX's customers were allocated to USG's B Book. Because USG was the counterparty to all the trades, it derived profit from trades by customers in the B Book when those customers made a loss in respect of those trades. It followed that EuropeFX's revenue was essentially derived from, or based on, the net trading losses incurred by its customers. The more its customers lost, the more revenue it earned. That conclusion was also unequivocally supported by EuropeFX's own financial records. While EuropeFX submitted that the Court could not conclude that it profited from its customers' losses, those submissions have no merit.
It is also important to emphasise there was no evidence to suggest that EuropeFX ever clearly or explicitly advised any of its customers that it profited from their losses. While an astute and knowledgeable customer who had read and understood EuropeFX's PDS may have been able to ascertain that USG was a counterparty to every trade - which for the reasons given earlier in respect of EuropeFX's onboarding processes was highly unlikely - they would not have been able to ascertain how EuropeFX derived its revenue from USG. To make matters worse, as discussed earlier in the context of the misleading and deceptive representations made by EuropeFX account managers, customers were frequently misled about how EuropeFX earned its revenue. They were often misleadingly told that EuropeFX would generate revenue when the customer made money.
It is difficult to imagine that many people would willingly deposit funds and trade in CFDs and Margin FX contacts through EuropeFX if they were told that EuropeFX would profit from their losses.

[211]

Patterns of behaviour of account managers

The evidence of the EFX8 in respect of their trading with EuropeFX and their dealings and engagement with EuropeFX account managers was discussed at some length earlier in these reasons. The evidence relating to the trading experiences of the EFX22 and their engagement with EuropeFX account managers was also summarised earlier. The evidence revealed several key themes or patterns of behaviour on the part of EuropeFX account managers. Those patterns of behaviour are in turn probative of, and support inferences relating to, the systems of conduct engaged in by EuropeFX more generally.
Before addressing the patterns of behaviour revealed by the evidence, it is necessary to briefly address EuropeFX's submission, based in part on the decision in Unique, to the effect that the Court cannot be "confident" that the evidence of the EFX8, and the evidence relating to the EFX22, is representative of EuropeFX's conduct or reflects a pattern of behaviour. For the reasons that follow, I reject that submission.
ASIC did not suggest, or adduce evidence to the effect, that it had randomly selected the EFX8 or the EFX30. Nor did it suggest, or adduce evidence to the effect that, the EFX30 were a statistically significant proportion of EuropeFX's customer base. It was, however, in my view unnecessary for ASIC to adduce evidence in respect of either of those matters given both the way ASIC put its case, and the scope and scale of the evidence it adduced concerning the EFX30 and EuropeFX's business practices more generally.
ASIC's case did not rely entirely on the evidence of and relating to the EFX8 and the evidence relating to the EFX30. ASIC also relied on other detailed and voluminous evidence concerning the manner in which EuropeFX conducted its business. That evidence was mainly, though not exclusively, documentary evidence.
As for the relevance and significance of the evidence of and relating to the EFX30 in relation to its systemic unconscionability case, ASIC submitted that the experiences of the EFX30 were demonstrative and illustrative of the systems of conduct that the evidence revealed that EuropeFX had put in place. ASIC contended that the available inference from the evidence as a whole was that the experiences of the EFX30 were in no relevant sense anomalous or unexpected, but were rather the natural and foreseeable consequences of EuropeFX's systems of conduct. ASIC also maintained that the experiences of the EFX30 covered almost the entire period of EuropeFX's business operations, and that the evidence indicated that the EFX30 comprised a broad and diverse range of people who had engaged and interacted with a large number of EuropeFX representatives. It could, in those circumstances, be concluded that their experiences provided a sound basis for inferring patterns of behaviour on the part of EuropeFX and its representatives which extended over EuropeFX's entire customer base, or at least a very significant proportion of it.
There is no hard and fast rule as to when and in what circumstances a sample of consumers may be said to be representative. The conclusions in Unique "must be understood in the context of the allegations and case advanced by the ACCC" in that case: Productivity Partners (FCAFC) at [167]. In my view, this case is far removed from Unique. Among other things, the ACCC's case in Unique "depended upon proof of the attributes (vulnerabilities) of individual customers": Productivity Partners FCAFC at [167]. This case does not.
I agree with the following observations made by Beach J in relevantly similar circumstances in AGM Markets at [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]).
It may be accepted that the evidence of 30 customers is not a particularly large sample, particularly when only eight customers were called as witnesses by ASIC. By the same token, it is not entirely clear how many people had active trading accounts with EuropeFX. A document apparently prepared by USG indicated that USG, EuropeFX and TradeFred had 3,743 customer accounts in Australia, though it is unclear how many of those accounts were EuropeFX accounts. EuropeFX chose to adduce no evidence in relation to its customer base.
More importantly, there was no persuasive or convincing evidence of any "counter-examples." The evidence adduced by ASIC in my view established that the experiences of the EFX8 and the EFX22 were by no means anomalous, but rather were the natural and likely consequences of EuropeFX's conduct or systems. EuropeFX was unable to point to any, or any persuasive, evidence that it had in place any systems which were designed to prevent its customers from experiencing the sort of conduct that was experienced by the EFX8 and EFX22. While Ms Ajaz and Mr Liu were retained to monitor telephone calls and report on any misconduct, there was no evidence that EuropeFX responded in any meaningful way to their repeated reports of misconduct. I also consider that ASIC's case depended more on generic conduct by EuropeFX and the generic vulnerabilities of the customers, and less on specific interactions with the EFX30, or their individual attributes: cf Unique at [135].
The evidence of and relating to the EFX8, and the evidence relating to the EFX30, was discussed at some length earlier. I am well satisfied that it is possible to infer and discern, from that evidence, a distinct pattern of behaviour on the part of the account managers and other representatives of EuropeFX who engaged with EuropeFX's customers. The key features of that pattern of behaviour are that: first, the EuropeFX representatives were dealing with, and knew that they were dealing with, relevantly vulnerable customers; second, the EuropeFX representatives invariably failed to give any, or any adequate and comprehendible explanation, of the complex financial products that were being offered to the customers, the concepts that it were necessary for the customers to understand if they were to trade in those products and the nature and extent of the risks involved in trading in those products; third, the account managers routinely gave the customers personal advice in circumstances where they either knew, or ought reasonably to have known, that EuropeFX was not authorised or permitted to provide such advice; fourth, the representatives made misleading or deceptive representations to the customers; fifth, the representatives encouraged the customers to rely on them and fostered that aspect of the relationship to the point that the customers became dependent on them; sixth, the representatives frequently recommended and pressured the customers to trade and deposit further funds; seventh, the representatives encouraged customers to deposit further money by employing unfair promotions; eighth, the representatives in many cases encouraged customers to use funds obtained from sources that were inappropriate in all the circumstances; ninth, the representatives discouraged or impeded customers from withdrawing funds from their trading accounts; tenth the representatives often encouraged the customers to employ trading strategies that were inappropriate having regard to the customers' circumstances; and eleventh, the representatives advised customers by reference to the total balance of their account and would often encourage customers to continue trading, despite the fact that they had large losses on open positions in their account.
The following discussion of the patterns of behaviour that can be discerned from the evidence draws heavily on the earlier consideration and discussion of the evidence of and relating to the EFX8 and the evidence relating to the EFX30.

[212]

Knowledge that dealing with inexperienced and vulnerable customers

None of the EFX30 had any significant or relevant prior knowledge of or, or experience in relation to, CFDs or Margin FX Contracts, or any similar complex leveraged derivatives. The vast majority of the EFX30 had no significant or relevant prior trading or financial experience at all. They were, for all intents and purposes, entirely ill-equipped to begin trading in such products. They were also in that regard plainly vulnerable. As Mr Blundell said, people who had no relevant trading experience and no sound understanding of the nature of CFDs and concepts such as margin and leverage were very likely to lose all the funds they deposited into a CFD trading account within a short period.
I would also readily infer that the lack of relevant knowledge and experience of the EFX30, and their unsuitability as traders of complex and risky financial products, was known and must have been obvious to EuropeFX and its account managers with whom those customers dealt. It was obvious from the answers the customers gave to questions in the account opening questionnaire. Moreover, as discussed earlier, the account managers almost invariably asked the customers about their trading experience and were invariably told that the customer lacked any relevant or significant knowledge or trading experience. The customers' lack of knowledge and understanding of CFDs, Margin FX Contracts, trading concepts such as margin and leverage, and the risks involved in trading in such products, is in any event readily apparent from the ongoing exchanges between the customers and the account managers. Even the most cursory reading of the transcripts of those exchanges reveals that the account managers were well aware that the customers were, as Mr Wilson put it in one of his exchanges with his account manager, "going in blind".
Annexure E.1 provides particulars of the exchanges between the EFX30 and the account managers which ASIC contended showed that the account managers knew, or at least ought to have known, that the customers had little or no prior experience in trading CFDs or Margin FX Contracts and were reliant on the account managers (categorised as "disadvantage"). I have considered those particularised instances. If have also considered EuropeFX's responses to those particulars. I accept ASIC's characterisation of those exchanges in most cases.
EuropeFX submitted, in effect, that it and its account managers were entitled to rely on the customers' responses in their onboarding questionnaires which indicated that they had read documents such as EuropeFX's PDS and had read, or heard, the pro forma and somewhat formulaic risk disclosure notices. I reject that submission for the reasons given earlier in relation to the onboarding systems and processes. There was also no evidence to suggest that the account managers were made aware of the customer responses to the questionnaire.
In any event, even if it can be assumed or inferred that the account managers were aware of the boxes ticked by the customers in the account opening questionnaires, which itself is doubtful, it must have been readily apparent to the account managers, from their discussions with the customers, that the customers had no relevant knowledge or experience in respect of CFDs and Margin FX Contracts. It must equally have been apparent to the account managers, as a result of their discussions with the customers, that the customers had no understanding, or no sound understanding, of concepts such as margin and leverage, and no real appreciation of the nature and extent of the risks involved in trading in CFDs and Margin FX Contracts. It must also have been readily apparent to the account managers that, as a result, the customers were almost entirely reliant on them.
It may in those circumstances be readily inferred that the account managers knew and understood that the customers were relevantly vulnerable. They were unable to make sound judgments or decisions in relation to their best interests, or realistic assessments of the risks of depositing funds and trading in CFDs or Margin FX Contracts. Despite being aware of the customers' relevant vulnerabilities, the account managers did not seek to dissuade the customers from depositing funds into their trading accounts and, in due course, trading. Quite the contrary. They regularly encouraged the customers to deposit more funds and trade, usually based on their specific trading advice and recommendations.
I should also note in this context that, at least initially, ASIC also relied on several other more individualistic circumstances in relation to the EFX30 which were said to establish that those customers were relevantly vulnerable or disadvantaged. Those additional circumstances, which were identified in Annexure F to the SOC, included, in summary, that the customers, or some of them: had limited formal education; were unemployed or were employed in jobs that were entirely unrelated to the financial services industry; earned fairly low wages or salaries or, in some cases, received social security benefits; had fairly limited financial means; and were in some cases elderly or infirm in other respects. I do not propose, at least in the present context, to consider those additional circumstances in any detail. Ultimately, ASIC's systemic case focussed mainly on the vulnerability of the EFX30 arising from their lack of knowledge and trading experience in respect of CFDs and Margin FX Contracts, their lack of understanding of those products and trading concepts such as leverage and margin, and their lack of appreciation of the nature and extent of the risks involved in trading in those products.
It should finally be added in this context that, for the reasons effectively already given, I would infer from the evidence as a whole that a significant proportion of EuropeFX's customer base were, like the EFX30, relevantly ignorant of, and inexperienced in the trading of CFDs and Margin FX Contracts. I would also infer that EuropeFX account managers engaged with other customers who they knew to be inexperienced in much the same way as they engaged with the EFX30. I am, in other words, comfortably satisfied that the circumstances of the EFX30 were not anomalous.

[213]

Inadequate explanations of concepts and risks

The account managers who dealt with the EFX30 invariably failed to give the customers any sensible or adequate explanation of CFDs and Margin FX Contracts and concepts such as margin and leverage. They also invariably failed to give the customers any adequate explanation about the nature and extent of the risks involved in trading in CFDs and Margin FX Contracts. Such explanations that were given were at best superficial or simplistic. In many instances the explanations that were given were nonsensical or misleading.
Numerous examples of superficial and inadequate explanations of the relevant financial products and the risks associated with trading in them were given earlier in the course of the discussion of the evidence of the EFX8. It is unnecessary to refer again to those examples. It suffices to observe that the Court was not taken to, and I was not able to otherwise identify, any instances where a EuropeFX account manager gave any of the EFX8 or EFX22 a sensible, comprehendible and adequate explanations concerning the nature of a CFD or Margin FX Contract, or important concepts such as leverage and margin. Nor was I taken to any instance where an account manager gave any of those customers a sensible, comprehendible and adequate explanation of the nature and extent of the risks involved in trading in CFDs and MarginFX contracts. It was not sufficient, as EuropeFX appeared to contend, for the account managers to rely on what was said about those products or concepts in EuropeFX's PDS, particularly in circumstances where the account manager did not inquire whether the customer had read that document and, in most cases, it must have been readily apparent to the account manager that the customer had not, in fact, read the document.
Mr Blundell and Mr Dowd were asked to express their opinions about 11 instances where EuropeFX account managers gave an explanation to one of the EFX8 concerning the risks associated with a transaction or position in the customer's trading account. They expressed divergent views concerning the adequacy of those explanations. I do not intend to consider each of those 11 instances. It suffices to refer to one example and to note that, for the reasons given in relation to that example, I generally prefer the evidence and opinions expressed by Mr Blundell in relation to the various scenarios and explanations.
One of the example explanations which was considered by Mr Blundell and Mr Dowd (the fourth example) involved the following exchange between Ms Elford and one of the account managers with whom she regularly dealt: ALAN: Good. So what you're going - there are going to be - you're going to stand with 22,000 in your account, but you're only going to be using 11. DEBBIE ELFORD: Yes. ALAN: The rest - the rest is for what? What is the rest of the 11,000 going to do? What is it for? DEBBIE ELFORD: For future? ALAN: No. For proper risk management.
Mr Blundell and Mr Dowd agreed that this exchange related to a recommendation by the account manager that Ms Elford should open a position in a NASDAQ CFD based on information that was said to have been published by Investing.com and Trading Central. That information concerned an announcement that it was suggested might affect the price of shares in Apple. Ms Elford had just deposited $22,000 into her trading account. The reference to "you're going to stand with 22,000 in your account" was taken to be a reference to the amount of free margin that was available in Ms Elford's account. Ms Elford did not have any other trades open at the time. The reference to "but you're only going to be using 11" was taken to be a reference to the fact that only 50% of the available margin of $22,000 (that is, $11,000) would be used in respect of the recommended trade.
Mr Blundell's evidence was that the risk associated with the strategy was significant. He explained in his report that: The risk associated with this strategy (i.e. placing 50% of the client's Net Equity as margin) is that adverse price movements will erode all available equity in the account and lead to a forced liquidation. That risk is a very significant one in the present case. This degree of risk would not be considered "proper risk management" by experienced traders and is not an effective means of maintaining open positions. The strategy identified by the Account Manager is not an effective means of managing the risks which I have identified above, because in my experience, a strategy of placing such a high percentage of Net Equity as margin would make it more likely than not that the client would eventually experience a forced liquidation.
Mr Blundell also explained that in his experience market analysists at his company and experienced traders recommend as a "rule of thumb" placing as margin no more than 1% of their net equity on any one position. Perhaps more significantly, Mr Blundell expressed the opinion that the explanation concerning risk that the account manager gave Ms Elford was deficient because it was not made clear to her that all the funds in her trading account would be put at risk as a result of the trade.
Mr Dowd's opinion was that the instructions or trading strategy that the account manager gave to Ms Elford would have been an effective means by which to manage the risk of forced liquidation as a result of a margin call because "additional margin would be available in the account which would reduce the likelihood of forced liquidation". In cross-examination, however, Mr Dowd effectively conceded that he had simply compared the risk of placing 50% of free margin on a trade with placing 100% on a trade and that he had not really offered an opinion about the risks associated with the strategy of placing 50% of net equity on a single trade. He also agreed that, if there had been an adverse movement in the NASDAQ of 385 over two trading days, a movement which he conceded could happen, Ms Elford would suffer a forced liquidation, even if commission and swap fees were disregarded. Mr Dowd was nevertheless unwilling to concede that a single trade using 50% of the customer's net equity would expose the customer to a not insignificant risk of forced liquidation, or to concede that the account manager should have expressly drawn Ms Elford's attention to that risk. His unwillingness to make those concessions appeared to be based on his view that the transaction may nonetheless have been beneficial because the NASDAQ may have moved in the customer's favour.
I prefer Mr Blundell's straightforward and cogent view concerning the risks associated with the account manager's recommendation. I found Mr Dowd's view to be unrealistic and unpersuasive. His unwillingness to concede the obvious risks associated with the strategy did not reflect well upon his objectivity. In any event, it must have been readily apparent to the account manager from Ms Elford's question - "what is the rest of the 11,000 going to do?" - that Ms Elford did not have any understanding or appreciation of the concept of margin. The account manger's glib response - "[f]or proper risk management" - was both an inadequate explanation of margin and an inadequate explanation of the risk involved in the recommended course of action.
The inadequacy of the explanations given by the account managers to the EFX30, and in particular the EFX8, was fundamental, pervasive and reflective of a clear pattern of behaviour towards obviously inexperienced customers. There was no evidence to suggest that EuropeFX had in place any systems, guidelines or practices to ensure that account managers provided customers with adequate explanations of the financial products in respect of which they encouraged customers to trade, or the nature and extent of the risks inherent in trading in those products. As discussed later, there was no evidence that EuropeFX took any steps to ensure that the account managers were appropriately qualified, or received appropriate training. I would infer that, in all the circumstances, that when EuropeFX account managers dealt with other inexperienced customers, they similarly failed to give those customers any, or any sensible, comprehendible or adequate, explanations of the nature of CFDs and Margin FX Contracts and important concepts such as margin and leverage. I would also infer that they generally failed to give inexperienced customers adequate warnings and explanations concerning the nature and extent of the risks involved in trading in CFDs and Margin FX Contracts.
EuropeFX submitted that EuropeFX's customers, including the EFX30, were the "ultimate decision-makers of the executed trades" and that the account managers did not control the trading platform or the actions of the customers, each of whom were capable of making their own decisions. In EuropeFX's submission, the customers' decisions to trade were "outside the understanding or any level of control, of the Account Manager". A constant theme in EuropeFX's submissions was that the customers were willing participants in the market.
I reject those submission. They are, in my view, unrealistic, unpersuasive, and fail to have any regard to the extent to which the customers were ignorant of the financial products in which they traded and the inherent risks involved in their trading. It was in my view incumbent on the EuropeFX account managers to provide adequate and comprehendible explanations to their customers, including the EFX30, particularly in circumstances where the customers were obviously inexperienced and relevantly unknowledgeable, and yet the account managers were actively encouraging and, at times, pressuring them to deposit money and invest in highly risky derivatives.
Annexure E.1 provides particulars of the instances where ASIC contended that EuropeFX account managers gave the EFX30 inadequate explanations concerning the nature and extent of the risk involved in their trading (categorised as both "failure to ensure comprehension" and "inadequate explanation of risk"). I have considered those particularised instances. I have also considered EuropeFX's responses to them. I accept ASIC's contentions in respect of most of them.

[214]

Impermissible provision of personal advice

Specific findings were made earlier in these reasons in respect of instances where EuropeFX account managers gave many of the EFX30 personal advice in contravention of s 911A(5B) of the Corporations Act. EuropeFX belatedly admitted that its representatives provided personal advice in contravention of s 911A(5B) on 178 occasions. As discussed in that context, while ASIC alleged that the representatives contravened that provision on more than 2,000 other occasions, ASIC ultimately decided to limit its case in respect of the other alleged contraventions of s 911A and pressed the Court to make findings only in the case of those 118 instances where EuropeFX had admitted ASIC's characterisation of the personal advice statements. I have found that all those statements constituted personal advice in contravention of s 911A(5B) of the Corporations Act - making a total of 295 contraventions.
ASIC described EuropeFX's contravening conduct, including in respect of the personal advice contraventions, as "pervasive and consistent". I agree. I find that EuropeFX account managers consistently and persistently provided personal advice to the EFX30 in clear contravention of s 911A(5B) of the Corporations Act.
Annexure A.1 provides particulars of all the instances where ASIC contended that EuropeFX account managers gave the EFX30 personal advice. For reasons that I explained earlier, ASIC ultimately did not press the Court to find that that all the particularised instances constituted a contravention of s 911A of the Corporations Act. I addressed the admitted contraventions earlier and also made specific findings in relation to those instances where ASIC pressed the Court to make findings. I do not propose to individually address the balance of the particularised instances. I will, however, note that in my view most of those instances bore all the hallmarks of personal advice.
The conduct of the account managers in consistently and pervasively providing personal advice plainly constituted a pattern of behaviour. Moreover, that pattern of behaviour clearly was indicative and probative of a system of conduct which involved EuropeFX account managers disregarding and breaching important limitations or prohibitions in the Corporations Act with apparent impunity. It may readily be inferred that the account managers knew that they were not permitted to provide personal advice. They repeatedly read disclaimers to many of their customers that made that plain - though they then proceeded to completely ignore the prohibition in respect of providing personal advice. I would readily infer that the account managers knew that they were breaching that prohibition, particularly in the absence of any evidence to the contrary. If, on the other hand, there was some basis for finding that the account managers were not aware they were breaching the prohibition, that would in any event clearly indicate that such training that might have been given to the account managers was manifestly deficient. As discussed later, I would also readily infer that EuropeFX management well knew that its account managers were providing personal advice and did nothing about it.
The constancy and pervasiveness of account managers providing personal advice to the EFX30 supports the inference that this was a pattern of behaviour that extended well beyond that cohort of customers. I would readily infer that EuropeFX account managers engaged in that pattern of conduct in relation to other customers, particularly inexperienced customers, and that such conduct effectively formed part of EuropeFX's system of conducting business.
The evidence also supports the finding that the provision of personal advice by EuropeFX's account managers was systemic in another important and fundamental respect. I readily infer that it was fundamental to EuropeFX's business model and system of operation that its account managers made repeated and constant recommendations to their customer to open positions, usually based on "signals" supposedly contained in reports by third-party information providers such as Investing.com and Trading Central, as well as repeated and constant recommendations that customers deposit more money into their trading accounts. As discussed later, the recommendations to invest and deposit frequently escalated into sustained pressure to invest and deposit. That was essential to EuropeFX's system of operation because, without it, the likelihood would be that inexperienced customers like the EFX30 would make only modest deposits which they would quickly lose if they traded on their own. They would be unlikely in those circumstances to deposit further funds or engage in any more trading. If that occurred, EuropeFX was unlikely to generate much revenue and account managers would be likely to derive only modest commissions. As discussed earlier, EuropeFX profited from its clients' losses and account managers earned commissions which were, in part, based on the amount of money that customers deposited.
In short, both EuropeFX and its account managers had a financial incentive to encourage and pressure their customers to engage in more trading, and to deposit more funds, than they otherwise would have been likely to do. Moreover, they had a financial incentive to do that in circumstances where EuropeFX and the account managers must have been aware that it was likely that their inexperienced and vulnerable customers would ultimately lose all the money that they had deposited into their trading accounts. I would infer that that is why they unashamedly ignored the prohibition against them providing personal advice.
I should finally add, in this context, that an additional element of this pattern of behaviour and system of conduct was that EuropeFX's account managers directed their customers to install software which enabled the account managers to view and access the customers' computers and trading screen. That enabled the account managers to effectively micro-manage the customers' trading. The account managers would often go so far as to tell the customers where to click on the trading screen, and what information to enter, to effect the transactions that they told the customers they should make. The account managers were also able to tell the customers exactly how much more money they would need to deposit to take advantage of the trading they recommended, or how much more they would need to deposit into their accounts when, as almost invariably occurred, margin calls were made, or were likely to be made, if further funds were not deposited. This was also an element of the customers' almost complete reliance or dependence on the recommendations of their account managers.

[215]

Misleading and deceptive representations

Another consistent and pervasive aspect of the conduct of EuropeFX's account managers was the making of false, misleading or deceptive representations to their customers.
EuropeFX admitted that its account managers made 53 false, misleading or deceptive representations to its EFX30 customers in contravention of either ss 12DA(1) or 12DB(1) of the ASIC Act. Those representations included Profit Representations, Revenue Representations, Money Risk Representations, Withdrawal Representations, Loss Recovery Representations, Equities Representations, Plan Representations and Regulation Representations, as each of those categories of representation was defined by ASIC in the SOC.
As discussed earlier, while ASIC alleged that EuropeFX representatives made false, misleading or deceptive representations to its customers on more than 1,000 other occasions, ASIC ultimately agreed to narrow its case in respect of the other alleged contraventions and to press the Court to make findings only in the case of those 127 instances where EuropeFX had admitted ASIC's characterisation of the alleged false, misleading or deceptive representations. In respect of those allegations, I have found that EuropeFX account managers made false or misleading representations in contravention of s 12DB(1) of the ASIC Act on 121 occasions and engaged in misleading and deceptive conduct in contravention of s 12DA(1) of the ASIC Act, arising from the making of misleading representations, on 16 occasions. Those contraventions again included most of the defined categories of false or misleading representations.
It follows that EuropeFX has been found to have contravened s 12DB(1) of the ASIC Act on 172 occasions and s 12DA(1) of the ASIC Act on 18 occasions arising from its case managers making false, misleading or deceptive representations to the EFX30.
Annexure C.1 provides particulars of all the instances where ASIC contended that EuropeFX account managers made false, misleading or deceptive representations to the EFX30. I do not propose individually addressing all those instances, other than those in respect of which ASIC pressed the Court to make contravention findings. I have also considered those instances which EuropeFX admitted constituted contraventions of s 12DA(1) or s 12DB(1) of the ASIC Act. I will, however, observe that in my view many of the other particularised instances also appeared to involve misleading or deceptive representations or conduct, or at least highly questionable representations or conduct on the part of EuropeFX account managers.
I would again infer that the making of false, misleading or deceptive representations to the EFX30 by EuropeFX representatives was so regular and pervasive that it supports the inference that it constituted a pattern of behaviour that was likely to extend to a significant proportion of EuropeFX's customer base. That pattern of behaviour was also indicative and probative of a system of conduct which involved EuropeFX account managers misleading their customers when it suited their purposes. It can readily be inferred that many of the misleading or deceptive representations were intended to: reassure or convince the customer to trust EuropeFX and the account manager (in particular, the Regulation Representations, the Location Representations and perhaps the Revenue Representations); or to persuade the customer to deposit funds, or deposit more funds, or to commence or continue trading in CFDs or Margin FX Contracts with EuropeFX (in particular, the Money Risk Representations, the Withdrawal Representations, the Equities Representations, the Bank Account Representations and the Plan Representations); or to persuade the customer to conduct or effect trades recommended by the account manager (in particular the Profit Representations); or to persuade the customer to leave certain specific positions open despite the fact that the position had moved against the customer (in particular the Loss Recovery Representations).
The general or common purpose for making the misleading and deceptive representations could again be said to be to ensure that the customer ultimately engaged in more trading, and deposited more funds, than they otherwise would have. It may again be inferred that the reason the account managers wanted to encourage their customers to invest and deposit more was because they and EuropeFX had a financial interest in customers depositing more funds and ultimately losing those funds as a result of their trading.

[216]

Encouraging reliance

Another pattern of behaviour that is evident from the evidence concerning the engagement between EuropeFX account managers and the EFX30 is that the account managers encouraged and fostered a relationship whereby the customer relied and depended almost entirely on the account manager in respect of their trading and their trading account. The customers' reliance was in part a product of their relative ignorance and lack of experience. Were it not for the account managers' recommendations and instructions in respect of specific trades, many of the EFX30 would most likely have been unable and unwilling to engage in any trading, or any significant trading. The patterns of behaviour that encouraged and fostered reliance, however, went far deeper than that.
EuropeFX account managers almost invariably told the EFX30 that they would not have to trade alone, and that they, the account managers, would be there to guide them every step of the way. As discussed earlier, the account managers effectively micro-managed the customers' trading through remote viewing technology and told customers which trades to place. The account managers also constantly telephoned the customers and told them that: they would miss opportunities to make substantial profits if they did not follow their recommendations; or had missed such opportunities because they did not follow the account manager's recommendations; or would sustain losses if they did not follow the account manager's recommendations; or that they had sustained losses because they had not followed the account manager's recommendations; or that the customer would sustain losses if they traded on their own; or they had sustained losses because they had traded on their own. The account managers frequently held themselves and their colleagues out to be experts.
Annexure E.1 provides particulars of the instances where ASIC contended that EuropeFX account managers effectively encouraged the EFX30 to rely on them in relation to their trading. I have considered those particularised instances, as well as EuropeFX's responses to them. I accept ASIC's contentions in respect of the most of them. In it unnecessary to descend into the detail. Suffice to say that EuropeFX characterised many of those instances as involving little more than the account managers "endeavouring to provide helpful client service". I reject that benign characterisation of the relevant exchanges. The inference available from most of the particularised exchanges is that the account managers were engaging in a pattern of behaviour pursuant to which they fostered and encouraged their customers to depend on them and their advice with the ultimate objective being that the customers would almost unquestioningly follow the account managers' recommendations.
I would also readily infer that this pattern of behaviour was part of the overall pattern of behaviour, or system of conduct, whereby EuropeFX customers were encouraged and ultimately pressured to trade and deposit more money with EuropeFX. That conduct was again motivated by the fact that, at the end of the day, both EuropeFX and the account managers would benefit financially from the deposits made and the trading losses almost invariably suffered by inexperienced and naïve customers. The evidence supports the inference that the pattern of behaviour and system of conduct extended beyond the EFX30 and applied to a significant proportion of EuropeFX's customers.

[217]

Pressure to trade and deposit funds

As has already been adverted to, the evidence of and relating to the EFX8 and the evidence relating to the EFX22 reveals that EuropeFX account managers frequently exerted pressure on their customers to trade or open positions and deposit further funds into their trading account. With the possible exception of Ms Love, each of the EFX8 gave evidence that at times they felt that they were being pressured by their account manager to open positions or deposit further funds. I accept that evidence, particularly when it is considered in the context of the customers' telephone conversations with the account managers. When those calls are listened to, or the transcripts of the calls are read, the pressure exerted by the account managers on certain occasions is palpable. Examples of some of the exchanges during those calls were referred to earlier. Many of the transcripts of the telephone conversations between EuropeFX account managers and the EFX22 similarly reveal many occasions where the account managers exerted considerable pressure on the customers to trade or deposit funds.
The evidence in relation to the EFX30, in particular the EFX8, revealed that EuropeFX account managers pressured their customers to invest and deposit further funds in various ways. They frequently contacted their customers, sometimes many times per day, and peppered them with recommendations in respect of specific trades. Most of those recommendations were based, or supposedly based, on information gleaned from third-party information providers. The exhortations by the account managers exploited the customer's fear of missing out. The account managers often pointed out to the customer the profit they supposedly would already have made if the trade had been placed, or suggested that the window of opportunity within which the trade could profitably occur was narrow. If the customer's trading account had insufficient money or margin to make the trade, the account managers would often pressure the customer to deposit more money, even if the customer told the account manager that they had no more money to invest. Account managers also frequently told customers that they should deposit more money as a matter of "risk management", or to provide "oxygen" to their trading account. The pressure often did not cease even when the customers were in obvious distress. There were numerous instances where the customer's distress must have been readily apparent to the account manager, but they pressed on undeterred.
Annexure E.1 provides particulars of the instances where ASIC contended that EuropeFX account managers pressured the EFX30 to trade or deposit further money into their trading accounts (categorised as "pressure to invest"). I do not propose individually addressing all those particularised instances. It is unnecessary and unrealistic for me to do so. I have, however, considered them in the context in which they occurred. I have also considered EuropeFX's responses to those particularised instances. I accept ASIC's characterisation and contentions, and reject EuropeFX's responses, in respect of most of them. I would readily infer from the evidence as a whole that EuropeFX account managers regularly and consistently pressured the EFX30 to trade and deposit money into their trading accounts.
The constancy and pervasiveness of the instances in which EuropeFX account managers pressured the EFX30 to trade and deposit funds supports the inference that that pattern of behaviour extended well beyond that cohort of customers and occurred in respect of a significant proportion of EuropeFX's customer base. That inference is supported by internal compliance reports concerning the conduct of EuropeFX account managers, as well as other internal documents, including reports prepared by Ms Ajaz. Those documents, which are summarised in Schedule N to ASIC's closing submissions, are replete with reports about account managers unacceptably and improperly pressuring customers to trade and deposit funds. It suffices to give a few examples.
The notes of a compliance meeting on 14 May 2019 attended by Mr Amsalem on behalf of EuropeFX and Mr Martin on behalf of USG, record that: It appears complaints are coming from "Retention Team", or "Trading Specialist" where client is pressured to add more funds. This practice breaches on Personal Advice and Pressure Sales. This practice needs to stop.
The notes of another compliance meeting on 25 June 2019, attended by Mr Amsalem and Mr Martin, records that the call monitoring reports included "Not acceptable Sales practices" including "The Agent promises profits, give personal advice, uses high pressure for additional deposits, not neutral and unemotive in agent language, and must discuss risk when talking profits". Similarly, the notes of a compliance meeting on 16 October 2019, again attended by Mr Amsalem and Mr Martin record: "Sales practices overall not acceptable - no pressure to deposit. When client says no to adding more funds STOP right there".
Ms Ajaz's evidence was consistent with the internal compliance records. The effect of her evidence was that, when she was performing work for EuropeFX, which included listening to telephone calls between EuropeFX account managers and customers who had lodged complaints, the most prevalent misconduct that she heard in those calls was "aggressive sales in terms of pressure".
There could be little doubt that the pressuring of customers was a pattern of behaviour among EuropeFX account managers that was common, pervasive and known to management. As discussed later, there is no evidence to suggest that EuropeFX management took any, or any adequate, steps to put a stop to that conduct. The available inference is that they made no real effort to do so because it was part of their business model or system.
EuropeFX maintained that many of ASIC's allegations of pressure amounted to no more than the account manager pointing out the margin requirements, or offering opportunities to trade or encouraging an increase to the free margin on the account. It also submitted that some "allowance should be made for the fact that Account Manager's were undoubtedly salespeople and versed in that language".
I reject the submission that many of ASIC's allegations concerning pressure amount to nothing more than the account manager pointing out margin requirements, or offering opportunities, or encouraging an increase to free margin. Even a cursory reading of the transcripts reveals that that submission cannot be sustained. It is also contrary to the internal compliance reports and correspondence which reveals that officers of USG and EuropeFX who had reviewed the recorded conversations considered that EuropeFX account managers employed high pressure tactics.
As for the suggestion that account should be taken of the fact that the account managers were salespeople, the short answer is that they were meant to be, or were held out to be, financial advisers, or financial service providers, not salespeople. If they were salespeople, or were acting like salespeople, they should not have been, particularly in circumstances where they were not authorised at all to provide personal advice to their customers. Nor should they have been using the language of salespeople. The available inference is that they were either not properly trained, or that if they were, they were deliberately ignoring their training. Given that, as discussed earlier, they had a direct financial incentive to extract as many deposit funds as possible from their customers, the latter inference is perhaps the more likely.

[218]

Unfair promotions

EuropeFX account managers frequently offered or referred to various packages - bronze, silver, gold, platinum, premium or VIP packages - which EuropeFX offered its customers. I will refer to those packages generally as the VIP packages or promotions. The VIP packages supposedly contained benefits for the customer, such as discounts on trading commissions and access to more senior or dedicated advisers. To qualify for those packages, however, the client had to deposit minimum amounts. The more the customer deposited, the greater the supposed benefits.
EuropeFX did not dispute that its account managers offered promotions to its customers. Rather, it submitted that the promotions were not unfair because they provided "clear, identifiable and measurable benefits to clients". ASIC, however, submitted that the benefits did not have any practical value. It gave as an example the case of Mr Kalusinghe, who, after having suffered several trading losses and having been required to deposit further money to keep his account alive, was offered the services of Victor, who was said to be the manager of the "VIP department". ASIC submitted that Victor's advice was largely indistinguishable from the advice Mr Kalusinghe had received from his previous account manager. The substance of that advice was to deposit more money. ASIC also submitted that any benefits arising from discounted commissions were at best illusory because they were "swamped by, and contributed to, further losses".
It is difficult to determine whether any benefits that customers may have received from these promotions were illusory. It is, for example, difficult to determine whether the advice given by supposedly more senior advisers pursuant to the promotions was materially different to or better than the advice given by the regular account managers. It may perhaps be accepted that the monetary benefits that some customers might have received pursuant to the promotions while they traded, such as discounted commissions, ultimately amounted to little or nothing, particularly given that each of the EFX30 eventually lost all, or most of the funds that they had deposited. It is, however, very difficult to determine if the customers did in fact receive any such monetary benefits. It might equally be accepted that, if the inducement provided by the promotion caused the customer to deposit further funds, the promotion could be said to have ultimately caused the customer to lose more money. Even so, I doubt that it could necessarily be said that the promotions were necessarily unfair for that reason alone.
The more significant point, however, is that the VIP promotions were undoubtedly used by account managers to induce or pressure customers to deposit more funds. Moreover, that inducement or pressure was more often than not offered or exerted in circumstances where it was not in the customer's best interests to deposit further funds. Mr Kalusinghe is again a case in point.
On 27 September 2018, Mr Kalusinghe's EuropeFX account manager at the time, Sean, recommended that Mr Kalusinghe increase his position in FTSE CFDs. That would have required Mr Kalusinghe to deposit further money into his trading account. He told Sean that he did not have any more money to deposit. Mr Kalusinghe had deposited $85,000 into his trading account by this time. The following exchange then occurred: SEAN: 85, meaning 15K more, we get up to premium account, correct? If you open - if you go now to EuropeFX.com.au, take a look on the top, you have account. If you want, I can email you the account type. I just want you to have a look on the premium one. There is a premium, it says 100K, and look - look on the benefits you get. If you scroll down, take a look what it says. Trading commissions, up to 30 per cent discount. Do you see that? PRASANNA KALUSINGHE: Okay. SEAN: And then you have VI - VIP services. You can actually go to the website, either now or later today, and you can see the premium account that I'm talking about. PRASANNA KALUSINGHE: Mmm-hmm. SEAN: Which you get a senior forex specialist, like Adam, for example, in case you spoke with before, one of the analysts, that can get another - you know, another point of view, another person to work with and - and - and to, let's say, instead of four eyes on the account, it will be six eyes on the account. Now, it's not just about that -- PRASANNA KALUSINGHE: Yes, Sean, sorry, I - I - I understand what you are going to say, so but I am very sorry to say that I don't have money, mate. I am waiting for next salary to live. SEAN: I know, I know, my friend. PRASANNA KALUSINGHE: I have pumped all -- SEAN: I know. PRASANNA KALUSINGHE: -- because I have taken some loan (indistinct), so I am very -- SEAN: I know. No, look, so, of course, I don't want you to be in that point, but all -- PRASANNA KALUSINGHE: I can't go any more. SEAN: I know. I know, my friend, I know. But all I'm trying - all I'm trying to say, bottom line is with this - for example, with this specific discount, 30 per cent discount on commission, just because we have this - look at the balance, more than 100K account.
The pressure exerted by Sean, including by reference to the VIP promotion, did not end there.
Ultimately, I consider that the offering of promotions based on the amount of money a customer deposited is best considered to be a component of the overarching and pervasive pressure that account managers exerted on inexperienced investors to deposit further funds.
Annexure E.1 provides particulars of the instances where ASIC contended that EuropeFX account managers told the EFX30 about the VIP packages, usually in circumstances where they were encouraging or pressuring the customer to deposit more money into their trading account (categorised as "unfair promotions"). I have considered those particularised instances relating to the VIP packages, as well as EuropeFX's responses to them. I accept ASIC's contentions in respect of many of them. I am satisfied that the use of the VIP promotions in that regard was pervasive and formed part of a pattern of behaviour or system of conduct on the part of EuropeFX the purpose of which was to maximise the deposits that customers made, whatever their circumstances may have been.

[219]

Encouraging use of inappropriate funds

Another common feature of the conduct of EuropeFX account managers which related to the pressure to trade and deposit funds was that, when customers said that they did not have any more money to deposit, account managers often encouraged customers to borrow money, or use credit cards, or source funds from other inappropriate sources. Some examples of this conduct were identified earlier in the context of the evidence of the EFX8 generally. It suffices to give another example of such conduct directed towards one of the EFX30, Ms Battersby.
On 5 September 2019, Ms Battersby received a call from Leo, who said that he was calling her "from the risk department" because her account was "standing on a very, very low margin level." Leo told Ms Battersby to deposit $10,000 into her trading account to increase her free margin "according to proper risk management". Ms Battersby told Leo that she did not have $10,000 and that she would have to borrow money. Leo then said: LEO N TURA: I'll tell you something: even we in EuropeFX, we do not, you know, encourage you to take a loan or to borrow money, but, at the same time, we will never decline using your credit card, for example, as the borrowed money. Even if you're going to use your credit card, my dear Miriam, for five business days, okay, only for five business days, and the market will stabilise. You don't need to wait till the market will go all the way up to your profit, even if it would be able just to close it on a zero level, a big amount of money out of your margin will be released into your free margin and then you will be able to cash it out from your free margin back to your bank account or back to your card out of your available funds. You understand what I'm saying? This is only, you know - this money should not stay inside your trading account. It should only - only support what you have in there. That's all. This is all that I'm saying, okay? I don't want to be in the position where in two days from now, you know, God forbid, that that moneys will be - you know, will be deducted from your account balance, okay?
Leo, who had access to Ms Battersby's trading screen, then directed Ms Battersby in minute detail how to go about depositing funds into her trading account using her credit card, though he claimed that he had minimised the screen when it displayed her bank account details. The pressure exerted by Leo did not end there. Rather, Leo suggested that Ms Battersby deposit a further $5,000 using her credit card so she could "sleep well at night". Ms Battersby told Leo that she could not deposit any more money because she had a limit on her credit card. The following exchange then occurred: MIRIAM BATTERSBY: I cannot add any more. I have a limit on my credit card. LEO N TURA: What is the limit? MIRIAM BATTERSBY: I have my limit. 5,000. LEO N TURA: For - per -- MIRIAM BATTERSBY: I am maxed out. I am a pensioner. LEO N TURA: But it's 5,000 - it's 5,000 per transaction, right? MIRIAM BATTERSBY: No. Total. I cannot take any more. LEO N TURA: Okay. MIRIAM BATTERSBY: That's it. You cannot get blood out of a stone. I'm an old lady. I do not work.
The pressure exerted by Leo continued.
It was manifestly inappropriate for Leo to pressure Ms Battersby to deposit further money using her credit card in the circumstances, particularly by misleading her that the market would stabilise and she would be able to withdraw money from her trading account and pay it back to her credit card account within five business days. There was, of course, no certainty that that the market would stabilise or that Ms Battersby would be able to, or would be in a position to, withdraw that money from her trading account in five days' time.
The evidence relating to the EFX8 and EFX22 revealed that such conduct was common and certainly not isolated. Annexure E.1 provides particulars of the instances where ASIC contended that EuropeFX account managers encouraged the EFX30 to use borrowed funds, or funds acquired from generally inappropriate sources (categorised as "encouraging use of borrowed funds, remaining savings or superannuation"). I have considered those particularised instances. I have also considered EuropeFX's responses. I accept ASIC's characterisation of most of those instances.
EuropeFX submitted, in effect, that there was nothing wrong with its account managers telling their customers that they could or should use their credit cards, or borrow money from others, or use their diminishing savings, to fund further deposits because "it was open to [EuropeFX or its account managers] to inform clients about all available means for them to obtain in funding to continue to trade". I reject that submission and the benign characterisation of the impugned conduct which underpinned it. Among other things, the submission ignores the inexperience and vulnerability of the customers and the often-parlous financial circumstances of the customers.
I would again readily infer that it was a pattern of behaviour and part of EuropeFX's system of conduct which involved pressuring customers to deposit more and more funds, even if those funds had to be borrowed or obtained from other inappropriate sources.

[220]

Impediments to withdrawals

Another common feature of the conduct of the EuropeFX account managers towards the EFX30 is that, while they advised the customers that they were able to withdraw funds from their trading accounts, they frequently discouraged or impeded the customers from withdrawing funds. Examples of this conduct were given earlier in the context of the discussion of the evidence of the EFX8. It suffices for present purposes to give one further example.
In December 2018, Ms Boden made a request to withdraw $100,000 from her trading account. That request was met with resistance by her then EuropeFX account manager, Jovanni. Ms Boden's request was responded to in the following way by Jovanni: JOVANNI: I know, dear. I know, my love. I know. I want to tell you something that my mum taught me. When we are becoming emotional we are becoming irrational, and when we are becoming irrational we are taking the wrong decisions. And it's not an assumption; it's a fact. Another fact: if you opened yesterday a position on the NASDAQ today you could withdraw 100K and then you've got another 100K. It's not a dream; it's reality and it's here. This is (indistinct), this is (indistinct), this is Christmas. It's here. … JOVANNI: I want that you make a scenario in your mind tomorrow morning you are closing again your entire position and this time you have an equity of 200K and you withdraw 100K in order to treat that medical reason, and with the rest you can continue and trade with tiny positions. Tiny, but potential positions. This could be lovely. Remember the sentence - when we are becoming emotional we are becoming irrational and then we are taking the wrong decisions. So I missed to the sharp Julie, to the killer Julie. Be for you, not for me. It's not for me, it's for you. Be for you the killer Julie, okay? Because, yes, the medical is so important, but with God's help after the operation, okay, when you're feeling much more better, okay, you'll want to live your own life, your own life with your own terms and with your own conditions. And it's a fact. Because that medical operation, you're going to pay a lot of money, and you know that. And it's the truth.
The pressure exerted on Ms Boden to cancel the withdrawal request did not end there. On the same day, she was contacted by another EuropeFX representative, David, who also sought to dissuade her from pursuing the withdrawal request. The following exchange occurred: DAVID SHMUELI: So that - that - that's not an issue. It can stay with zero in the balance. Okay? Honestly, we will maintain you as a client, and as long as that you will be ready to come back, you will come back. What I'm trying to say, that right now because of that opportunity, you can - you will have the ability or the access to create such a big return in such a short period of time potentially that in the next - if you delay your withdrawal, I can put you - you know that when you ask for a withdrawal, it takes three business days. Okay? JULIE BODEN: Yeah, I know, yep. DAVID SHMUELI: We - we are - we are on Thursday, middle way. So it's Thursday. Friday. Saturday and Sunday are not working days. Then we have Christmas. Right? JULIE BODEN: Yes. DAVID SHMUELI: So it's going to take a bit longer period of time according to circumstances. Do you follow me? Now, now, because I'm the manager of the prestige department, once, you know, I'm taking you under of my wing, you will be able to open the withdrawal again, and I will able to (indistinct) to be released, which means the transfer will be approved on the same day, everything that you have in the balance. Do you follow me?
That sort of conduct was, it may be inferred, a manifestation or natural and expected consequence of the way in which EuropeFX account managers were remunerated. As already noted, account managers received commission based on the amount of money that their customers had on deposit with EuropeFX. It can perhaps be inferred that, if a customer withdrew money from their trading account before the account manager's commission for the relevant period was calculated, the account manager was likely to receive less commission than they otherwise would have for that period. It was hardly surprising, in those circumstances, that account managers frequently took steps to prevent withdrawals from being requested or pursued.
Annexure E.1 provides particulars of the instances where ASIC contended that EuropeFX account managers discouraged, impeded or endeavoured to impede or delay, the EFX30 from withdrawing funds from their accounts (categorised as "unreasonable impediments to withdrawal"). I have considered those particularised instances and EuropeFX's responses thereto. I accept ASIC's characterisation and contentions in respect of most of them. I would infer that conduct of that nature was pervasive and was indicative of a pattern of behaviour whereby customers were encouraged to deposit and retain money as much money as possible in their trading accounts.

[221]

Inappropriate or unfair trading strategies

The evidence of and relating to the EFX8, and the evidence relating to the EFX22, indicated that EuropeFX account managers regularly and routinely advised customers to engage in various trading strategies. Those strategies included: advising customers to open a large number of positions; advising customers to open a large number of positions, or positions at a high volume, in circumstances where the account manager subsequently became unavailable for an extended period of time; advising customers to open larger or significantly more positions, thereby increasing the risk to which the customers were exposed, and increasing the amount of funds required in the customers' trading accounts; advising customers to leave open positions that had moved adversely to their position, and in some cases advising the customers to deposit further money into their trading accounts so the open positions could be retained; advising customers who had already incurred losses to deposit further funds to their trading account in order to be able to open further positions and thereby recover some or all of those losses; so-called "double direction trading", which involved the customer opening both long and short positions in respect of the same currency, index, share or commodity at the same time; and advising customers not to use stop losses.
Those strategies were generally inappropriate and unfair having regard to the customers' lack of knowledge and experience in respect of trading in CFDs and Margin FX Contracts and their almost complete reliance on their account managers.
I do not propose to address all those strategies. Some of them have already been considered in different contexts, including in the context of the general discussion of the evidence of the EFX8 and in the context of the personal advice and false, misleading and deceptive representation contraventions. It suffices to make the following additional short observations.
First, there could be little doubt from the evidence as a whole that EuropeFX account managers regularly and routinely advised their customers to engage in those types of trading strategies. Annexure E.1 provides particulars of the instances where ASIC contended that the EFX30 were advised to adopt unfair or inappropriate trading strategies. I have considered those particulars and EuropeFX's responses to them. I agree with ASIC's characterisation of most of those instances and find that most of them involved a recommended adoption of a trading strategy that was, or was likely to be, inappropriate having regard to the customers' circumstances.
Second, there could be little doubt that the types of strategies that the account managers recommended were often risky, and in many cases very risky, strategies for inexperienced traders to adopt or follow.
Third, the evidence revealed that the account managers invariably neglected or failed to advise the customer that the strategies that they were recommending were risky in the circumstances.
Fourth, while the strategies did not always fail, the ultimate and inevitable result in the case of each of the EFX30 was that they lost most of the money that they had deposited.
I would infer from the evidence as a whole that the conduct of the EuropeFX account managers in encouraging their customers to engage in risky and inappropriate trading strategies constituted a pattern of behaviour which was entirely in keeping with, and demonstrative of, a system of conduct on the part of EuropeFX and its account managers to which included maximising the amounts their customers deposited and eventually lost as a result of their trading. As has already been noted, EuropeFX account managers had a direct financial incentive to maximise their customers' deposits and EuropeFX itself had a direct financial incentive to maximise its customers' losses. Its revenue and profit depended on its clients' incurring losses and incur losses they did.

[223]

Inadequate training of account managers

As noted earlier in the context of EuropeFX's onboarding system and processes, EuropeFX was ordered to discover all call scripts, sales guides, training materials or similar documents which were provided or made available to the sales representatives or account managers engaged by or on its behalf. That order relevantly required EuropeFX to produce any call scripts, sales guides or training materials that it provided, or caused to be provided, to the account managers who were employed by XYX to provide services as account managers on EuropeFX's behalf. Very few, if any documents that fell within that category were produced. There is no evidence to suggest that EuropeFX provided any such documents to XYX, or that XYX provided any training materials to the account managers retained to provide account management services on behalf of EuropeFX. EuropeFX did not adduce any evidence in respect of any training that it provided to the account managers, or requested XYX to provide to the account managers who XYX engaged to provide services on its behalf.
There were three documents in evidence which, it might be inferred, were intended to provide some degree of training or guidance to account managers, though those documents appeared to emanate from USG, not EuropeFX. They were: a document entitled "Recruitment, Sales & Marketing Compliance Guide for USGFX Partners"; a document entitled "Training for salemen"; and a document entitled "Training Guidelines". The evidence indicated that Mr Martin, on behalf of USG, provided those documents, or at least some of them, to EuropeFX employees, including Ms Ajaz and Mr Lui, and to individuals who appeared to be employees of Maxiflex who had responsibilities in relation to account managers. There is, however, no evidence, documentary or otherwise, to suggest that EuropeFX provided any of those three documents to XYX.
In any event, Mr Blundell's largely unchallenged evidence was that those documents would not have provided sufficient training to account managers, even if they had been provided to XYX or the account managers retained by it who represented EuropeFX. It is, in the circumstances, unnecessary to address Mr Blundell's evidence in respect of the documents in any detail. The essence of it was that such training and guidance as was provided in those documents was very high-level or bullet point summaries which were devoid of context, examples, or practical guidance, in respect of issues that can be complicated and difficult to comprehend. In Mr Blundell's experience, the provision of such high-level bullet point documents would not be sufficient to ensure staff understood what should and should not be said to customers, particularly in respect of the provision of only general (not personal) advice.
In cross-examination, Mr Blundell agreed that the licensee (the holder of the AFSL) bore the primary responsibility for ensuring compliance, not the CAR, and that the deficiencies in the documents he had considered (specifically the document entitled "Recruitment, Sales & Marketing Compliance Guide for USGFX Partners") were the responsibility of USG, as licensee, not EuropeFX. That may be so, but it hardly provides any answer to the question whether EuropeFX, as USG's CAR, did anything whatsoever to ensure that the account managers who were acting on its behalf had received any training, let alone any adequate training.
In all the circumstances, I would readily infer from the evidence that EuropeFX did nothing, or next to nothing, to ensure that the account managers that XYX retained to act on its behalf and engage with its customers were adequately trained. In particular, EuropeFX did nothing to ensure that the account managers knew and had a proper understanding of the nature of the advice (in particular personal advice) that they were not permitted to provide to customers, or that they knew and understood that they were not permitted to mislead, misrepresent or misinform the customers in any way, or engage in aggressive or high-pressure sales techniques. It is, in those circumstances, hardly surprising that the account managers regularly and routinely engaged in the misconduct to which references has already been made.
There are, however, some indications in the evidence that the XYX account managers who were acting on EuropeFX's behalf were receiving some sort of training from someone, albeit not the sort of training that they should have been receiving. An analysis of the transcripts of the telephone conversations between the account managers and the EFX30 reveals that the account managers regularly used many of the same phrases or expressions, particularly when seeking to encourage the customer to trade or deposit more money into their trading account. Many of those phrases or expressions were inappropriate. It suffices to give but a few examples.
Account managers regularly told customers that their trading would provide them with a "secondary income". As discussed earlier in the context of the Profit Recommendations, those representations were almost invariably misleading. Similarly, account managers regularly told customers that, if they traded, their money would be put to better use than it would if it was left in a bank account. In that context, the account managers also told the customers that the money in their bank account was "collecting dust". As discussed earlier, in the context of the Bank Account Representations, those sorts of representations were, or were likely to be, to be misleading.
As also discussed earlier, when account managers first engaged with customers, they frequently asked the customers what their "goals" or "main goals" were, and what they wanted to "achieve" by opening the trading account. In that context, the account managers frequently queried whether the customer was looking to buy a "new car" or a "new house". In their initial and early conversations with customers, account managers also frequently told the customers that they were there to "hold [the customer's] hand" and that they would guide the customer "step by step" when it came to trading.
When discussing trading strategies and seeking to encourage customers to trade, account managers also frequently indicated that their strategy was a "hit and run" strategy which was intended to "catch small movements" in the market. Similarly, when seeking to persuade the customer to deposit further money into their trading account so they could trade more, the account managers frequently exhorted the customers to "maximise the potential" or "maximise your potential". When seeking to persuade the customer to deposit more money to improve their margin, the account managers frequently said that the customer's trading account needed "oxygen" or "air", or that depositing further funds in that context would constitute "proper risk management", or would provide "back-up", or would allow the account or the customer to "sustain market fluctuations".
There are many other examples. It could scarcely be said that the repeated use of those somewhat distinctive expressions or phrases by many different account managers was entirely coincidental. Rather, the available inference is that the account managers were instructed by someone to employ those expressions as a means by which to encourage the customer to begin trading with EuropeFX and subsequently to engage in more trading and to deposit more money. They were, in short, sales pitches or techniques which were used to induce or pressure mostly inexperienced and vulnerable consumers to part with their money and trade with EuropeFX.

[224]

EuropeFX management awareness of misconduct and inaction

The evidence adduced by ASIC clearly indicated that EuropeFX management was aware of the consistent and pervasive misconduct of its account managers towards its customers, but that no effective steps were taken to stop that misconduct. The available inference in the circumstances is that it was simply not in EuropeFX's interests to put a stop to it. It profited from that conduct. Indeed, it was effectively part of EuropeFX's business model or system.
The evidence of the EuropeFX "quality control" officers, Ms Ajaz and Mr Liu, was referred to earlier in these reasons. EuropeFX sought to discredit them and their evidence. For the reasons already given, I considered them both to be honest and reliable witnesses.
As discussed earlier, Ms Ajaz and Mr Lui prepared daily call monitoring reports and sent copies of those reports to Mr Martin and various people overseas who were said to be part of EuropeFX's management team, or "overseas EuropeFX". Some examples of the reported misconduct in some of Ms Ajaz's call monitoring reports were extracted earlier in these reasons. It is unnecessary to give any more examples.
ASIC conducted an analysis of the call monitoring reports that had been produced to it. That analysis indicated that of the 2,152 calls that were referred to in the reports, 356 calls (or 16.54% of the calls) included identified misconduct by the account managers who were parties to those calls. The analysis also indicated that of the 66 EuropeFX account managers whose calls were identified in the reports, 48 (or 73%) of them engaged in at least some misconduct. There is no reason to doubt that analysis. EuropeFX did not appear to challenge or dispute it. The analysis reveals the pervasiveness of account manager misconduct. The analysis is also consistent with the evidence of Ms Ajaz and Mr Lui. Mr Liu's unchallenged evidence, for example, included the following: The extent of misconduct that I identified in the calls which I listened to varied. My best recollection is that every day I identified minor or medium misconduct in the calls which I listened to. On a good day, I identified no calls with serious misconduct, but this was very rare. On a bad day, I identified serious misconduct in about half of the calls which I listened to.
Of more relevance, for present purposes, is that the evidence of Ms Ajaz and Mr Liu and the call monitoring reports that they prepared clearly establish that EuropeFX management were aware of the significant misconduct identified in the call monitoring reports, yet nothing whatsoever appears to have been done to stop or curb that misconduct. As already indicated, the reports were sent to Mr Martin, as well as various people overseas who were supposedly part of EuropeFX's management or compliance team. There is no evidence that any effective action was taken by management in response to those reports. Neither Ms Ajaz nor Mr Liu were aware of any action being taken against any account manager as a result of the misconduct identified in their reports. It is readily apparent from the evidence as a whole that the account managers who were identified in the reports as having engaged in misconduct nevertheless continued to provide account management services. EuropeFX adduced no evidence from Mr Sasso, or anyone else, which addressed this issue.
There is other documentary evidence that reveals that EuropeFX management were well aware that the account managers who were acting on EuropeFX's behalf were engaged in serious misconduct. As has already been adverted to in the context of the finding that EuropeFX account managers pressured customers to trade and deposit, there was documentary evidence that regular "compliance meetings" were attended by Mr Martin, on behalf of USG, and various people representing EuropeFX, including Mr Amsalem. The notes or minutes of those meetings frequently record that USG had identified misconduct on the part of EuropeFX account managers. Examples of the sorts of misconduct reported in those meetings were given earlier. It is apparent that USG was sufficiently concerned about the reported instances of misconduct that it required EuropeFX to take remedial or disciplinary action. The notes of a compliance meeting on 31 October 2018, attended by Mr Amsalem on behalf of EuropeFX, recorded that EuropeFX was to "put in place rules for reprimanding Agents" who "repeat offenses". There was no evidence to suggest that EuropeFX ever put any such rules in place.
There was a raft of other documentary evidence that established that EuropeFX management and its sole director, Mr Sasso, were well aware of misconduct on the part of the account managers who were acting on EuropeFX's behalf. Among other things, Mr Sasso was aware that many customers had lodged complaints with EuropeFX in respect of the conduct of its account managers. He was also aware that complaints had been lodged with ASIC and AFCA. ASIC compiled a schedule which summarised the documentary evidence concerning 257 such complaints. The documentary evidence also indicated that EuropeFX was aware of those complaints and was actively monitoring them. That evidence included email correspondence between Mr Amsalem and Mr Martin, and correspondence between Mr Sasso and Mr Amar, about specific complaints. In one such email, which concerned Ms Robinson's complaint, Mr Sasso presciently advised Mr Amar in the following terms: If this is type of conduct we have a major problem. This type of pressure selling cannot be condoned and could result in an ASIC investigation.
About five weeks later, Mr Sasso signed a deed of release on behalf of EuropeFX which resolved Ms Robinson's complaint.
In the period during which EuropeFX conducted its securities business and Mr Sasso was a director, Mr Sasso signed 82 deeds of release on behalf of EuropeFX so as to settle complaints lodged by its customers. EuropeFX's complaints resolution processes and procedures are discussed in more detail later.
I would infer, from the evidence as a whole, that the apparent failure on the part of Mr Sasso and EuropeFX's management to take appropriate or effective action in respect of the known misconduct of the account managers was more likely the product of an unwillingness to appropriately act, rather than an inability to effectively act. EuropeFX was profiting handsomely while the account managers engaged in the identified misconduct. As will be seen in the later discussion concerning EuropeFX's complaint resolution process, EuropeFX was generally able to resolve its customer complaints by paying out a fraction of the customers' losses and having the customers sign a deed of release. There was accordingly little or no economic or commercial incentive for EuropeFX to act. Indeed, there was a disincentive.
The inference that EuropeFX management was simply unwilling to stop account manager misconduct can all the more easily be drawn in the absence of any evidence from Mr Sasso or any other officer, employee or agent of EuropeFX in respect of the steps, if any, that were taken to put a stop to that misconduct.

[225]

Unfair complaints resolution process

The final feature of EuropeFX's system of conducting its business concerns the dispute resolution processes it employed when customers who lost money as a result of their trading with EuropeFX lodged complaints with EuropeFX or regulatory bodies such as ASIC or AFCA. The experiences of the EFX30 in respect of EuropeFX's complaints resolution system were very similar and supported the inference that there existed a system of conduct and pattern of behaviour that was unfair in several respects. The pattern of behaviour and system that was revealed by the evidence of and concerning the EFX30 had the following features.
First, the customers were generally advised that the complaint had been the subject of a thorough investigation, or "internal audit", which had revealed no intentional wrongdoing. Ms Boden, for example, received an email which advised as follows: First and foremost, know that your complaint has been heard and underwent serious scrutiny, an internal audit has been made in order the bring to the light facts which might have escape a simple due diligence check. I must disclose that no intentionally wrong doing was found, I guarantee you that no stone was left unturned.
She subsequently received a letter which advised: After conducting yet another comprehensive review of your trading history and communications with us, we wish to bring to your attention the following facts, which we have fully recorded and documented, and will wholeheartedly demonstrate should we be required to: • EuropeFX.com.au is owned and operated by Maxi EFX Global AU Pty Ltd ACN 625 283 785 ("EuropeFX") is a Corporate Authorized Representative (# 001258580) of Union Standard International Group Pty Ltd ACN 117 658 349, which holds an Australian Financial Services License # 302792. • We operate in full compliance with every legal and regulatory requirement which applies to our operations. • There were no intentionally flaws or misconducts in our trading with you, nor in any of our communications. • All of your trades with us were chosen and entered into by you alone, without any intervention on our part. • You are and have been, ever since you started trading with us, aware of the risks associated with trading in financial instruments.
The letter then drew Ms Boden's attention to the various risk disclaimers that were included in EuropeFX's documentation.
Similar emails and letters were received by most of the other EFX30. It is, however, difficult to accept that EuropeFX ever conducted a thorough and bona fide investigation or examination of customer complaints as it asserted it had. Had a genuine investigation been undertaken, it would almost invariably and inevitably have revealed that there had not been full compliance with the applicable legal and regulatory requirements, and that account managers had engaged in certain misconduct. Using Ms Boden as an example, as the findings that have been made thus far indicate, EuropeFX account managers had in fact made at least five impermissible personal advice statements and at least eight false, misleading and deceptive representations to Ms Boden. Ms Boden has also been subjected to, among other things, inappropriate pressure by her account managers.
Second, the customers were almost invariably discouraged from lodging or pursuing their complaints with ASIC, AFCA or the Financial Ombudsman Service. Mr Amsalem, who spoke with many of the customers in respect of their complaints, was particularly forceful in that regard. For example, Mr Amsalem told Ms Nikiforos that if she escalated her complaint to AFCA, EuropeFX would be "standing fully confident behind the response letter" it had sent her. He then made a modest settlement offer and said: Now, if you decline it, which is okay, this case is basically escalate to AFCA, how long it's going to take. AFCA, okay, is giving a recommendation. AFCA is not a court. Okay? They cannot force the company to pay you money. They can give a recommendation. Now, because of USG as a member … Because of how USG is a member with AFCA, so basically, we are going to go to a direction, to accept a recommendation. But it's not necessary. It depends. If they are going to say, "Refund it in full," we can basically decline it. And the other legal routes that you can force it to ask your money is through legal procedure and courts and more. Now, you are very intelligent person. You need to understand that if we issue you a response letter which is going to be fully transparent with AFCA and basically have a lot of experience working with AFCA because, unfortunately, clients do complain when they lose their money. So we know which case there is a risk to lose or which case there is not a risk to lose. Once this has placed to AFCA, basically, you are losing your leverage in front of the company to settle any dispute internally. So basically, if AFCA will say compensate the client with 5,000, or "We don't believe you will compensate", so basically you will lose the opportunity to get anything. It's a risk you are willing to take? If I'm offering you at the moment $AUD10,000?
It was a common theme of Mr Amsalem's engagement with a number of the EFX30 complainants that he told them: that AFCA took a long time to deal with complaints; that if the customer pursued their complaint with ASIC or AFCA the complainant would lose the goodwill that he or she had with Mr Amsalem; that EuropeFX could refuse to accept AFCA's findings; and that the customer would then have to resort to the legal process. Similarly, Mr Amsalem also frequently dissuaded EFX30 complainants from consulting lawyers. For example, after assuring Mr Cartwright that he would investigate his complaint, Mr Amsalem said: My job as head of the dispute resolution here to end this matter obviously. And of course, if you - I will not - I will not persuade it otherwise, but you are more than welcome - if my - my audit or my solution is not to your satisfaction you're more than welcome to take it further. But once you take it further, basically, you - you are you know, ugly. When the lawyer takes place, you know, end of story. Whatever sentiment and goodwill that I might, again, I cannot guarantee it… … … in cases like that, listen. I mean you - you spoke about legal advice or take legal action. You're more than welcome. But, if I can give you a friendly tip, those lawyers are - they will drive you. They will drive you and it could take years in court… and they ask a commission of 30 percent of what you get. So any - any settlement that I might be able to reach. Okay? I mean keep it 100 percent to yourself. Don't - I mean do you understand what I'm saying? I mean you communicate with people. Do you know … lawyers are taking advantage of - of your losses?
All the EFX8, other than Mr Kalusinghe, gave evidence concerning similar discussions they had with Mr Amsalem. In Mr Kalusinghe's case, he was similarly discouraged from pursuing his complaint with ASIC by Michelle, who was said to be a compliance manager at EuropeFX.
Third, having told the customer that EuropeFX had effectively found that their complaint had no merit, and having actively dissuaded the customer from lodging or pursuing a complaint with ASIC, AFCA or any other regulator, or from consulting their own lawyers, EuropeFX generally offered to settle the complaint by making a payment that reflected only a small portion of the losses that they had suffered. That payment was frequently referred to as a "gesture of goodwill" that was made without any admission of wrongdoing. The customers were also usually required to sign a deed of release which released EuropeFX from any claims relating to the dispute and required the customer to keep the settlement confidential and not disparage EuropeFX. The practical result was that the customer could not lodge or pursue any complaint with any regulator.
ASIC did not rely solely on the evidence of or relating to the EFX8, or the evidence relating to the EFX22, in support of its contention that EuropeFX had an unfair complaints resolution process. It tendered and relied on EuropeFX's own business records in relation to over 250 complaints, many of which were consistent with the pattern of behaviour revealed by the evidence concerning the complaints lodged by the EFX8 and EFX22.
One significant presentation document concerning EuropeFX's complaint handling strategy refers to "prevention tactics" which include an "alert system" the purpose of which is said to be to "isolate potential problematic exchanges with client which could led to an undesired escalation". That document also identifies the "parameters" of the "compensation decision" as including "regulatory audit exposure" and the "level of regulatory enforcement". The "challenges" were said to include "AFCA time frames" and the fact that the "average Australian knows their rights and understands the law". The presentation also refers to the difference between EuropeFX's exposure to its customers and the compensation which it paid to them as an amount "saved" by EuropeFX.
I am satisfied from the evidence as a whole that the experiences of the EFX30 in respect of EuropeFX's complaints handling system are indicative of a pattern of behaviour and system of conduct that applied generally to EuropeFX's customers who lodged complaints. That pattern of behaviour and system was unfair in material respects.
It may of course be accepted that a company such as EuropeFX was free and entitled to negotiate the settlement of disputes and in making offers which advance its own commercial interests. The evidence, however, revealed a pattern of behaviour on the part of Mr Amsalem and EuropeFX more generally which involved the use of coercive and misleading statements and the exertion of pressure on people who, by virtue of having lost money, often large amounts of money, were in a vulnerable and often in a precarious state. I accept ASIC's contention that the evidence revealed that EuropeFX's complaints resolution process was unfair and systemically so.

[226]

Section 12CC ASIC Act considerations

The parties' submissions did not specifically advert to the s 12CC ASIC Act considerations in relation to ASIC's case that EuropeFX engaged in systemic unconscionability. That is perhaps understandable given that few if any of those considerations have any direct application to ASIC's systemic unconscionability case. I should, however, briefly note that the following considerations identified in s 12CC(1)(a), (c) and (d) perhaps have some relevance, at least by analogy.
As for s 12CC(1)(a), for the reasons already given, the likely and natural consequences of EuropeFX's advertising and onboarding systems or practices was that many, if not most, of EuropeFX's customers came to it without any prior relevant knowledge or experience in respect of the complex financial services which it provided. It could perhaps be said in those circumstances that the customers had little or no real bargaining power or strength as compared to EuropeFX when it came to their engagement with EuropeFX.
As for s 12CC(1)(c), a likely and natural consequence of EuropeFX's onboarding system or pattern of behaviour was that prospective customers were not encouraged to read, or worse still were misled or dissuaded from reading, important documentation, including EuropeFX's PDS and Terms of Business. In any event, given that most of the prospective customers had no prior relevant knowledge or experience in respect of the financial services provided by EuropeFX, it is at best questionable that the customers would have been able to readily comprehend or understand the contents of the PDS or Terms of Business.
Finally, and perhaps most significantly, as for s 12CC(1)(d), for the reasons already given, I have found that the evidence indicates that there was a pattern or behaviour or system of conduct at EuropeFX which included EuropeFX account managers regularly and routinely exerting undue influence and pressure on the customers to trade and deposit more and more money into their trading accounts. That undue influence and pressure was the likely and natural consequence of the terms and conditions upon which account managers were remunerated and EuropeFX derived its revenue. In short, the more the customer deposited and lost as a result of their trading, the more the account managers and EuropeFX earnt.

[227]

EuropeFX's submissions

Most of EuropeFX's submissions concerning aspects of ASIC's systemic unconscionability case have already been considered in the context of the various factual findings that I have made. It remains to briefly address some of the miscellaneous submissions advanced by EuropeFX that have not yet been squarely addressed.
EuropeFX submitted that it was relevant to have regard to the relevant regulatory framework, and in particular s 912A of the Corporations Act, which obliges the holder of an AFSL to do certain things, take certain steps and comply with various obligations. In EuropeFX's submission, it followed that USG, as the holder of the relevant AFSL, was responsible in law for many aspects of the conduct upon which ASIC relied.
It may be accepted, as a general proposition, that USG may be liable as a result of some aspects of EuropeFX's conduct. USG liability is considered separately in these reasons. The fact that USG may also be liable, however, does not somehow absolve EuropeFX of responsibility for contravening conduct on its part, including systemic unconscionable conduct.
EuropeFX appeared to submit, in this context, that ASIC somehow bore the burden of proving that EuropeFX did not rely on USG to provide for the training of its staff, or to provide appropriate dispute resolution. I reject that submission. If EuropeFX contended that its systems of conduct or patterns of behaviour were not unconscionable because it relied on USG to do certain things, it bore at least an evidentiary onus or burden of establishing that it in fact so relied on USG. EuropeFX failed to discharge that evidentiary burden. I was not taken to any evidence which was capable of supporting any inference that EuropeFX relied on USG in respect of the training of the sales representatives and account managers who acted on its behalf.
EuropeFX chose to outsource effectively all its day-to-day business functions to various overseas companies. It engaged XYX, a company based in Israel, to, it may be inferred, provide account management services on its behalf. It ultimately bore the responsibility of ensuring that the account managers retained by XYX to provide services on its behalf were appropriately trained and supervised. For the reasons already given, the overwhelming inference is that EuropeFX failed to discharge that responsibility. It is somewhat fanciful to suggest that it relied on, or could reasonably rely on, USG to train the account managers that were retained by XYX. That is particularly so in circumstances where it was EuropeFX that chose to outsource that aspect of the conduct of its business to a company based on the other side of the world. There was also documentary evidence that USG did raise issues with EuropeFX in respect of the misconduct of the account managers. That evidence was referred to earlier. The available inference is that EuropeFX effectively ignored USG's entreaties and did little if anything to rein in the inappropriate misconduct of the account managers who were acting on its behalf.
As for dispute resolution, as discussed earlier, the evidence as a whole indicated that EuropeFX had its own internal dispute resolution process. For the reasons given earlier, there were elements of that process which were unfair. There is no evidence to suggest that EuropeFX relied in any meaningful respect on USG in that regard. Indeed, there was documentary evidence, in the form of communications between Mr Martin, on behalf of USG, and Mr Amsalem, on behalf of EuropeFX, that tended to support the inference that EuropeFX assumed or asserted its responsibility in respect the resolution of complaints by its customers to the exclusion of USG.
EuropeFX submitted that the fact that its customers, and in particular the EFX30, lost money trading with it, was not conclusive. That may be so, though the fact that its customers, including the EFX30, lost money, is relevant, particularly in circumstances where its systems of conduct and patterns of behaviour were such that it was plainly foreseeable that its customers would lose money.
EuropeFX also relied on the evidence of Mr Greene, who produced a spreadsheet which indicated that, on average, the EFX8 (and Ms Battersby) made a larger percentage of profitable trades than unprofitable trades. In my view, however, that analysis is of little, if any, relevance or significance. Mr Blundell agreed, in cross-examination, with the general proposition that the "overall profitability of an account is ultimately more important than each of the individual trades". The total value of the individual profitable trades of each of the EFX30 was far outweighed by the total value of the unprofitable trades. Every one of the EFX30 ultimately lost most of the money that they had deposited.
It should also be noted in this context that many of the profitable trades by the EFX8 were small trades which were made by them on the recommendation of their EuropeFX account manager in the early stages of their trading. The fact that those trades may have been profitable says nothing whatsoever about whether the EFX8 were able to trade effectively and profitably. They were in effect just doing what the account managers told them to do. In any event, those small profitable trades were soon swamped by much larger unprofitable trades.
The evidence concerning the conduct of the EuropeFX account managers also indicated that the account managers frequently directed their customers to employ a hedging strategy pursuant to which they would open buy and sell positions in respect of a CFD or Margin FX Contract at the same time. The account manager would then tell the customer to close and then reopen the positions that had become profitable as a result of price movements, but leave open the positions that had correspondingly become unprofitable until that position recovered or returned to profit. The problem with that strategy, however, was that the unprofitable position did not necessarily recover, at least in the short term, meaning that the unprofitable positions often remained open for long periods before they were ultimately closed, often automatically, and incurred large losses - as well as large swap fees. The result was the large number of trades that resulted in small gains were completely eclipsed by the unprofitable trades which, while smaller in number, incurred heavy losses.
It is also relevant to note, in this context, Mr Blundell's evidence concerning the likelihood and foreseeability that inexperienced customers, like the EFX8, would incur losses from trading in CFDs and Margin FX Contracts. His evidence included the following: Over any given trading period a client will experience periods when they make a profit but also suffer a loss. It is the lack of understanding of how losing positions need to maintain a minimum margin level to remain open which leads to inexperienced clients depositing, and in turn losing additional funds. I have seen numerous occasions where these inexperienced clients have a losing position that keeps moving against them, they continually deposit funds to be used as margin to keep the losing position open. On rare occasions I have seen inexperienced traders recover their losses and return to a profitable position. However, I have rarely seen such traders make a profit over the entire course of their trading. Typically, I see those clients open new positions which lose money, and the client deposits funds to feed these positions until they have no more funds to deposit, at which time the positions are forcibly liquidated and the client has lost a significant amount of money. It is for this reason that in my experience over the past seven years being involved with CFDs and margin FX that I am firmly of the opinion that inexperienced traders are more likely than not to see greater returns over the course of a year by depositing funds in an ADI than by trading leveraged products.
The circumstances in which inexperienced traders almost inevitably incur losses, as described by Mr Blundell, essentially matched the circumstances in which the EFX8 ultimately incurred substantial losses. The one difference is that the losses incurred by the EFX8 arose not just a product of their inexperience and lack of relevant knowledge, though that was no doubt a significant element. The losses incurred by them were also to a certain extent the product of the recommendations and trading strategies that EuropeFX account managers told them to employ.
EuropeFX also raised a number of pleading quibbles concerning ASIC's case of systemic unconscionability. I have already addressed one of those quibbles. I do not propose to address the others other than to note that I consider them to be entirely unmeritorious.

[229]

UNCONSCIONABLE CONDUCT BY EUROPEFX TOWARDS THE EFX8

ASIC alleged that EuropeFX engaged in conduct that was, in all the circumstances, unconscionable in connection with the supply, or possible supply of financial services (the provision of financial product advice and dealing in CFDs and Margin FX Contracts) to each of the 30 identified EuropeFX customers (that is, the EFX30). It alleged that there was a separate contravention of s 12CB of the ASIC Act by EuropeFX in respect of each of the 30 identified customers.
As has already been noted, however, ASIC ultimately narrowed its unconscionability case in respect of the individual customers. Its final position was that if the Court accepted its case in respect of systemic unconscionability and found that EuropeFX had engaged in unconscionable conduct by virtue of its system of conduct or pattern of behaviour in respect of its customers generally, it did not press or require the Court to determine and make findings as to whether EuropeFX engaged in unconscionable conduct in respect of each of the EFX30 individually. It did, however, "ask" the Court to make findings in that regard in respect of each of the EFX8. I interpreted the effect of that submission to be that, while the Court was not bound to make findings in relation to each of the EFX8, the Court could and should proceed to make such findings if it considered that to be appropriate in all the circumstances.
I have determined that it is appropriate for me to consider and determine ASIC's case that EuropeFX engaged in unconscionable conduct towards or in respect of the identified customers, but only in respect of the EFX8 and not in respect of the EFX22.
I consider that it is appropriate to consider the individual circumstances of the EFX8 given that they each gave evidence and were cross-examined at length concerning their engagement and experiences with EuropeFX. I am also persuaded that there is potential utility in determining whether EuropeFX engaged in unconscionable conduct towards or in respect of the EFX8 because it may have an impact on any penalty imposed on EuropeFX in relation to its contravention of s 12CB of the ASIC Act. That is because there is a possible divergence in the authorities about whether a finding of systemic unconscionability is capable of attracting a penalty which exceeds the maximum penalty prescribed for contraventions of that provision: see Australian Securities and Investments Commission v Forex Capital Trading Pty Ltd [2021] FCA 570 at [125]-[133].
I see less utility in making separate findings in respect of the EFX22. Whichever way I may ultimately determine the issue concerning the maximum penalty for a systemic contravention of s 12CB of the ASIC Act, I doubt whether additional individual findings of unconscionability in respect of the EFX22, if made, would have any significant or material impact on the overall penalty imposed on EuropeFX. I also doubt whether proceeding to determine whether there were a further 22 instances of individual unconscionable conduct would be an efficient use of the Court's resources given the finding of systemic unconscionability that has been made and the voluminous evidence that was tendered in respect of the EFX22. I also consider that it is of some relevance that the EFX22 did not give evidence in this proceeding. It would, in those circumstances, be necessary to determine the question whether EuropeFX's conduct towards or in respect of those 22 customers entirely on the basis of documentary evidence. While I do not go so far as to say that the absence of direct evidence from those 22 customers somehow precludes the Court from determining ASIC's case of unconscionable conduct in relation to them, it is a factor that militates against taking that step in light of the finding of systemic unconscionability.

[230]

Outline of ASIC's case in respect of unconscionable conduct towards the EFX8

ASIC's case was, in summary, that EuropeFX's conduct in connection with the trading by each of the EFX30 was unconscionable because that conduct had certain features or characteristics which, particularly when considered cumulatively, meant that the conduct fell well outside the norms of acceptable commercial behaviour. ASIC gave those features or characteristics various shorthand descriptions or labels. It produced a detailed schedule (Annexure E.1 to the SOC) which applied those labels to a very lengthy list of identified conduct in respect of each of the EFX30. The identified conduct mostly occurred in, or was evidenced by, the recorded telephone exchanges between the customers and EuropeFX representatives. The following discussion will focus only on the conduct relating specifically to the EFX8 because, as I have already noted, I will only be addressing and making specific findings concerning ASIC's case in respect of the conduct directed towards the EFX8.
Most of the categories or indicia of unconscionable conduct relied on by ASIC in respect of its case concerning the individual customers have already been discussed in the context of the consideration of ASIC's case that EuropeFX engaged in systemic unconscionability. They nevertheless bear repeating. The 18 categories or indicia of unconscionability in respect of each of the EFX8 may be summarised as follows.
First, EuropeFX representatives gave personal advice to each of the EFX8 in circumstances where EuropeFX, as USG's CAR, was only authorised to give general advice. Findings have already been made in respect of some of the alleged instances of the provision of personal advice to the EFX8.
Second, EuropeFX representatives made numerous false, misleading or deceptive representations to each of the EFX8 in the course of their dealings with them. Findings have already been made in respect of some of the alleged false, misleading or deceptive representations made to the EFX8.
Third, EuropeFX representatives failed to provide any, or any adequate explanations, to each of the EFX8 in respect of the risks involved in trading in CFDs and Margin FX Contracts.
Fourth, each of the EFX8 customers was vulnerable or at a disadvantage because: most of them had very low financial literacy; they were inexperienced in trading in CFDs, Margin FX Contracts or other derivatives; they lacked any real understanding of complex financial products, particularly leveraged derivatives, and their associated risks; they had relatively low levels of income; and they were heavily reliant on the advice and recommendations of EuropeFX representatives in respect of their trading activities. ASIC alleged that EuropeFX knew, or ought reasonably to have known that its customers were vulnerable and disadvantaged in those respects.
Fifth, EuropeFX or its representatives failed to take reasonable steps to ensure that each of the EFX8 understood the complex financial products which they advised or encouraged them to trade in and their associated risks.
Sixth, EuropeFX representatives placed pressure on each of the EFX8 to deposit or invest further funds in their trading accounts, or to open, close or leave open CFD or Margin FX Contract positions. That pressure was exerted by, among other things, requiring or advising the customers to act quickly to take advantage of supposed profit opportunities and by engaging in multiple lengthy telephone conversations.
Seventh, EuropeFX representatives induced each of the EFX8 to make larger deposits to their trading accounts by, among other things, telling them that they would gain access to "premium packages" or "VIP departments" that were said have certain advantages, or that they would get discounts on charges or fees. Those inducements were often offered in circumstances where the customers had already incurred losses, or were incurring losses, and had expressed a desire to close a position, or withdraw funds, or close their account. The supposed benefits were also contingent on the customer depositing further funds.
Eighth, EuropeFX representatives on occasion facilitated the transfer of funds from the bank accounts of each of the EFX8 in circumstances where the representative sought and obtained remote viewing of the customer's computer and it was therefore possibly able to identify the customer's available funds for deposit into their EuropeFX trading account.
Ninth, EuropeFX representatives advised each of the EFX8 to engage in unfair trading strategies in circumstances where the representative knew, or ought reasonably to have known, that the strategies were not in the customer's financial interests, or in circumstances where the strategies were calculated to limit profits or result in losses. The risky strategies that were the subject of advice included: opening a large number of positions, or positions at a high volume, including in circumstances where the representative was subsequently unable to be contacted to provide advice in respect of those positions for an extended period; leaving open positions that had moved adversely to the customer; depositing further funds to the customer's trading account to avoid an open position being automatically closed, even where the position had moved adversely to the customer; depositing further funds to the customer's trading account to support a position that had moved adversely, and then opening further positions; depositing further funds, after losses had been incurred, so as to recover those losses; opening both long and short positions in respect of the same currency, index, share or commodity; and advising customers not to use stop losses.
Tenth, EuropeFX or its representatives imposed or caused unreasonable impediments or delays to each of the EFX8 in respect of the withdrawal of money from their trading accounts, or encouraged the customers to cancel withdrawals.
Eleventh, EuropeFX or its representatives imposed or caused unreasonable impediments or delays to each of the EFX8 in respect of the closure of open CFD or Margin FX Contract positions.
Twelfth, EuropeFX representatives encouraged each of the EFX8 to rely on them, mainly by telling them that they would sustain losses or miss opportunities if they did not follow the representative's suggestions or directions, or that they had sustained losses or missed opportunities because they had not followed the representative's suggestions or directions.
Thirteenth, EuropeFX representatives either encouraged the EFX8 to deposit money into their EuropeFX trading account in circumstances where they knew that the customer would borrow the money, use money from their superannuation, or use money from their remaining savings, or knew that the customer had deposited money from those sources.
Fourteenth, EuropeFX representatives encouraged each of the EFX8 to continue to trade, or knew that they would continue to trade, in circumstances where the representative knew that the customer's trading had negative impacts on them, including loss of sleep, loss of weight, sickness, stress, and relationship issues.
Fifteenth, EuropeFX representatives encouraged the EFX8 customers who had large losses on open positions, and therefore low equity in their trading account, to continue to trade by telling them that the customer had either not lost money, or had made a profit at that point, in circumstances where that was only the case because the losses from the open positions would not crystalise unless or until they were closed.
Sixteenth, when each of the EFX8 lodged complaints about the conduct of the EuropeFX representatives with whom they had dealt, EuropeFX representatives, including those who identified themselves as being part of EuropeFX's "Client Relations Department": encouraged customers not to report their complaint to ASIC or AFCA; endeavoured to persuade the customers not to pursue complaints that they had lodged with ASIC or AFCA; dissuaded the customers from taking legal action; told the customers that the EuropeFX representative had not engaged in any wrongdoing, or that the responsibility for the customer's losses lay with the customer; or suggested that entering into a settlement agreement with EuropeFX was the only real option that the customer had to recover any portion of their losses.
Seventeenth, EuropeFX encouraged prospective customers, including some of the EFX8, to open a trading account with EuropeFX by, among other things, relying on misleading promotions that referred to a supposed automatic trading programme in Bitcoin, or otherwise misrepresenting or mischaracterising the financial services or financial products provided by EuropeFX, or the level of involvement, experience and comprehension required of a customer in relation to trading in those products, or the risks associated with those services or products.
Eighteenth, EuropeFX failed to maintain and apply adequate minimum qualification criteria that prospective customers would need to demonstrate before it agreed to open a trading account on their behalf.
ASIC did not allege that any of the individual 18 categories or indicia of unconscionability, considered alone or in isolation, was sufficient to establish that EuropeFX's conduct towards any of the EFX8 customers was unconscionable. Rather, its case was that the combined or cumulative effect of the indicia in respect of each customer established that the conduct was unconscionable.
As will soon become apparent, I do not propose to address ASIC's case precisely in accordance with those 18 categories of unconscionability, though I will address most if not all of them in one way or another. I also do not propose to address each and every one of the many hundreds of examples of those categories of unconscionability particularised in Annexure E.1 to the SOC. The categories of unconscionability and the particulars in Annexure E.1 are useful tools in considering whether EuropeFX engaged in conduct towards each of the EFX8 which was, in all the circumstances, unconscionable. I doubt, however, that allegations of unconscionability are properly or usefully approached by ticking off alleged indicia of unconscionability listed on a lengthy schedule. What needs to be addressed is the overall nature and effect of EuropeFX's conduct towards each of the EFX8.

[231]

Outline of EuropeFX's defence or case in response

As already indicated, EuropeFX denied that it engaged in any unconscionable conduct towards or in respect of any of the EFX8 and contended that ASIC had failed to prove that it had. At a broad or general level, it contended that the following factors or considerations indicated that it had not engaged in any unconscionable conduct.
First, it contended that there was no disparity of bargaining position as between EuropeFX and its customers. According to EuropeFX, the customers were free to choose to trade or not to trade at their discretion.
Second, EuropeFX maintained that each of the customers had available to them a wide range of relevant information. That included EuropeFX's PDS, Financial Services Guide and Terms of Business and a "suite of information relating to CFDs" which was accessible from the EuropeFX website. EuropeFX's case was that the customers each represented to EuropeFX that they had read the PDS and Terms of Business and EuropeFX was entitled to rely on those representations.
Third, in EuropeFX's submission, all financial investments come with risk and the inherent risk of investing was well-known to all investors, including the EFX8.
Fourth, EuropeFX contended that its representatives did not engage in any "personal contact" with the customers and the customers were not subject to the "pressure of any face-to-face marketing or promotional tactics". The communications between the representatives and the customers were by telephone or email and, according to EuropeFX, the customers were "always free to discontinue the communication".
Fifth, the customers, including the EFX8, were said to be in control of their "tools of trading", in particular the MT4 interface, which was available from the customer's own computer or smartphone. According to EuropeFX, the customer could also trade at a time or place of their convenience and could choose whether and when to trade.
Sixth, EuropeFX maintained that none of the EFX8 had been shown to be vulnerable or disadvantaged. Moreover, to the extent that any of the EFX8 was vulnerable, that vulnerability was, according to EuropeFX, not reasonably foreseeable to it.
Seventh, EuropeFX contended that it took appropriate and reasonable steps to ensure that each of the EFX8 understood CFDs and Margin FX Contracts and their associated risks because it provided them with the EuropeFX Documents - in particular, its PDS and Terms of Business. The customers were also said to be the "ultimate decision makers of the executed trades".
Eighth, EuropeFX submitted that ASIC's allegation that EuropeFX representatives pressured the EFX8 to invest, needed to be viewed in the context that trading with it was a "discretionary venture". In EuropeFX's submission, many of ASIC's allegations concerning unfair pressure amounted to "no more than the [representative] pointing out the margin requirements" and "the opportunities to trade…on the assumption that [the customer] actually wanted to trade. EuropeFX also asserted that some allowance should be made for the fact that the representatives were "salespeople" versed in the language of sales.
Ninth, EuropeFX maintained that the promotions that EuropeFX offered its customers, including the EFX8, were not unfair and their benefits were not "illusory" as ASIC contended.
Tenth, EuropeFX did not dispute that its representatives asked customers, including the EFX8, to install software which enabled the representatives to remotely access the customer's computer and to view the customer's account balance. It contended, however, that ASIC had failed to allege or prove that the representatives lied when they told the customers that they would minimise the remote viewing software, or turn away, when the customer was accessing their bank details.
Eleventh, EuropeFX denied that it provided its customers, including the EFX8, with any unfair trading strategies and submitted that ASIC's allegations in that regard were based on a "fanciful and simplistic view of trading experiences". It was, for example, said to be wrong to suggest that a CFD trader should close an open position whenever the trade starts to "bear an unrealised loss" and that the question whether a trade carrying an unrealised loss should be closed or not depends on all the circumstances, including the customer's trading strategies.
Twelfth, in relation to the allegation that EuropeFX representatives caused unreasonable impediments in relation to the withdrawal of funds from a customer's trading account, EuropeFX pointed out that its website "clearly recorded its position on withdrawal of money". Some of ASIC's examples were also said to be not unusual and indicated no more than the representative was having a discussion with the customer "as to whether they wish to react emotionally to losses by quitting trading, or whether they wished to reflect upon their experiences and to stay the course".
Thirteenth, according to EuropeFX, its representatives did not encourage reliance, as alleged by ASIC, but rather were "endeavouring to provide helpful client service". The customers were also said to be aware that the representatives were not "on call 24 hours a day, nor 7 days a week" and the customers could not reasonably expect the representatives to be always "holding their hands".
Fourteenth, as for ASIC's allegation that representatives encouraged the use of funds obtained from inappropriate sources, EuropeFX contended that it was open to the representatives to inform the customers about "all available means for them to obtain funding to continue to trade". Customers were also said to be routinely informed that superannuation accounts were not accepted.
Fifteenth, according to EuropeFX, each conversation that ASIC alleged constituted the encouragement of trading where the client had suffered negative impacts of trading had to be read in its full context. Many of the instances relied on by ASIC were said to involve "fleeting reference[s]" by the customer over the course of a large number of conversations. Many also occurred "a considerable way into the investor's trading" and in circumstances where the customer had indicated that they wanted to continue to trade.
Sixteenth, as for ASIC's allegations concerning the encouragement of trading by reference to the customer's trading balance, EuropeFX agreed that it was not unusual for representatives to refer to the customer's trading balance, but submitted that the "simple, innocent explanation" was that calculations of available equity and available margin must necessarily have regard to the trading account balance.
Seventeenth, EuropeFX maintained that it had an effective internal dispute resolution process. According to it, the complaints were "attended to and investigated" and it was open to EuropeFX to make compensation payments to complainants on a no admissions basis.
Eighteenth, as for ASIC's allegations concerning promotions or representations referring to Bitcoin automatic trading, EuropeFX submitted that the evidence did not establish that the majority of its customers "came to" EuropeFX as a result of internet advertisements or marketing which referred to Bitcoin automatic trading. In any event, EuropeFX contended that it did offer clients the option of trading in Bitcoin CFDs, with the added "optionality of auto-trading".
Nineteenth, there was said to be no "binding rule" that EuropeFX was required to maintain and apply adequate minimum qualification criteria that prospective customers would need to demonstrate before it agreed to open a trading account on their behalf.
EuropeFX also provided detailed submissions, including detailed responses to ASIC's schedule, in relation to ASIC's individual allegations concerning the indicia of unconscionability in respect of each of the EFX8.

[232]

Some general observations

I have already summarised the evidence of the EFX8 and made various findings concerning their individual circumstances and the conduct of EuropeFX account managers towards them. That allows me to be relatively brief in considering and determining whether EuropeFX engaged in unconscionable conduct towards or in respect of each of the EFX8. So too does the fact that, as discussed at length earlier, the conduct of the various EuropeFX account managers who dealt with the EFX8 and the experiences of each of the EFX8 was in many respects very similar.
My assessment of the evidence of and relating to each of the EFX8 is that the combination or cumulative effect of some or all of the following facts and circumstances support the conclusion that EuropeFX's conduct towards or in respect of each of those customers was unconscionable in all the circumstances: first, each of the EFX8 was relevantly vulnerable in respect of their dealings with EuropeFX, primarily as a result of their lack of experience and knowledge; second, EuropeFX failed to take any, or any reasonable, steps to ensure that each of the EFX8 had a sufficient understanding of the relevant financial services and products and the risks of trading before actively encouraging them to trade; third, EuropeFX account managers repeatedly gave each of the EFX8 personal advice in circumstances where they knew they were not permitted to do so; fourth, EuropeFX account managers made misleading representations to, or engaged in misleading or deceptive conduct towards, each of the EFX8, other than Ms Nikiforos; fifth, EuropeFX account managers fostered and encouraged the EFX8 to rely on them and follow their recommendations, often blindly so; sixth, EuropeFX account managers pressured each of the EFX8 to trade and deposit more and more funds into their trading accounts, sometimes by employing unfair tactics and promotions; seventh, EuropeFX account managers encouraged some of the EFX8 to engage in some risky trading strategies and on occasion gave them other highly questionable advice; and eighth, EuropeFX representatives engaged in other unfair conduct towards the EFX8, including persuading them not to withdraw funds, or impeding them from withdrawing funds, from their trading accounts and dealing unfairly with their complaints.
I have already addressed some of EuropeFX's contentions and submissions concerning the EFX8 when I considered their evidence earlier in these reasons. I will also briefly address some of those contentions and submissions later when I explain my findings in respect of each of the EFX8 individually. In general, however, I reject the submission as outlined earlier as not being supported by, or in most instances being contrary to, the evidence. In particular, I reject the following contentions or submissions advanced by EuropeFX: first, that the EFX8 were not relevantly vulnerable, or that there was no relevant disparities in bargaining positions; second, that EuropeFX account managers did not encourage the EFX8 to rely on them, and did not actively encourage and pressure the EFX8 to trade and deposit more funds into their trading accounts; third, the account managers took reasonable steps to ensure that the EFX8 adequately understood the relevant financial products and the risks of trading in them; fourth, the EFX8 were not advised to engage in risky or inappropriate trading strategies; fifth, the EFX8 were willing participants in the market who were able to and did trade independently; sixth, the EFX8 were not relevantly impeded or dissuaded from withdrawing funds from their trading account; and seventh, EuropeFX had a fair and effective dispute resolution process. In my view, those contentions or submissions were unsupported by and in most case contrary to the evidence.
The end result of EuropeFX's conduct towards or in respect of each of the EFX8 was effectively the same. Each of the EFX8 lost not insubstantial amounts of money as a result of their trading with EuropeFX. Those losses were not mere trading losses. They were losses that were largely the result of unconscionable conduct on the part of EuropeFX and its representatives.
The following summary of my findings concerning each of the EFX8 draws heavily on my earlier discussion and consideration of the evidence of and concerning each of the EFX8 and the findings that I made in that context. I have endeavoured to avoid repetition. I have also focussed on what I consider to be the main elements of EuropeFX's conduct which compel the finding that it engaged in conduct in connection with the supply of financial services to each of the EFX8 which was, in all the circumstances, unconscionable. I have also endeavoured to address the main submissions that were advanced by EuropeFX in respect of the EFX8, though as noted previously, the length and prolixity of the written submissions (and multiple annexures) was such that it was impossible and impractical to specifically respond to each and every submission that may have been made. In general, I consider that most of the submissions advanced by EuropeFX in respect of the circumstances and experiences of each of the EFX8 were entirely unrealistic and based on isolated extracts from the evidence of the witnesses and the various transcripts which, when read in context, do not fairly reflect the evidence as a whole.

[234]

Vulnerability

While Mr Wilson may have been an intelligent, educated and articulate person generally, he was nevertheless vulnerable in his dealings with EuropeFX. That is because, prior to his engagement with EuropeFX, he had no prior knowledge of or experience in respect of CFDs, Margin FX Contracts or like products. He had very little, if any, relevant experience with financial markets or trading in complex financial products. His evidence, which I accept, was that he was contacted by EuropeFX after clicking on a social media advertisement or promotion in respect of Bitcoin or other cryptocurrency trading. He did not approach EuropeFX with the intention of trading in CFDs or Margin FX Contracts. He did not even know what those products were.
Mr Wilson's vulnerability in this regard was also readily foreseeable by EuropeFX. His lack of relevant knowledge and experience was apparent from the account opening questionnaire that was completed on his behalf. In any event, it would have been obvious to the EuropeFX account manager who first spoke with Mr Wilson after his account was opened. The evidence concerning the first conversation between Mr Wilson and a EuropeFX account manager was referred to in details earlier in these reasons.
EuropeFX submitted that Mr Wilson was not a vulnerable consumer, or at a disadvantage in his dealings with EuropeFX, because he was financially secure, in secure employment on a decent wage, owned a property and had a mortgage. I reject that submission. Accepting, for present purposes that he was all those things, it does not follow that he was not relevantly vulnerable. He was relevantly vulnerable because, to put it in simple terms, he had no idea what he was getting himself into in his dealings with EuropeFX. The fact that he was employed as a geotechnical technician and may have earned a decent wage as a fly-in-fly-out employee in remote Western Australia, says nothing about his knowledge or experience in respect of complex financial products and the trading therein. The same can be said in respect of the fact that he owned a property and had a mortgage.
EuropeFX submitted that it was not foreseeable to it that Mr Wilson had no prior experience in CFDs and Margin FX Contracts because Mr Wilson represented in the questionnaire that he had some experience with "OTC forex exchange", that he had completed a quiz and that he represented in the questionnaire that he had had read EuropeFX's PDS and Terms of Business. I reject that submission.
Mr Wilson's evidence, which I accept, is that he did not complete the questionnaire himself. He spoke to someone representing EuropeFX on the telephone who appears to have completed the questionnaire on Mr Wilson's behalf. Mr Wilson's evidence was that he did not in fact have any experience in respect of "OTC forex exchange." Indeed, he did not even know what that term or expression meant. The available inference is that the person who completed the questionnaire either misrepresented Mr Wilson's position or simply made a mistake. It must also have been apparent to the EuropeFX representative who spoke with Mr Wilson and completed the questionnaire over the telephone that Mr Wilson was unlikely to have read, or to have closely read and understood, the PDS or Terms of Business at that time. In any event, in the circumstances of this case, it was not sufficient for EuropeFX to rely on the fact that boxes ticked in the questionnaire supposedly recorded that Mr Wilson had read and understood the PDS and Terms of Business.
I would conclude that EuropeFX onboarded Mr Wilson and permitted him to open an account and begin trading in circumstances where it knew or had reason to believe that he had no prior relevant knowledge or experience in respect of trading in the type of risky leveraged derivatives offered by EuropeFX. Indeed, I would go so far as to infer that EuropeFX encouraged Mr Wilson to open an account despite his lack of relevant knowledge and experience. At the very least, EuropeFX was undiscriminating in that regard, in the sense that it did not care whether Mr Wilson was ignorant or inexperienced. It accordingly failed to employ the sort of onboarding process that, in Mr Blundell's opinion, a corporate authorised representative acting reasonably would have employed.

[238]

Pressure to invest and deposit, encouraging reliance and unfair inducements

Given his lack of any prior relevant knowledge or trading experience, Mr Wilson relied heavily on his EuropeFX account manager. The account manager was plainly aware of and fostered Mr Wilson's reliance and gave Mr Wilson regular and frequent trading recommendations. Those recommendations were supposedly based on information on third-party information provider websites. The account manager also on occasion pressured Mr Wilson to trade. The evidence in that regard was discussed in detail earlier. It is unnecessary to refer to that evidence again. I accept Mr Wilson's evidence that he felt that he was pressured to trade. The account manager also sought to induce Mr Wilson to deposit more money into his trading account by offering "packages" based on the amount of money a customer had deposited in their account. The account manager also on occasion pressured Mr Wilson to deposit more money into his trading account.
I reject EuropeFX's submission that Mr Wilson was not subjected to any pressure or undue influence. I am satisfied from the evidence concerning Mr Wilson, considered fairly and as a whole, that he was subject to undue influence and pressure. That undue influence and pressure ultimately resulted in Mr Wilson depositing and losing more money than he would otherwise have deposited and lost.
The EuropeFX account manager who mainly dealt with Mr Wilson also encouraged him to adopt a trading strategy referred to as double direction trading. While that may be a legitimate trading strategy in some circumstances, I am satisfied it was not an appropriate strategy for an unknowledgeable and inexperienced trader, as Mr Wilson was. Moreover, I am satisfied that the account manager did not adequately explain the strategy or its risks to Mr Wilson. Mr Wilson was, as he told his account manager, "going in blind". It was Mr Wilson's attempt to follow the trading strategy recommended by his account manager that ultimately led to his undoing - or rather, the undoing of his account.
Overall, I reject EuropeFX's submission that Mr Wilson was a "willing participant in the market" in any meaningful sense. He did not have any real understanding of the market in which he was supposedly a willing participant and was basically doing what he was told or at times pressured to do. I also reject EuropeFX's submission that Mr Wilson traded independently in any meaningful sense. He may have opened or closed some positions while he was not on the telephone with his account manager, but in those instances he was merely trying to do what his account manager had directed him to do.

[243]

Vulnerability

At the time she came to engage with EuropeFX, Ms Love had no relevant knowledge or trading experience in securities, options, commodities, futures, CFDs or foreign exchange. She had had some prior involvement with stocks and shares, but told a EuropeFX representative that she did not know much about trading in shares or stocks. While I accept that Ms Love was an intelligent woman who had been successful in her chosen occupation, she knew next to nothing about financial markets and had no real or sound understanding about complex financial products like CFDs and Margin FX Contracts. In my view, that made her relevantly vulnerable in the context of her dealing with EuropeFX.
Ms Love's vulnerability was also readily foreseeable by EuropeFX. Ms Love told the representative who onboarded her on behalf of EuropeFX that she had no relevant knowledge or experience in respect of CFDs. Despite that, she was encouraged to open a trading account on the promise that a EuropeFX account manager would be "holding [her] hand". The representative also rushed Ms Love through the onboarding questionnaire and told her to tick boxes indicating that she had read disclosures or documents when the representative plainly knew or had reason to believe that she had not done so. The person onboarding Ms Love on behalf of EuropeFX, made no genuine attempt to explore whether, in light of her obvious lack of knowledge and experience in respect of trading in complex financial products, it was appropriate for Ms Love to open a EuropeFX trading account without first educating herself about the relevant financial products and the inherent risks in trading in them.
EuropeFX submitted that Ms Love was not vulnerable because she was financially secure and "had funds to engage in discretionary trading to build her wealth". I reject that submission. The fact that Ms Love had acquired some wealth and was interested in trading in a general sense does not mean that she was not relevantly vulnerable in respect of her trading through EuropeFX, particularly given her obvious lack of knowledge and experience in trading in the particular products or services offered by EuropeFX.
I would readily infer and conclude from the evidence relating to Ms Love's onboarding that EuropeFX encouraged her to open a trading account despite her obvious absence of any relevant knowledge or experience in respect of the financial products in which she would trade and despite her obvious vulnerability in that regard. I should note in this context that, unlike most of the other EFX8, Ms Love's evidence was that she "attempted to play around with" a demonstration account, but that she did not know what she was doing. Had EuropeFX followed the procedure that, in Mr Blundell's opinion, a corporate authorised representative acting reasonably would have followed, Ms Love's experience with the demonstration account would have further demonstrated why it was not appropriate to permit her to open a live trading account without taking further steps to educate her concerning CFDs and Margin FX Contracts and the nature of the risks involved in trading in them.

[247]

Encouraging reliance and trading

The evidence indicates that at all relevant times Ms Love relied on, and was encouraged to rely on, her EuropeFX account managers in respect of her trading. That is hardly surprising given Ms Love's lack of knowledge and experience in respect of CFDs and relevant trading concepts. The account managers frequently gave Ms Love advice and recommendations, often supposedly based on information on third-party websites like Investing.com. Ms Love's evidence was that the account managers "guided" her to open and close positions. I would also characterise some of the exchanges between account managers and Ms Love as constituting pressure or undue influence given Ms Love's reliance and lack of understanding. Ms Love was similarly on occasion pressured to deposit more money into her trading account, including by way of credit card, so as to provide "oxygen" for her account. The account managers also advised her to employ various trading strategies, though the explanations that were given to her concerning those strategies were generally somewhat garbled and difficult to understand.
I reject EuropeFX's submission that Ms Love traded independently. Even if Ms Love opened or closed some positions while she was not on the telephone with an account manager, I do not accept that it is fair or accurate to characterise that as independent trading. Ms Love essentially did what her account managers told her to do.
EuropeFX account managers advised Ms Love to engage in risky trading strategies, often without giving her a comprehendible or meaningful explanation of the strategy. An example was given earlier in the discussion concerning Ms Love's evidence. That strategy ostensibly involved hedging, though it also involved a form of double direction trading. Ms Love was advised to open buy and sell positions in respect of the same CFD and, when the price moved, to close and then reopen the position which had moved in her favour, but leave open the position that had moved against her so that it could supposedly recover and return to profit. What was not made clear to Ms Love at the time was that the profit displayed on the trading screen in respect of the positions she had closed did not include the commission she was required to pay. Nor did she appreciate at the time that the positions that she left open overnight incurred swap fees. More broadly, it is tolerably clear that Ms Love did not understand the strategy that she had been directed to employ and did not appreciate the risks involved.

[252]

Vulnerability

Mr Kalusinghe was well educated, gainfully employed and plainly not unintelligent. I nevertheless consider that he was vulnerable in his dealings with EuropeFX given his lack of any relevant knowledge or experience in respect of the complex financial products with which EuropeFX dealt. He had no relevant trading experience in securities, options, commodities, futures, CFDs or foreign exchange. When he first came to engage with EuropeFX he did not even know what a CFD was. His contact with EuropeFX arose as a result of him responding to an online advertisement about investing in Bitcoin.
Mr Kalusinghe's vulnerability arising from his lack of relevant prior knowledge or experience in respect of CFDs and Margin FX Contracts was readily foreseeable by EuropeFX. It was apparent from the recorded responses to the onboarding questionnaire and must in any event have been obvious to the EuropeFX account managers with whom he dealt. That is particularly apparent from the terms and nature of the exchanges between Mr Kalusinghe and the account managers. While Mr Kalusinghe appeared to be enthusiastic and keen to learn, as discussed earlier, my overall impression from the evidence of his exchanges with the EuropeFX account managers was that Mr Kalusinghe was far more ignorant, naïve and gullible than he was prepared to admit in his evidence. Mr Kalusinghe's relative ignorance, naïveté and gullibility must, I would infer, have been apparent to his account managers. Mr Kalusinghe remained at all times heavily reliant, if not almost entirely dependent, on his account managers.
EuropeFX submitted that Mr Kalusinghe was not vulnerable or at a disadvantage because he was intelligent, educated, earned a good salary, owned a house (subject to a mortgage) and had savings. While the factual underpinnings of that submission may be correct, it does not follow that Mr Kalusinghe was not relevantly vulnerable in the context of his dealings with EuropeFX given his obvious lack of knowledge, appreciation and experience in respect of trading in complex financial products. It was that vulnerability, as well as Mr Kalusinghe's naïveté and gullibility, that EuropeFX effectively exploited.
I would infer in all the circumstances that EuropeFX was willing and content to onboard Mr Kalusinghe and have him sign up for a trading account in circumstances where it was known that he lacked any relevant knowledge or experience in respect of trading in CFDs and Margin FX Contracts. Indeed, I would infer that Mr Kalusinghe was encouraged to open an account despite his obvious vulnerability. Certainly, no real attempt was made to ensure that Mr Kalusinghe was equipped with the necessary knowledge and experience to trade in CFDs and Margin FX Contracts before he was encouraged to trade. The onboarding procedure that Mr Blundell considered a corporate authorised representative acting reasonably would employ, or should employ, was plainly not employed in Mr Kalusinghe's case.
I should hasten to add that while EuropeFX's onboarding procedure required the prospective customer to tick boxes in the questionnaire to indicate that they had read risk disclosure notices and documents such as EuropeFX's PDS, I am not persuaded that Mr Kalusinghe was appropriately taken to the risk disclosure notices or the documents during the onboarding process. I infer from the evidence as a whole that Mr Kalusinghe was most likely guided through the process by a Global Win representative, acting on behalf of EuropeFX and, as Mr Kalusinghe suggested in his evidence, he was effectively just told to tick the boxes. I am not satisfied that EuropeFX in fact required, encouraged or ensured that Mr Kalusinghe had in fact read and understood the PDS. Indeed, I would infer from the content of the discussions between the account managers and Mr Kalusinghe that the account managers must have known that he had not.

[253]

Failure to ensure an adequate understanding of the financial services and risks

I am satisfied that the evidence of and concerning Mr Kalusinghe supports the finding that EuropeFX failed to ensure that Mr Kalusinghe had an adequate understanding of the financial products in which he traded, or the concepts that it would have been necessary for him to understand in order to properly trade in those products. His understanding of those products was rudimentary or superficial at best, and in many respects misguided or misconceived. I am also satisfied that EuropeFX failed to ensure that Mr Kalusinghe had a sound or adequate appreciation of the nature and extent of the risks involved in trading CFDs and Margin FX Contracts. He obviously knew that there were risks involved, but his inadequate understanding of the nature of CFDs and concepts such as leverage and margin meant that he never fully appreciated how much risk was involved.
The evidence concerning Mr Kalusinghe's exchanges with his account managers was discussed in detail earlier in these reasons. It suffices at this point to reiterate that such explanations as were given to Mr Kalusinghe were at best overly simplistic or unhelpful, and at worse incoherent. While Mr Kalusinghe may have said "yes" or "yeah" as those explanations were given, I accept Mr Kalusinghe's evidence that he was in effect just prompting the account manager to continue with the explanation. That is, in any event, readily apparent when one actually listens to the exchanges. It would also have been apparent to the account manager as the conversation with Mr Kalusinghe progressed. I reject EuropeFX's submission that the account managers were unaware of, or could not have foreseen, that Mr Kalusinghe did not have a firm grasp on the nature of the financial products that were being discussed, or important concepts such as leverage and margin. Indeed, I would infer that the account managers recognised that Mr Kalusinghe was ill-equipped to trade independently. Some of them even intimated to Mr Kalusinghe that he would be ill-advised to trade by himself.
I similarly reject EuropeFX's submission that Mr Kalusinghe understood the basics of trading from an early stage and that he could and did exercise his own judgment when it came to trading. I will address this issue further in the context of reliance and pressure to invest.

[256]

Pressure to invest and deposit, encouraging reliance and unfair inducements

The evidence of and concerning Mr Kalusinghe, indicates that Mr Kalusinghe was significantly reliant on the EuropeFX account managers when it came to trading. That was the overall effect of Mr Kalusinghe's evidence. His evidence in that respect was also largely corroborated by the documentary evidence, in particular the recordings and transcripts of the conversations between Mr Kalusinghe and the account managers. I also consider that Mr Kalusinghe's evidence concerning his reliance was entirely plausible given his lack of experience and inadequate understanding of CFDs, Margin FX Contracts and the important concepts such as margin and leverage that underlie the trading in those products. While Mr Kalusinghe may at times have been engaged and inquisitive when discussing trading with the account managers, he generally followed and relied on their direction and advice.
It is also apparent from the nature and tenor of many of the discussions between Mr Kalusinghe and the account managers that the account managers encouraged and fostered Mr Kalusinghe's reliance. The account managers regularly told Mr Kalusinghe about market "events" or information, often by reference to third-party information provider websites, and recommended trades based on that information. They frequently suggested that Mr Kalusinghe would make specified profits if he followed their recommendations, and intimated that he would miss out if he did not act quickly. The recommendations concerning trading were often accompanied by recommendations that Mr Kalusinghe deposit more funds into his trading account to enable the trading to occur.
The account managers' recommendations or encouragement to trade and deposit money often escalated and amounted to pressure and undue influence. The pressure exerted upon Mr Kalusinghe to deposit more money into his account was often intense and occurred in circumstances where it was obvious to the account managers that Mr Kalusinghe was in a state of distress. He was encouraged to borrow money to deposit into his trading account. He was also offered inducements to deposit in the form of packages or account categories that supposedly carried certain benefits, but were tied to the amount of money a customer deposited. Mr Kalusinghe was also often pressured or persuaded not to withdraw money from his trading account. EuropeFX ultimately conceded that there were some instances where Mr Kalusinghe was impeded or dissuaded from withdrawing funds from his trading account.
The evidence concerning the pressure exerted upon Mr Kalusinghe to trade, deposit and not withdraw was discussed at length earlier in these reasons. It is unnecessary to repeat what was said earlier.
As adverted to earlier, I reject EuropeFX's submission that Mr Kalusinghe was able to and did trade independently of his account managers. That submission was based on a schedule that purportedly identified trades that Mr Kalusinghe carried out while not on the telephone to one of his account managers. I have not endeavoured to resolve the complex dispute between the parties concerning the accuracy of that schedule, though I entertain some doubts concerning its accuracy. In any event, and more importantly, I am not persuaded that the fact that on occasion Mr Kalusinghe may have carried out trades while he was not on the telephone indicated that he was able to trade independently in any meaningful sense. When Mr Kalusinghe did carry out such trades, it was almost invariably his attempt to follow recommendations, directions or strategies that his account managers had given him. Some of them appeared to have carried out in desperation when Mr Kalusinghe's account had deteriorated and he was unable to contact his account manager.
I similarly reject EuropeFX's submission that Mr Kalusinghe was a willing participant in the market. In my opinion he could not be said to have been a willing participant in the market in any meaningful sense given his lack of any relevant knowledge, understanding and experience in respect of trading in CFDs and Margin FX Contracts, his reliance on his account managers, the misleading and deceptive conduct of his account managers and the pressure and undue influence that was exerted on and over him.

[261]

Vulnerability

There could be little if any doubt that Ms Elford was vulnerable and at a considerable disadvantage in her dealings with EuropeFX. She had no previous knowledge of, or experience trading in CFDs, Margin FX Contracts or any comparable financial products. She was an aged care worker and had never been exposed to the type of financial markets where complex derivatives like CFDs and Margin FX Contracts were traded. She first came to engage with EuropeFX as a result of conducting internet searches for Bitcoin and signing up for a Bitcoin newsletter, not because she had any interest in trading in CFDs or Margin FX Contracts. Indeed, it is readily apparent that she did not even know what CFDs or Margin FX Contracts were when her trading account was opened. Nor did she have any idea about the risks that were involved in trading in financial products of that nature.
Ms Elford's lack of relevant knowledge and experience was foreseeable and must have been obvious to EuropeFX. Indeed, the online onboarding questionnaire produced a response which indicated that EuropeFX did not consider that a CFD account was appropriate for her, no doubt because the responses to various questions in the questionnaire made it clear that Ms Elford had no relevant knowledge or experience in respect of CFDs and Margin FX Contracts. While boxes in the questionnaire were ticked to indicate that Ms Elford had read the risk disclosure notices and documents such as EuropeFX's PDS, I infer from the evidence as a whole that the questionnaire was most likely completed while Ms Elford was on the telephone with a Global Win representative, acting on EuropeFX's behalf, and that the representative directed Ms Elford to tick the boxes without making any genuine attempt to ensure that she had read the notices or documents. I am not satisfied that EuropeFX in fact required, encouraged or ensured that Ms Elford had actually read and understood the PDS. In any event, I am not persuaded that Ms Elford would have fully understood the notices or documents given her complete absence of any prior knowledge about CFDs and Margin FX Contracts, and her lack of any real understanding at the time about concepts such as margin and leverage.
I conclude from the evidence as a whole that EuropeFX opened a trading account for Ms Elford in circumstances where it well knew that she had no relevant knowledge or experience in respect of the financial products and financial services it offered and had no idea whatsoever about the nature and extent of the risks involved in trading in those products. Had EuropeFX employed the onboarding processes that Mr Blundell considered that a corporate authorised representative acting reasonably would have employed, Ms Elford would not have been permitted to open a trading account without demonstrating some knowledge of the relevant financial products and some appreciation of the risks involved.

[262]

Failure to ensure an adequate understanding of the financial services and risks

It is readily apparent that the EuropeFX account managers with whom Ms Elford dealt failed to ensure that Ms Elford had an adequate and sound understanding of CFDs, Margin FX Contracts and associated concepts such as leverage and margin. It is equally apparent that the account managers failed to ensure that Ms Elford had an adequate understanding of the nature and extent of the risks involved in trading in those products.
Ms Elford made it tolerably clear to the account managers with whom she first dealt that she knew nothing whatsoever about CFDs, Margin FX Contracts, or any similar or comparable financial products, and had no idea about concepts such as margin. While the account managers purported to provide her with some explanations concerning those products and concepts, those explanations were at best superficial and rudimentary and in many cases confusing if not nonsensical. It is also readily apparent, and would have been apparent to the account managers, that Ms Elford did not adequately understand their explanations. I reject EuropeFX's submission to the effect that Ms Elford was following and understanding the explanations, and that the account managers would have understood that to be the case, because she said "yep", "yeah" or "Mmm-hmm" as those explanations progressed. A fair reading of the transcripts reveals that submission to be fanciful. It is even more apparent from the recordings that were played. As I noted earlier, Ms Elford was not a person who was able to readily understand or grasp certain concepts, particularly complex financial concepts. I would readily infer that that must have been tolerably clear to the account managers from a very early stage.
In my view, it is abundantly clear from the evidence of and concerning Ms Elford that she never adequately understood what a CFD or Margin FX Contract was and therefore never really understood what it was she was trading in. It is equally clear that, while Ms Elford no doubt knew that there was some risk involved in her trading, she never adequately understood or appreciated the nature and extent of that risk, as opposed to, for example, the risks involved in investing in shares. Ms Elford's evidence, which I accept, was that she did not believe or understand that all the money she had deposited in her trading account was at risk. I reject EuropeFX's submission that Ms Elford knew that she was engaging in a "high risk venture where her capital was at risk". That submission is not supported by a fair consideration of the evidence of and concerning Ms Elford as a whole.
Ms Elford's vulnerability arising from her ignorance persisted during the entirety of her trading with EuropeFX. I would also readily infer that her vulnerability in that respect was obvious and appreciated by the EuropeFX account managers with whom she dealt.
I should finally note in this context that EuropeFX's reliance on the fact that the EuropeFX account manager's routinely, though quickly and formulaically, read Ms Elford a risk disclaimer, does not assist its case. Ms Elford's evidence, which I accept, was that, while she understood the words that were read out, their meaning did not resonate with her because she trusted the account managers. The purport or true import of the disclaimers was also often downplayed or undermined by other things that the account managers said.

[265]

Pressure to invest and deposit, encouraging reliance and unfair inducements

In my view the evidence plainly revealed that Ms Elford relied almost entirely on the EuropeFX account managers in respect of her trading. The evidence also established that the EuropeFX account advisers consciously and deliberately fostered and encouraged Ms Elford's reliance on them. Every position that she opened and closed was on the recommendation of an account manager while Ms Elford was either on the telephone with them, or during an exchange of text messages with them. From the very outset, a EuropeFX account manager told Ms Elford that he would hold her hand and guide her through the process and would give her all the information she needed to know before she traded. What in fact occurred went beyond that. The account managers effectively told or directed Ms Elford what to do and she generally did what she was told to do. EuropeFX submitted that Ms Elford's reliance was "by choice" and that it was "open to her to take steps to learn to trade and move towards making independent decisions". That submission, however, entirely ignores Ms Elford's vulnerability and the fact that the account managers actively encouraged Ms Elford to depend on them. I would also reiterate that on my assessment Ms Elford was naïve and gullible in her dealings with EuropeFX. In my view, that naivety and gullibility was exploited by the account managers.
It is also clear from the evidence concerning Ms Elford's conversations with EuropeFX account managers that she was frequently pressured to trade and to deposit more and more funds into her trading account. Numerous examples of instances where EuropeFX account managers repeatedly pressured Ms Elford to trade and deposit more funds into her trading account were given earlier in the discussion of Ms Elford's evidence. Ms Elford was similarly often pressured, or at least dissuaded from, withdrawing funds from her trading account. An example of that conduct on the part of EuropeFX account managers was also given earlier. While EuropeFX submitted that no undue pressure was placed on Ms Elford, that submission was based on a narrow selection of some snippets of the evidence. I reject that submission and find that the pressure exerted on Ms Elford at times was manifest.

[270]

Vulnerability

Unlike virtually all the other EFX8, Ms Nikiforos had some background knowledge and experience in respect of finance and financial services. Ms Nikiforos had a degree in applied finance and had worked in the finance sector, albeit in an area that was entirely unrelated to the types of financial markets in which USG and EuropeFX operated. She had heard of derivatives during her studies, however she had no relevant trading experience and her evidence, which I accept, is that she did not know what a CFD was when she opened her trading account with EuropeFX.
In my view, Ms Nikiforos could fairly be said to have been in a relatively vulnerable position in terms of her dealings with EuropeFX despite her education and job in the finance sector. That is primarily because, as already noted, she had no relevant personal trading or investment experience prior to her dealings with EuropeFX, and certainly had no practical knowledge or experience in respect of trading in complex leveraged derivatives such as CFDs and Margin FX Contracts. She also had little or no knowledge or understanding of important trading concepts such as leverage and margin. That was the overall effect of Ms Nikiforos' evidence. While Ms Nikiforos was pressed in cross-examination concerning her knowledge and understanding in that regard, I accept her evidence that, despite her education and occupation, her knowledge of those matters was very limited throughout the period she traded with EuropeFX. Similarly, I accept Ms Nikiforos' evidence, which was to the effect that, while she understood that there would be some risk associated with trading on financial markets generally, she did not appreciate that trading in CFDs and Margin FX products was any risker than trading in, for example, shares.
I am also satisfied from the evidence as a whole that Ms Nikiforos was onboarded and her trading account with EuropeFX was opened in circumstances where EuropeFX was aware that she had an inadequate understanding and appreciation of CFDs and Margin FX Contracts and the risks inherent in trading in those complex financial products. The questionnaire that was completed as part of the onboarding process in respect of Ms Nikiforos included information to the effect that she had no trading experience in securities, options, commodities, futures, CFDs or "OTX forex exchange". While the online questionnaire that was completed during Ms Nikiforos' onboarding purported to record that she had read EuropeFX's PDS and Terms of Business, I am also not satisfied that EuropeFX took appropriate steps to ensure that Ms Nikiforos had in fact read and understood those documents. Indeed, as discussed in detail earlier, it is open to infer that Ms Nikiforos was onboarded while on the telephone with a Global Win employee, representing EuropeFX, who invited Ms Nikiforos to tick the box indicating that she had read the documents without taking any steps to ascertain or ensure that she had in fact done so.
Ms Nikiforos' relevant vulnerability arising from her limited knowledge and experience in respect of CFDs and Margin FX Contracts was also evident from and revealed by her subsequent engagement with EuropeFX account managers. The evidence, including the evidence in the recordings and transcripts of the conversations between Ms Nikiforos and the account managers, indicates that Ms Nikiforos' knowledge and understanding of CFDs, Margin FX Contracts and concepts such as leverage and margin remained very limited and that she was almost totally reliant on the account managers when it came to her trading.
EuropeFX submitted that Ms Nikiforos was not vulnerable because, while she had no prior knowledge of or experience in respect of trading in CFDs and Margin FX Contracts, "every experienced trader was once a beginner". That, however, is no answer to the point that Ms Nikiforos was vulnerable when she dealt with EuropeFX precisely because she was a beginner and never progressed to be an experienced trader. As for Ms Nikiforos' reliance on the account managers, EuropeFX submitted that her reliance did not make her vulnerable because she was reliant "by choice". I reject that submission. To the extent that it could be said that Ms Nikiforos chose to rely on her account managers, she did so precisely because she had no relevant knowledge or experience and reasonably expected that the account managers would assist in filling that lacuna. They did not do so.

[273]

Reliance, encouraging reliance and pressure to invest

Ms Nikiforos did not trade independently of the influence of her EuropeFX account managers in any meaningful respect. Rather, she was almost entirely reliant and dependent on the account managers. The account managers peppered her with recommendations and directions concerning trades she should make. They enthusiastically encouraged her to follow those recommendations and directions, often by telling her about the profits that she was likely to make if she made the trade, or the profits that she would miss out on if she did not act quickly and make the trade. Ms Nikiforos' largely unchallenged evidence, which I accept, was that she often felt pressured by those tactics and felt pressured to follow the account managers' instructions. Her evidence in that regard was effectively corroborated by the transcripts and recordings of her conversations with the account managers and is, in any event, entirely plausible given her lack of relevant knowledge and experience and the persistence and enthusiasm of the account managers.
I would also readily infer from the evidence that the EuropeFX account managers were fully aware that Ms Nikiforos relied on them and fostered and encouraged that reliance. They were aware that Ms Nikiforos was, as EuropeFX put it in their submissions, a "beginner" and had very limited knowledge about CFDs and Margin FX Contracts and the financial markets more broadly. They held themselves out to be experienced traders and encouraged Ms Nikiforos to trust them and rely on their judgment. They used the lure of information that they suggested they were able to glean about the markets and the promise of profits to pressure Ms Nikiforos to follow their recommendations.
I reject EuropeFX's submission that Ms Nikiforos was a willing participant in the market in any meaningful sense. That submission cannot be sustained given the evidence concerning Ms Nikiforos' lack of knowledge and experience, her reliance on the EuropeFX account managers, and the pressure that they exerted on her, albeit in some instances in subtle ways, to follow their recommendations and directions. The evidence supported the Ms Nikiforos' trades were the direct product and result of her account managers' recommendations and directions. They were not the product of any independent judgment by Ms Nikiforos.

[278]

Vulnerability

In my view, Ms Sapor was relevantly vulnerable in terms of her dealings with EuropeFX. That is primarily because, while she had some prior experience in respect of trading in CFDs, it was clear that at the time she engaged with EuropeFX her knowledge and understanding of CFDs and Margin FX Contracts was at best superficial. Indeed, it was apparent from her evidence that she knew very little about the essential nature or features of CFDs and Margin FX Contracts, and had a very limited understanding about concepts such as leverage and margin that it would have been necessary for her to understand in order to appreciate the risks associated with trading in such products. It became equally apparent from the evidence that Ms Sapor's prior training and trading experience was in fact very limited and certainly was inadequate to adequately equip her to trade CFDs with EuropeFX without further education and assistance.
Ms Sapor's vulnerability was also apparent from the nature of the relationship she had with EuropeFX account managers once her trading account was established. In short, she was heavily reliant on the advice and recommendations of her account managers. That was essentially a product of her lack of any real knowledge or understanding of the financial products in which she was trading and the concepts that she would have needed to understand were she to trade independently in any meaningful sense. The effect of Ms Sapor's evidence, which I accept, was that she trusted and relied on the account managers, who she believed were experienced and were acting in her best interests. She felt that she was unable to trade by herself, even towards the very end of the period during which she traded with EuropeFX. When she was unable to contact her account managers, she felt abandoned. I accept that evidence.
EuropeFX submitted that Ms Sapor was not vulnerable or disadvantaged. In support of that submission it relied, among other things, on: Ms Sapor's previous trading experience; the fact that Ms Sapor was a self-employed bookkeeper, which suggested that she had "some familiarity with financial matters"; the fact that Ms Sapor had a "rudimentary" understanding of concepts such as leverage and margin; and the fact that she did not rely on her account managers, but rather exercised her own judgment and traded independently.
I reject EuropeFX's submissions in that regard. I have already dealt with Ms Sapor's trading experience. It was very limited and ultimately of little, if any, assistance to her. As for her understanding of leverage and margin, I consider that it is perhaps an overstatement to say that her understanding of those concepts was rudimentary. In any event, even if she had a "rudimentary" understanding of those concepts, that would hardly mean that she was not vulnerable in all the circumstances. Finally, it is difficult to see how the fact that Ms Sapor was a bookkeeper could be said to have adequately equipped her to understand and trade in complex financial derivatives.
I would also infer that Ms Sapor's vulnerability resulting from her lack of relevant knowledge and experience was readily apparent to EuropeFX, not only at the time she was onboarded, but also during the period she traded. As for onboarding, the evidence indicates that Ms Sapor came to engage with EuropeFX, not because of any desire to trade in CFDs, but rather because she engaged with an advertisement relating to automatic trading in Bitcoin. While Ms Sapor's recollection of the onboarding process was limited, it is nevertheless open to infer that Ms Sapor was most likely onboarded by a Global Win representative, acting on behalf of EuropeFX, who guided her through the online questionnaire while on the telephone. I would also infer that the representative who onboarded Ms Sapor and guided her through the questionnaire most likely encouraged her to tick the boxes indicating that she had read the risk disclosure notice and other documents, including the PDS, without confirming or ensuring that Ms Sapor had in fact read, let alone understood, the notice or the documents in question. Ms Sapor had no real recollection of reading the documents.

[279]

Failure to ensure an adequate understanding of the financial services and risks

I am satisfied that the evidence of and relating to Ms Sapor and her engagement with EuropeFX on the whole indicates that EuropeFX failed to ensure that Ms Sapor had an adequate understanding of the essential features of CFDs and Margin FX, or an adequate understanding of important concepts such as leverage or margin. Similarly, the evidence supports the conclusion that EuropeFX failed to ensure that Ms Sapor had an adequate appreciation of the nature and extent of the risks associated with trading in CFDs and Margin FX Contracts.
The evidence concerning Ms Sapor's understanding of the relevant financial products and concepts, and her appreciation of nature and extent of the risks involved in trading in those products, was discussed at length earlier in these reasons. For the reasons given there, I find that it must have been apparent to the EuropeFX account managers with whom Ms Sapor dealt that she had an inadequate and incomplete understanding and appreciation of those matters. Moreover, the explanations of those matters that account managers gave, or purported to give, Ms Sapor were at best overly simplistic, to the point of often being almost meaningless or of no assistance, or at worst entirely obscure or incoherent. I would also infer that the EuropeFX account managers were aware, or ought reasonably to have been aware, that Ms Sapor did not comprehend their explanations, deficient as they were.
EuropeFX relied heavily on the fact that the account managers with whom Ms Sapor dealt often read a risk disclosure notice to her at the commencement of their telephone conversations. I do not accept that the reading of that notice was adequate to properly apprise Ms Sapor of the nature and extent of the risks involved in trading in CFDs. While the reading of the risk disclosure notices would no doubt have indicated to Ms Sapor that there was a risk in trading, I nevertheless accept the general tenor of her evidence, which was that the reading of the disclaimer did not resonate or mean much to her, particularly given the nature of the relationship that the EuropeFX representatives had fostered with her. While the disclaimer referred to there being a "high degree of risk", Ms Sapor's evidence, which I accept, was that she did not think that applied to her because she believed was "in good hands" and "felt safe". That evidence was entirely plausible in circumstances where the EuropeFX representatives with whom Ms Sapor dealt in fact repeatedly assured her that they were experienced and would ensure that her trading was not risky.
Ms Sapor was cross-examined at some length concerning her understanding of CFDs, Margin FX Contracts and concepts such as leverage and margin. She was also cross-examined about her appreciation of the risks involved in trading in CFDs and Margin FX Contracts. None of the evidence that Ms Sapor gave during cross-examination persuades me that Ms Sapor had an adequate or sound understanding or appreciation of any of those matters during the period she traded at EuropeFX. It may be accepted, that as Ms Sapor's trading progressed, she came to appreciate, at least in a superficial way, the relative importance of certain figures on her trading screen, such as the figure for free margin, when it came to her trading. Similarly, she became progressively aware of the risks involved in her trading, particularly towards the end of her trading when her account was encountering difficulties. Even at that point, however, the EuropeFX account managers continued to assure Ms Sapor and downplay the risks.

[282]

Reliance, encouraging reliance and pressure

As I have already noted, there could be no doubt from the evidence of and relating to Ms Sapor and her engagement with EuropeFX that Ms Sapor relied heavily on the EuropeFX account managers. There could equally be little or no doubt that the account mangers fostered and encouraged Ms Sapor's reliance on them. The evidence in relation to Ms Sapor's reliance and the conduct of the account managers in that regard was discussed at length earlier in these reasons. It is unnecessary to repeat what was said there. It suffices to note that the overall effect of Ms Sapor's evidence, which I accept, was that she trusted and relied on the account managers. Ms Sapor's evidence in that regard was largely corroborated by what appears in the recordings and transcripts of the conversations between her and the account managers. Several extracts from the transcripts that were demonstrative of both Ms Sapor's reliance and the means by which the account managers fostered that reliance were identified in the earlier discussion.
It is equally clear from the evidence of and relating to Ms Sapor that the EuropeFX account managers often pressured Ms Sapor to invest and deposit more funds into her trading account. Ms Sapor's evidence was that she frequently felt that the account managers were pushing her to trade and to deposit more funds. She maintained during cross-examination that she felt that she was often pushed to deposit more money and that she could see a pattern in the way the account managers acted in that respect. Perhaps not surprisingly, she was unable to identify specific instances or give specific examples of how she was pushed by the account managers. I nevertheless accept the general tenor of her evidence in that regard. It is effectively corroborated by parts of the transcripts of Ms Sapor's telephone conversations with the account managers which in my view manifest the exertion of undue pressure. Examples drawn from the transcripts of the conversations were referred to earlier. I reject EuropeFX's submission that no undue pressure was placed on Ms Sapor.

[288]

Vulnerability

I am satisfied from the evidence of and relating to Ms Boden that she was in a position of vulnerability in respect of her dealings and engagement with EuropeFX. At the time she opened her account with EuropeFX, she was 51 years of age, effectively unemployed, and in receipt of a disability support pension. She had very limited formal education. While she had some experience in relation to trading in currencies with or through another company, that experience was unsuccessful, so much so that Ms Boden had lodged a complaint with ASIC against that company. She had also paid money to other businesses with the intention of trading or attending seminars and learning how to trade in currencies and CFDs. It was, however, at best unclear whether she had in fact attended any seminars or engaged in any trading with those other companies. In any event, it was abundantly clear that, whatever Ms Boden's previous trading or learning experiences may have been, she had not learned or acquired much knowledge of any real relevance from it.
It was readily apparent from Ms Boden's evidence that she did not have any sound or adequate understanding of CFDs, Margin FX Contracts, or important concepts such as leverage or margin, when was opened her trading account with EuropeFX. Moreover, it is readily apparent from the evidence that her level of understanding about those financial products and concepts did not materially improve during or as a result of her engagement with EuropeFX. Ms Boden's evidence in that regard was effectively supported and corroborated by her recorded conversations with EuropeFX account managers.
The evidence concerning Ms Boden's understanding of the financial products and relevant concepts was discussed at length earlier in these reasons. For the reasons already given, I find that throughout the time she engaged with EuropeFX, her knowledge and understanding concerning CFDs, Margin FX Contracts and concepts such as leverage and margin, was at best superficial and inadequate to equip her to trade in those products without exposing herself to considerable losses.
Much the same can be said concerning Ms Boden's appreciation of the nature and extent of the risks involved in trading in CFDs and Margin FX Contracts. Plainly Ms Boden understood that there was a risk involved in trading those products. It is, however, difficult to see how she could possibly have understood the nature and extent of the risk if she did not have any sound understanding of what a CFD, or a Margin FX Contract was, or any sound understanding and appreciation of leverage. For the reasons given earlier, I find that Ms Boden did not have a sound or adequate appreciation of the risks involved in trading in leveraged derivatives like CFDs and Margin FX Contracts when she first opened her trading account with EuropeFX. Nor did her appreciation or understanding in that regard materially improve as a result of her engagement with EuropeFX.
Without wishing in any way to criticise or deprecate Ms Boden, my distinct impression having heard her give evidence and having considered the evidence relating to her engagement with EuropeFX, was that she was barely financially literate and was a person who had considerable difficulty comprehending concepts which involved any level of complexity. I also formed the distinct impression that she was particularly naïve and gullible in certain respects. While she obviously wanted to learn how to trade in financial markets, and wanted to engage with financial service providers in that regard, she appeared to me to be a person who was easily and unquestioningly persuaded to engage in trading activities despite her apparent limitations and relative ignorance and inadequate understanding of exactly what was involved in that trading. She was, in my view, plainly relevantly vulnerable in that respect.
EuropeFX submitted that Ms Boden was not vulnerable. It submitted that Ms Boden was "no ordinary pensioner" because she had money in her bank account. It also questioned whether Ms Boden was in fact unemployed because she was "working in exchange for board" and "dearly wanted to be a full-time trader". EuropeFX also relied on the fact that Ms Boden "had the funds to secure accommodation, to purchase furniture and to acquire a car at the time she commenced trading". I reject those submissions. They essentially miss the point and significantly understate the personal circumstances that in fact made Ms Boden particularly vulnerable. Ms Boden was relevantly vulnerable because, despite her desire to become a trader, she was not only ill-equipped, in terms of knowledge and experience, to be a trader in the complex products offered by EuropeFX, but was also naïve and gullible about her capacity to engage in such trading. EuropeFX did maintain, in that regard, that Ms Boden "had a relatively well developed understanding of the products at the time she started trading and a clear understanding of the relevant risks due to her previous trading". I reject that submission. The evidence in my view was clearly to the contrary.
I would also infer from the evidence of and relating to Ms Boden that her vulnerability was foreseeable to and appreciated by EuropeFX, not only at the time her trading account was opened, but throughout the time that she traded with or through EuropeFX. The questionnaire that was completed as part of Ms Boden's onboarding recorded, among other things, that she was unemployed, that her income was under US$10,000, and that she had no trading experience in respect of options, commodities, futures, CFDs or OTC forex exchange. The accuracy or otherwise of those responses is largely immaterial in considering foreseeability. The point is that those responses highlighted Ms Boden's vulnerability and the fact that a CFD trading account was highly unlikely to be appropriate for her in those circumstances. Yet she was nevertheless onboarded, her trading account was opened, and she was encouraged to trade.
I should also add, in the context of onboarding, that I am not satisfied that EuropeFX in fact ever required, encouraged or ensured that Ms Boden had read and understood the PDS. I do not accept that it was open to EuropeFX, in the circumstances, to simply rely on the fact that a box ticked as part of the onboarding process indicated that Ms Boden had read and understood the PDS. It must have been immediately apparent to the account managers with whom Ms Boden dealt that she had either not read the PDS, or did not understand it.
Ms Boden's vulnerability and her relative ignorance and inexperience in respect of trading in CFDs and Margin FX Contracts would, in my view of the evidence, have been obvious to the EuropeFX account managers with whom Ms Boden first dealt. Those initial exchanges were referred to earlier in these reasons. There is no evidence to suggest that any of the account managers ever told Ms Boden that a CFD trading account may not have been appropriate for her.

[292]

Encouraging reliance, pressure to invest and unfair inducements

The evidence clearly established that EuropeFX account managers fostered and cultivated a relationship with Ms Boden that ensured that she trusted and would unquestioningly rely on them and their trading recommendations. They held themselves out to be experts who would advise and guide her trading. The tactics that they employed to ensure Ms Boden's trust and reliance were on occasion inappropriate and improper. In particular, as the earlier discussion of the evidence concerning Ms Boden revealed, they endeavoured, and to an extent succeeded, in developing a personal or even intimate relationship with Ms Boden. Ms Boden's evidence, which I accept having regard to some of the exchanges recorded in the transcripts, was that the account managers made Ms Boden feel like they were her close friends. The account managers also made extravagant and inappropriate promises about the profits that Ms Boden would make if she followed their plans and recommendations. Ms Boden's evidence was to the effect that her discussions with the account managers made her believe that they could help her to become a millionaire. All this occurred in circumstances where the account managers were not permitted, and it may be inferred knew that they were not permitted, to give Ms Boden personal advice.
It is equally clear from the evidence that Ms Boden in fact trusted and came to heavily rely and depend on the account managers and their advice and recommendations. Ms Boden's evidence, which I accept, was that, while she did not understand a lot of the "jargon" used by the account managers, she trusted them because "they were the ones in the know and were supposed to know everything that goes on in the trading world". She also gave evidence that she often spoke to the account managers many times a day and that during those conversations the account managers would tell her what to do. She often opened and closed positions while she was on the telephone with the account managers. On those occasions when she opened and closed positions while she was not on the telephone with one of the account managers, her evidence was that she was acting on what she understood to be their advice as given in a previous telephone call. I accept that evidence. I also reject EuropeFX's submission that the fact that Ms Boden on occasion opened or closed positions while she was not on the telephone meant that she could and did trade independently. The evidence in my view indicated that Ms Boden was unable to trade independently, and did not trade independently, at least in any meaningful sense.
The encouragement and recommendations that the EuropeFX account managers constantly gave Ms Boden often escalated to the point that their conduct amounted to undue pressure to trade and deposit further funds in her trading account. Examples of the pressure exerted on Ms Boden by the EuropeFX account managers, drawn from the transcripts of the conversations between Ms Boden and the account managers, were given earlier in the context of the discussion of Ms Boden's evidence. It is unnecessary to refer again to those examples. Ms Boden was similarly pressured not withdraw funds from her trading account. The overall effect of Ms Boden's evidence was that she often felt pressured by the account managers. I accept that evidence. It is supported and corroborated by the transcripts.
EuropeFX submitted that Ms Boden was not pressured to trade or deposit funds because her relationship with the account managers, in particular Jovanni, was "amicable" and she was not critical of them until the very end of her trading. It also submitted that Ms Boden was happy and willing to take telephone calls from the account managers. I reject those submissions. They are not a fair or accurate summary or characterisation of the evidence. While the account managers fostered and cultivated an amicable relationship with Ms Boden, it did not stop them from pressuring her at times. Indeed, it was the very nature of the relationship that they had fostered which enabled them to do so. As noted earlier, the account managers acted as if they were Ms Boden's close personal friends. That enabled them to manipulate and pressure her to effectively do what they told her to do. As for Ms Boden's willingness to take telephone calls, if anything, that simply indicated the extent of her reliance and dependency on the account managers.
It should finally be noted in this context that the evidence also indicated that the EuropeFX account managers frequently encouraged or sought to induce Ms Boden to deposit more funds into her account by indicating that if her deposits reached a certain amount she could get into the "VIP department" or have a "gold account". Ms Boden was led to believe that as a "VIP client" she would be entitled to certain benefits, including discounts on swaps and commissions. The reference to those promotions were part of the overall pattern of conduct on the part of the account managers the object of which was to foster Ms Boden's trust and reliance and encourage her to trade and deposit more and more money.

[297]

Vulnerability

The evidence of and relating to Ms Kuhn and her engagement with EuropeFX was discussed at length earlier in these reasons. In my view, the evidence clearly demonstrated that she was relevantly vulnerable, not only when her trading account was opened, but also throughout the time she traded with EuropeFX. Her vulnerability was mainly a product of the fact that she had no prior knowledge of, or experience trading in, CFDs or Margin FX Contracts. She had very limited formal education, was not employed and was receiving social security benefits.
I am also satisfied that EuropeFX was aware of Ms Kuhn's vulnerability. Ms Kuhn had little recollection of the onboarding procedure, including the completion of the questionnaire. The questionnaire did, however, accurately confirm she had no trading experience in securities, options, commodities, futures, CFDs or foreign exchange. While boxes were ticked in the questionnaire to indicate that Ms Kuhn had understood the nature and risk of "margined transactions" and had read and acknowledged a notice that stated that a CFD account may not be suitable for her, Ms Kuhn had no recollection ticking those boxes or reading those disclaimers or notices. In any event, it is difficult to see how Ms Kuhn could meaningfully have ticked those boxes or understood the disclaimers or notices in the questionnaire in circumstances where it was readily apparent that she did not know what a "margined transaction" was. Nor did she know what a CFD was. There was no evidence to suggest that anyone had given Ms Kuhn any explanation about CFDs, or margined transactions, when the questionnaire was completed. While Ms Kuhn's evidence in cross-examination was that at some stage she "reviewed" EuropeFX's PDS, though "not in its entirety". She was not pressed about which parts she reviewed and whether she understood them. I am not persuaded that she had read or understood that document at the onboarding stage.
In any event, whatever may have been recorded in the onboarding questionnaire, it must have been readily apparent to the account managers with whom Ms Kuhn subsequently dealt that she had no knowledge or understanding in respect of CFDs, Margin FX Contracts, or any of the concepts that it would have been necessary to understand or appreciate were she to successfully trade in those financial products. Indeed, Ms Kuhn made it quite clear to those account managers that she had absolutely no idea what she was doing when it came to trading in those products. It must equally have been obvious to those account managers that Ms Kuhn had not read EuropeFX's PDS.
EuropeFX submitted that Ms Kuhn was not relevantly vulnerable because her social security payments "were not the full extent of the funds to which she had access" because her husband carried on a business. It also submitted that the fact that Ms Kuhn was "out of the workforce" also did not indicate that she was vulnerable because she participated in the family business. Those submissions rather miss the point and do not engage with what was the relevant aspect of Ms Kuhn's vulnerability, that being her complete absence of any prior relevant knowledge or experience in respect of the risky leveraged derivatives that EuropeFX encouraged her to trade in.
EuropeFX did concede that Ms Kuhn was a "beginner" who did not have any experience trading in the products offered by it. It submitted that it did not follow that she should be precluded from trading. That submission again failed to engage with the point that Ms Kuhn's lack of any relevant knowledge or experience put her in a position of vulnerability. Moreover, it failed to engage with Mr Blundell's opinion evidence, which was to the effect that a CAR in EuropeFX's position, acting reasonably, would not have permitted a person in Ms Kuhn to open a CFD trading account unless and until she was able to demonstrate that she had acquired an adequate understanding of CFDs and the risks involved in trading in them. While there was evidence that Ms Kuhn had placed some trades on a demonstration account, she told the account manager with whom she first dealt that she had no idea what she was doing when she placed those trades. There was also no evidence to suggest that EuropeFX monitored or analysed those trades. Mr Blundell's evidence was that a CAR acting reasonably would have reviewed the demonstration account trading to ascertain whether the customer had an adequate understanding and appreciation of trading.
Overall, in my view the evidence concerning Ms Kuhn supports the inference that EuropeFX onboarded and permitted Ms Kuhn to open a trading account and trade in circumstances where it knew that she was vulnerable and disadvantaged given her complete lack of knowledge and experience and her relatively meagre financial circumstances.

[298]

Failure to ensure an adequate understanding of the financial services and risks

The evidence concerning Ms Kuhn's engagement with the EuropeFX account managers was discussed at length earlier in these reasons. That evidence establishes that the account managers with whom Ms Kuhn dealt failed to ensure that she had an adequate understanding of CFDs, Margin FX Contracts and associated concepts such as leverage and margin. They also failed to ensure that she had an adequate appreciation of the nature and extent of the risks involved in trading in those products.
As has already been noted, Ms Kuhn made it clear to the account managers with whom she first dealt that she knew nothing whatsoever about CFDs, Margin FX Contracts, or concepts such as leverage and margin. While the account managers may have given her some explanations concerning those matters, those explanations, as recorded in the telephone call transcripts, were, in my view, at best superficial and often confusing and very difficult to understand. As discussed earlier in these reasons, when considering Ms Kuhn's evidence, EuropeFX relied on the fact that Ms Kuhn often said "yeah" or "Mmm-hmm" while those explanations were given. When those exchanges are read or listened to, however, it is obvious that Ms Kuhn was not conveying her understanding of the explanations. Rather, as she said in her evidence, she was just acknowledging that she had heard what the account managers had said. In any event, as has already been noted, the explanations were at best simplistic and superficial and in many cases made little if any sense.
I am satisfied from the evidence of and concerning Ms Kuhn that she never had a sound or adequate understanding of CFDs and Margin FX Contracts or concepts such as leverage and margin. It was never clearly put to her in cross-examination that she did. Ms Kuhn also had an inadequate understanding of some of the trading strategies that the account managers recommended that she should employ, including hedging. I am equally satisfied that, while Ms Kuhn was no doubt aware that there was some risk involved in her trading, she never adequately understood or appreciated the full nature and extent of that risk. It is apparent that over time she gained a superficial understanding of, for example, the importance of the figure for margin on her trading screen and became aware that when that figure was low her account was at risk. At some point later in her trading she also understood that her whole account may be at risk, but by that time it was effectively too late for her to do anything meaningful about it.

[306]

UNCONSCIONABLE CONDUCT BY TRADEFRED - SYSTEM OF CONDUCT AND PATTERNS OF BEHAVIOUR

ASIC's case that TradeFred's engaged in unconscionable conduct by means of or by virtue of a system of conduct or patterns of behaviour is in many respects similar to its case against EuropeFX. That is perhaps not surprising given that the evidence revealed that TradeFred's business was conducted in a very similar fashion to EuropeFX's business.
Given the similarity of ASIC's respective case against EuropeFX and TradeFred, and given that TradeFred did not file a defence and filed a submitting appearance, it is possible to express my findings and conclusions in respect of ASIC's systemic unconscionability case against TradeFred in brief terms. For the brief reasons that follow, I am satisfied that the evidence adduced by ASIC against, and in respect of, TradeFred establishes that TradeFred engaged in systems of conduct and patterns of behaviour in the conduct of its securities business that were, in all the circumstances, unconscionable.
The evidence adduced by ASIC established the following systemic features of TradeFred's business.
First, TradeFred utilised or took advantage of misleading online advertising or promotional material which was likely to attract customers who were likely to be inexperienced and unsophisticated in respect of trading in complex derivatives.
Second, I would infer from the evidence that TradeFred utilised an onboarding process that did not discourage or prevent inexperienced or vulnerable consumers from opening accounts. Indeed, it facilitated or even encouraged the opening of accounts in respect of such customers. That inference was supported by evidence which indicated that many of TradeFred's customers had no prior experience in trading in CFDs or Margin FX Contracts. The evidence relating to the TF20 also indicated that prospective customers who had no relevant knowledge or understanding of CFDs and Margin FX Contracts, an no appreciation of the nature and extent of the risks involved in trading in such financial products, were nevertheless readily permitted to open trading accounts.
Third, TradeFred's contractual arrangements with USG, the issuer and market-maker in respect of the CFDs and Margin FX Contracts that were traded by TradeFred's customers, were such that TradeFred's income was largely derived from its customers' trading losses. The evidence indicated that TradeFred's customers were unlikely to have been aware of that fact.
Fourth, the account managers who performed services for TradeFred were remunerated in a way which in effect provided an incentive for them to encourage and pressure customers to deposit more funds into their trading account. In particular, the account managers received bonuses based on the net amount that their customers deposited into their trading accounts.
Fifth, TradeFred failed to appropriately train its sales or account management representatives. There was, for example, evidence that suggested that TradeFred or Capital Unit, the Israeli company that TradeFred appears to have retained to provide sales or account management services, employed "scripts" which encouraged inappropriate conduct. For example, one (possibly draft) script that was in evidence suggested that the representatives should describe a customer's inexperience as an advantage and should tell customers, misleadingly, that TradeFred profited when the customers opened trades so there was a "win-win situation".
Sixth, there was some evidence which tended to support the inference that TradeFred failed to prevent and respond to instances where they engaged in inappropriate and improper conduct towards customers.
Seventh, the evidence of and relating to the TF4, and the evidence relating to the TF16, revealed patterns of inappropriate behaviour on the part of TradeFred account managers. Those patterns of behaviour supported and provided a basis for inferring a system of conduct by TradeFred that was, in all the circumstances, unconscionable. The experiences of the TF20 were illustrations and manifestations of what was more broadly an unconscionable system of conduct and pattern of behaviour by TradeFred.
The patterns of behaviour that could be discerned or inferred from the evidence mainly involved the conduct of TradeFred account managers. That evidence included the unchallenged affidavit evidence of the TF4 and the recordings and transcripts of the telephone conversations between TradeFred account managers and the TF20. The instances of unconscionable conduct by TradeFred account managers towards the TF20 which were relied on by ASIC are summarised in Annexure E.2 to the SOC.
In short summary, the pattern of behaviour on the part of the TradeFred account managers included the following features: first, the TradeFred account managers knew that they were generally dealing with inexperienced, financially unsophisticated and therefore vulnerable customers; second, the account managers generally failed to give any, or any adequate explanations concerning the complex financial products that were being offered to their customers, the concepts that it was necessary for the customers to understand if they were to trade in those products, and the nature and extent of the risks involved in trading in those products; third, the account managers frequently gave the customers personal advice in circumstances where they either knew, or ought to have known, that TradeFred was not authorised or permitted to provide such advice; fourth, the account managers frequently made misleading or deceptive representations to the customers; fifth, the account managers encouraged the customers to depend on them and rely on their advice, despite the fact that they were not permitted to give personal advice; sixth, the account managers often recommended and pressured the customers to trade and deposit further funds; seventh, the account managers sometimes encouraged customers to deposit further money by employing illusory promotions; eighth, the representatives often encouraged the customers to employ inappropriate or unfair trading strategies; ninth, the representatives in many cases encouraged customers to use funds obtained from sources that were inappropriate in all the circumstances, including superannuation accounts; and tenth, the representatives on occasion discouraged or impeded customers from withdrawing funds from their trading accounts.
The pattern of unconscionable behaviour on the part of TradeFred account managers is entirely explicable having regard to the means and manner by which both TradeFred and the account managers were remunerated. TradeFred profited from the losses of its customers and the account managers profited by having their customers deposit more and more money into their trading accounts, often to chase their losses.
I am comfortably satisfied that ASIC's pleaded case of systemic unconscionability was made out by the evidence. I find that TradeFred contravened s 12CB(1) of the ASIC Act by reason of its established system of conduct and patterns of behaviour towards its financial services customers.

[307]

UNCONSCIONABLE CONDUCT BY TRADEFRED TOWARDS THE TF4

While ASIC's case as pleaded alleged that TradeFred engaged in unconscionable conduct towards each of the TF20, it ultimately agreed to narrow its case and press the Court to only make findings in respect of the TF4. The TF4 were the four TradeFred customers who provided lengthy affidavits which contained detailed evidence in respect of their dealings with TradeFred. The evidence of the TF4 was unchallenged and unanswered.
I again do not propose to give detailed reasons in respect of my findings concerning TradeFred's conduct towards the TF4, particularly given that TradeFred did not file a defence and filed a submitting appearance. ASIC's written and oral submissions in relation to this aspect of its case were also very sparse. For the brief reasons that follow, I am comfortably satisfied that ASIC's pleaded case of unconscionable conduct on the part of TradeFred towards each of the TF4 has been made out on the evidence adduced by ASIC.
The evidence of each of the TF4 was in many respects very similar to the evidence of the EFX8, even though the TF4 were dealing with TradeFred and its account managers, not EuropeFX. The conduct of the TradeFred account managers towards the TF4 was similar in many respects to the conduct of the EuropeFX account managers towards the EFX8. As has already been noted, Annexure E.2 to the SOC contained a summary of the instances of unconscionable conduct by TradeFred account managers that were relied on by ASIC, including in respect of the TF4. I make the following general findings in respect of the TF4 and their engagement with TradeFred and its account managers.
First, with the exception of Mr Fraser, the TF4 were all relevantly inexperienced and ignorant in respect of CFDs and Margin FX Contracts and the nature and extent of the risks involved in trading in them. Their inexperience and relative ignorance must, it may be inferred, have been obvious and apparent to the TradeFred account managers. I am satisfied that Ms Goodey, Ms Zdraveska and Ms Musgrave were all relevantly vulnerable consumers in that and in other respects. Mr Fraser had some prior, though unsuccessful, experience trading in CFDs with another securities company.
Second, again with the exception of Mr Fraser, each of the TF4 first came to engage with TradeFred as a result of responding in some way to an online or social media publication or promotion about trading in Bitcoin or other cryptocurrency. I would infer that those publications or promotions were most likely similar to those that were employed or utilised on EuropeFX's behalf.
Third, TradeFred account managers gave personal advice to each of the TF4 in circumstances where, as explained earlier, they were not permitted to do so. I would also infer that the account managers knew that they were not permitted to give customers personal advice, but did so anyway. The account managers regularly advised, encouraged and even pressured each of the TF4 to engage in specific trades, often on the basis of information supposedly published on third-party websites.
Fourth, the TradeFred account managers made misleading or deceptive representations to each of the TF4. The general nature of the misleading and deceptive representations was the subject of discussion earlier in these reasons.
Fifth, in my view the TradeFred account managers failed to ensure that each of the TF4 had an adequate understanding of the nature of the financial product in which they were being encouraged to trade. Perhaps more significantly, the account managers failed to ensure that the TF4 had an adequate understanding and appreciation of the nature and extent of the risks involved in trading in those financial products. Indeed, the account managers tended to understate or minimise the risk involved.
Sixth, the evidence tends to suggest that each of the TF4 relied on, and at least to some extent, depended on their TradeFred account manager. I infer from the evidence that the account managers fostered that reliance. That was of particular significance in circumstances where the account managers on occasion encouraged and pressured the customers to place trades and deposit more money into their trading accounts, often for the supposed purpose of recovering losses. The strategies and tactics employed by the account managers to encourage and pressure the customers to trade and deposit more money were frequently unfair and inappropriate. The account managers were able to access the TF4's computers and trading screens and direct and monitor their trading.
Seventh, the account managers on occasion unfairly dissuaded and impeded some of the TF4 from withdrawing money from their trading accounts.
Eighth, each of the TF4, somewhat predictably, lost significant sums of money as a result of their trading with TradeFred. Mr Fraser's losses totalled $171,950. Ms Goodey made a net loss of US$5,265.13. Ms Zdraveska deposited and appears to have lost almost $40,000. Ms Musgrave's net losses totalled US$16,480. While the losses themselves obviously do not establish unconscionability, I would readily infer that, but for the unconscionable conduct engaged in by the account managers, in particular their encouragement and pressure to trade and deposit, the customers would not have lost nearly so much money.
The s 12CC ASIC Act considerations which are of some relevance to the circumstances of each of the TF4 are: there was an inequality of bargaining power, particularly given the TF4's lack of relevant knowledge and trading experience (s 12CC(1)(a)); TradeFred did not ensure that the TF4 had an adequate understanding of information in documents relating to its supply of financial services to them (s 12CC(1)(c)); the TF4 were each subjected to undue influence and pressure and the use of unfair tactics by the account managers (s 12CC(1)(d)); TradeFred did not clearly or accurately disclose the basis upon which it and its account managers would be remunerated (s 12CC(1)(i)); and in all the circumstances I am satisfied that TradeFred did not act in good faith in its dealings with each of the TF4 (s 12CC(1)(l)).
I am comfortably satisfied that TradeFred engaged in conduct towards each of the TF4 that was, in all the circumstances, unconscionable.

[309]

USG's liability for the contravening conduct of EuropeFX and TradeFred

ASIC alleged that USG was liable in respect of the contraventions of s 911A of the Corporations Act and ss 12DA, 12DB and 12CB of the ASIC Act by EuropeFX and TradeFred. The basis of that allegation was that, when acting as USG's CARs, EuropeFX and TradeFred were USG's agents for the purposes of s 769B of the Corporations Act and s 12GH of the ASIC Act. The conduct of EuropeFX and TradeFred was accordingly taken to have been engaged in also by USG.
Section 769B of the Corporations Act relevantly provides as follows: 769B People are generally responsible for the conduct of their agents, employees etc. (1) Subject to subsections (7) and (8), conduct engaged in on behalf of a body corporate: (a) by a … agent of the body, within the scope of the person's actual or apparent authority; or (b) …. is taken, for the purposes of a provision of this Chapter, or a proceeding under this Chapter, to have been engaged in also by the body corporate. … (7) Nothing in this section, or in any other law (including the common law), has the effect that, for the purposes of a provision of Part 7.7 or 7.7A, or a proceeding under this Chapter that relates to a provision of Part 7.7 or 7.7A, a financial service provided by a person in their capacity as an authorised representative of a financial services licensee is taken, or taken also, to have been provided by that financial services licensee.
Section 911A is within Pt 7.6 of the Corporations Act and therefore does not fall within the carve-out in s 769B(7).
Section 12GH(2) of the ASIC Act similarly provides as follows: 12GH Conduct by directors, employees or agents …. (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; is taken, for the purposes of this Division, to have been engaged in also by the body corporate.
In AGM Markets, Beach J found that CARs who engaged in conduct, which was similar to the conduct engaged in by EuropeFX and TradeFred, were acting as agents of the AFSL holder within the scope of their apparent authority. The circumstances that led his Honour to that conclusion were, in summary: first, the CARs were appointed pursuant to s 916A of the Corporations Act, which provides that a "financial services licensee may give a person (the authorised representative) a written notice authorising the person … to provide a specified financial service or financial services on behalf of the licensee" (emphasis added); second, the Margin FX Contracts and CFDs issued to the clients of the CAR were issued by the AFSL holder; and third, the class of acts that the AFSL holder put the CARs in a position to undertake included the act of dealing in financial products on behalf of the AFSL holder and the giving of financial product advice in relation to those products.
Each of those circumstances was present in the case of USG, as the AFSL holder, and EuropeFX and TradeFred, as the relevant CARs.
EuropeFX and TradeFred were only able to lawfully conduct their financial services businesses without themselves holding an AFSL because they had been appointed by USG, pursuant to s 916A of the Corporations Act, to provide financial services "on behalf of" USG. Under the terms of USG's CAR agreements with EuropeFX and TradeFred, USG engaged and authorised EuropeFX and TradeFred to provide the "Specified Services" and EuropeFX and TradeFred accepted that "engagement and authorisation". The "Specified Services" were defined as including: the provision of "general financial product advice" for both derivatives and foreign exchange contracts; dealing in a financial product by "issuing on behalf of USG" derivatives and foreign exchange contracts; and dealing in a financial product by "applying for, acquiring, varying or disposing of derivatives and foreign exchange products on behalf of another person".
In AGM Markets, Beach J gave little weight to the fact that the CAR agreements in question in that case stated that the agreements did not give rise to an agency agreement. His Honour reasoned (at [476]) that the existence of that contractual provision was deserving of little weight because it did not "reflect the reality or substance of the relationship". The CAR agreements in this case did not expressly state that the agreements did not give rise to an agency agreement, though they did state (in clause 2.3), that the authorised representatives (EuropeFX and TradeFred) and USG had an "independent contractor" relationship, and that the agreements did not create "a partnership, a joint venture, the relationship of employee and employer or any other relationship" between the Authorised Representative and USG". Any suggestion that, by virtue of those provisions, the agreements did not create "any other relationship" between USG and EuropeFX and TradeFred respectively should be given no weight because, as was the case in AGM Markets, that plainly did not reflect the reality or substance of the relationships.
As for whether the acts carried out by the CAR were within the scope of their apparent authority, Beach J reasoned (at [466]) that "mere prohibition of misconduct does not relieve the principal of responsibility". His Honour referred (at [468]), in that context, to the well-known advice of the Privy Council in Mackay v Commercial Bank of New Brunswick (1874) LR 5 PC 394 at 410 (cited with approval by the High Court in Australasian Brokerage Ltd v Australian and New Zealand Banking Corporation Ltd (1934) 52 CLR 430 at 451-452) that the words "the scope of an agent's authority" should be given a wide construction and that "[p]rincipals 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 fraud". It followed, according to Beach J, that expressions such as "acting within the scope of an agency" should be "construed liberally" particularly "in the context of investor protection legislation that renders it sufficient that the act complained of falls within the agent's apparent authority" (at [469]). His Honour also observed (at [470]) that "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".
The same reasoning applies in this case. It accordingly matters not that there may be no evidence that USG authorised EuropeFX and TradeFred to engage in the contravening conduct that they have been found to have engaged in. In any event, there is evidence from which it could be inferred that USG was aware of and effectively authorised the impugned conduct, or at least did nothing to stop it. Either way, I am comfortably satisfied in all the circumstances that the contravening conduct of EuropeFX and TradeFred was within their apparent authority.
It follows that USG is liable for each the contraventions by EuropeFX and TradeFred of s 911A of the Corporations Act and ss 12DA, 12DB and 12CB of the ASIC Act.

[311]

Applicable statutory provisions and principles

As noted earlier in these reasons, USG was issued with an AFSL on 1 February 2016. The AFSL authorised USG, in relation to retail and wholesale clients, to provide general financial product advice for derivatives and foreign exchange contracts, deal in those financial products and make a market in relation to those financial products.
Section 912A(1)(a) of the Corporations Act provides that a "financial services licensee must … do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly". A person who contravenes s 912A(1)(a) thereby contravenes s 912A(5A) of the Corporations Act, a provision inserted in the Corporations Act with effect on and from 13 March 2019. Section 912A(5A) is a civil penalty provision: see s 1317E(3) of the Corporations Act.
The expression or phrase "efficiently, honestly and fairly" has been considered in a number of authorities, including: Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liq) [2012] FCA 414; (2012) 88 ACSR 206; Australian Securities and Investments Commission v Cassimitis (No 9) [2016] FCA 1023; (2016) 336 ALR 209; Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 147 (Westpac Bank Bill Swap Case); ASIC v Westpac and AGM Markets. It is unnecessary to consider in detail what has been said concerning the expression in those cases. It suffices to make the following brief points.
First, the words "efficiently", "honestly" and "fairly", and the composite or compendious expression "efficiently, honestly and fairly" do not admit of comprehensive definition: ASIC v Westpac at [172] (Allsop CJ). The boundaries and content of the expression or its various elements are incapable of clear or exhaustive definition: AGM Markets at [507].
Second, a person may contravene s 912A(1)(a) by failing to ensure that the financial services covered by their licence are provided efficiently, honestly and fairly, even though their impugned conduct may not have involved a contravention or breach of any separately existing legal duty or obligation, whether statutory, fiduciary, common law or otherwise: Westpac Bank Bill Swap Case at [2350]; AGM Markets at [512].
Third, conduct may fail to meet the standard of "honesty" even if it could not be said to be dishonest in the "criminal sense"; a person may fail to act "honestly" in the context of the s 912A(1)(a) expression if their conduct may be said to be "morally wrong in the commercial sense": Camelot Derivatives at [69(d)] and [70]; AGM at [509].
The issue concerning the territorial scope of s 912A(1)(a) is considered later after the outline of the facts relevant to the alleged contravention by USG.

[312]

Relevant facts

The facts established by the documentary evidence relevant to this alleged contravention may be shortly stated.
There could be no doubt that USG provided and marketed its Margin FX Contracts and CFDs to customers located in China. Indeed, just over half its customer base was located in China. As of 30 June 2019, USG had 18,442 customers in China and held approximately $28.4 million on behalf of those customers. By 1 January 2020, USG had approximately 139,000 customers in China (and held approximately $51 million on their behalf) and by 21 May 2020 it had approximately 152,000 customers in China (and held approximately $37.9 million on their behalf). USG had a Chinese language website.
Importantly, there was evidence that indicated that USG actively marketed its financial services and financial products to customers based in China. Among other things, it engaged or retained more than 15,000 "introducing brokers" who resided in China. Those introducing brokers introduced customers in China to USG and in return received a fee from USG. USG had an office in Shanghai in which nine people worked. The role of that office was to "host" the introducing brokers. USG also hosted seminars and other events in China.
USG was not registered by China's State Administration of Foreign Exchange to provide Margin FX Contracts to persons located in China. That, however, did not deter USG from marketing its Margin FX Contracts to customers in China.
There was documentary evidence which indicated that USG was aware from at least early 2018 that there was a risk that its provision of Margin FX Contracts to customers in China might contravene Chinese law. On 14 February 2018, USG obtained legal advice from an Australian law firm. The content of that advice is discussed later. It suffices at this point to note that the advice noted, among other things, that a relevant "agency" in China had stated that the provision of trading services by foreign institutions to domestic Chinese investors via online platforms without the approval of China's foreign regulators amounted to a violation of Chinese law. The advice did not address whether Chinese investors who traded in USG's Margin FX Contracts would breach Chinese law.
On 11 April 2019, ASIC published a media release entitled "Some AFS licensees may be breaking overseas laws". The media release included the following statements: Australian financial service (AFS) licensees that offer OTC derivatives to retail investors located in some overseas jurisdictions may be providing unlicensed or unauthorised services in those jurisdictions. Retail OTC derivatives are highly risky. Regulators in many jurisdictions (such as Europe, Japan, North America and China) have restricted or prohibited the provision to retail investors of certain OTC derivatives, such as binary options, margin foreign exchange and other contracts for difference (CFDs) to mitigate harm to retail investors. AFS licensees are on notice that in addition to overseas consequences of potential breaches of overseas law, ASIC will consider whether breaching overseas law is consistent with obligations under Australian law to provide services 'efficiently, honestly and fairly'. ASIC will also consider whether AFS licensee are making misleading or deceptive statements about the scope or application or effect of an AFS licence. … Chinese authorities have informed ASIC that: 'some online platforms are illegally engaged in forex margin trading activities.' Specific legal provisions have been implemented in China providing that 'any unauthorized institution that conducts forex margin trading without approval [in China] shall be deemed to be in violation of the law. It is also illegal for any client (entity or individual) to entrust an unauthorized institution to conduct forex margin trading.' Authorities in China have advised that no institution or agency has approval to carry out margin foreign exchange trading in China. AFS licensees with China-based clients may be conducting unlicensed or illegal activities in China if they are providing margin foreign exchange products to retail clients in China.
On 12 April 2019, ASIC sent an email addressed to the attention of USG in which it referred to the media release and stated, among other things, that "in order to comply with the Licensee's obligations as an Australian financial services licensee the Licensee should … [i]mmediately cease providing financial services to new clients residing in overseas jurisdictions in which the Licensee is not licensed or authorised to provide its financial services (the Affected Jurisdictions) … [and] [i]nitiate an orderly wind down of client positions for current clients of the Licensee residing in the Affected Jurisdictions". Those client positions were required to be closed out no later than 31 May 2019.
USG did not comply with that directive. Indeed, as noted earlier, USG not only retained but increased its customer base during the second half of 2019 and into 2020.
USG obtained legal advice from a law firm based in China concerning ASIC's media release and email. The content of that advice is discussed later. It suffices at this point to note that the advice was based on instructions from USG which included that USG's customers in China were "onboarded and serviced" by USG "wholly outside China". USG did not instruct the law firm that it in fact retained local Chinese introducing brokers and had an office in Shanghai. It is also worth noting that USG did not seek advice from the Chinese lawyers in respect of the question whether USG's customers based in China were breaching Chinese domestic law by trading in USG's Margin FX Contracts.

[313]

Were USG's actions illegal as a matter of Chinese law?

ASIC adduced expert opinion evidence concerning the relevant operation of Chinese domestic law from Dr Andrew Godwin. Dr Godwin was eminently qualified to express opinions in respect of the operation of Chinese law. He was not cross-examined, and his opinions were not otherwise challenged or contradicted.
Dr Godwin's opinion was that the provision by foreign based institutions of Margin FX Contracts to customers in China via websites or trading platforms, was likely to be illegal as a matter of Chinese domestic law if the institution was not approved by the China Securities Regulatory Commission (CSRC) or registered by the State Administration of Foreign Exchange (SAFE). That was the case even if the operators of the foreign based institutions did not engage in any solicitation activities in China. Such conduct was, in Dr Godwin's opinion, likely to constitute a breach of the 1994 Notice Concerning Strictly Investigating Illegal Activities Involving Foreign Exchange Transactions (the Notice), which in turn would constitute a breach of Article 45 of the Regulations of the Peoples Republic of China on the Administration of Foreign Exchange (the Foreign Exchange Regulations).
USG was not approved by the CSRC or registered by the SAFE. It followed that Dr Godwin's opinion was that USG was likely to have contravened domestic Chinese laws by making its Margin FX Contracts and CFDs available to Chinese residents via its website or trading platform, even if it did not engage in any solicitation activities in China.
The position was even clearer where the person or entity which operated the foreign based website or platform also engaged in solicitation activities in China, including by engaging local individuals to procure customers, or by conducting seminars or events in China. Dr Godwin's unequivocal opinion was that such activity was illegal as a matter of Chinese law and constituted a clear breach of the Notice and article 45 of the Foreign Exchange Regulations.
In Dr Godwin's opinion, the provision of CFDs via websites or platforms was likely to be treated in the same way as Margin FX Contracts even if the CFDs did not involve currency pairs.
It followed that Dr Godwin's opinion was that USG's conduct, as identified earlier, in not only providing Margin FX Contracts and CFDs to Chinese customers via its website and platform, but also in engaging in solicitation activities in China, involved a breach of Chinese law.
As noted earlier, there was documentary evidence that USG had sought and obtained legal advice from two law firms concerning the lawfulness of its activities in China. Dr Godwin was provided with copies of those letters of advice. His evidence was that the content of those letters did not alter his opinions, which was perhaps a courteous way of saying that he considered aspects of the advice in the letters to be incorrect.
The first letter of advice, which was from an Australian law firm and was dated 14 February 2018, was highly qualified. The specific advice that USG sought from that law firm was whether "the 'solicitation' of clients throughout Asia could amount to a contravention of its AFSL or a breach of the Corporations Act." The advice provided in that regard was that Australian law did not prohibit USG from "choosing to accept or engaging with clients overseas" provided that, among other things, USG ensured that any introducing brokers complied with the laws in those countries. The law firm also advised that "merely because an AFSL holder accepts clients from a foreign jurisdiction does not mean that they are a provider of financial services in that jurisdiction - this is a matter of fact and degree of solicitation of clients".
Importantly, however, the advice was highly qualified when it came to considering whether USG might breach Chinese law by providing Margin FX Contracts to customers in China. The letter stated that the advice did not "amount to advice on the financial services and securities laws" in jurisdictions in which there was a "higher risk for proactive inducement". China was said to be one of those jurisdictions. The lawyers also recommended that USG "contact a law firm in that jurisdiction familiar with local financial services laws" if "jurisdiction specific" advice was required.
The letter did, however, briefly address the position in respect of China. It advised that the regulation of "forex and CFDs throughout China" was "somewhat of a 'grey area'", but also noted that on 10 November 2017, the National Internet Finance Association of China had stated that "all kinds of trading services provided by foreign institutions to domestic investors via online platforms, including websites and mobile communications terminals and applications, without the approval of China's financial regulators, amount to a violation of local law". That advice would or should have put USG on notice that there was at least a significant risk that its provision of Margin FX Contracts to customers in China might contravene Chinese domestic law.
Three other points should be noted in respect of the advice from the Australian law firm. First, the advice does not directly address whether the provision by USG of financial services or financial products to customers in a foreign jurisdiction might amount to a contravention of s 912A(1)(a) of the Corporations Act if the provision of those services or products contravened the laws of the foreign jurisdiction. Second, the advice also does not address whether the provision by USG of financial services or financial products to customers in a foreign jurisdiction might amount to a contravention of s 912A(1)(a) of the Corporations Act if the provision of those services or products resulted in the customers contravening, or potentially contravening, the laws of the foreign country. Third, the advice did not address whether USG's provision of Margin FX Contracts to customers in China resulted, or might result, in those customers contravening Chinese law.
The second letter of advice, dated 4 June 2019, was from a law firm based in China. The letter of advice indicated that the advice was provided on the basis of instructions which included that USG "onboarded and serviced" its Chinese customers "wholly outside China" and that the Chinese customers traded on the platform on a "cross border basis". That instruction was inaccurate, if not completely false. The lawyers were not told that USG engaged in solicitation activities in China, including by engaging local individuals to procure customers and conducting seminars and other events in China. The advice therefore did not address the actual basis upon which USG "onboarded and serviced" its customers in China.
Putting that deficiency to one side, the Chinese based lawyers advised that a "lacuna" existed in Chinese law in respect of the cross-border provision of CFDs and Margin FX Contracts. They indicated that in their view China was not a jurisdiction in which a holder of an AFSL was required to hold a licence or authorisation to provide CFDs or Margin FX Contracts on a "wholly cross border basis". That advice was, however, qualified by the statement that Chinese legislation and regulations were "constantly evolving" and that Chinese legislation and regulations were "often complex, incomplete and yet to be fully rationalised".
As already noted, Dr Godwin effectively disagreed with the advice given by the law firms retained by USG. I prefer Dr Godwin's unchallenged evidence and reject the opinions expressed in the letters. In any event, the advice provided by the law firm based in China was based on the instruction, which, it may be inferred, Mr Zakhaim and USG must have known to be false, that USG did not engage in any solicitation activities in China.
I conclude that USG's actions in soliciting and providing Margin FX Contracts and CFDs to customers in China was unlawful as a matter of Chinese law. I also infer and conclude that USG knew that to be the case, or at least knew that it was likely to be the case. It had effectively been put on notice by ASIC that its actions were, or were likely to be, unlawful and later sought advice on the basis of instructions it must have known to be false.

[315]

The territoriality issue - can the provision of financial services or financial products to customers who reside in a foreign jurisdiction found a contravention of s 912A(1)(a)?

The amicus contended that, even if it be accepted that USG's provision of Margin FX Contracts and CFD trading to customers in China contravened, and caused the customers to contravene, China's domestic law, USG nevertheless cannot be said to have contravened s 912A(1)(a) of the Corporations Act. That was said to be the case because, properly construed, s 912A(1)(a) has no extraterritorial operation and is limited to conduct involving the provision of financial services to consumers in Australia.
I reject that contention.
The submissions advanced by the amicus concerning the limited territorial reach of s 912A(1)(a) of the Corporations Act involved the following steps.
First, the amicus contended that there is no express provision in the Corporations Act which addresses the territorial reach of s 912A(1)(a). The amicus submitted that, in those circumstances, it is necessary to identify the relevant "hinge" or "object of legislative concern" to the provision and then identify its territorial connection: BHP Group Ltd v Impiombato [2022] HCA 33; (2022) 405 ALR 402 at [59]; Chubb Insurance Company of Australia Ltd v Moore [2013] NSWCA 212; (2013) 302 ALR 101 at [146].
Second, the amicus submitted that the hinge or central conception of s 912A(1)(a) of the Corporations Act is the provision, by a financial services licensee, of financial services covered by the licence.
Third, and critically, the amicus submitted that the territorial scope of that statutory hinge is that the financial services provided by the licensee must be provided to customers or consumers in Australia. The amicus relied, in support of that submission, on the following textual and contextual considerations: first, subject to some exceptions that are not presently relevant, s 911A(1) of the Corporations Act only imposes an obligation on a person to hold a financial services licence if the person carries on a financial services business in "this jurisdiction"; second, s 911D(1) of the Corporations Act specifies one circumstance in which a person is taken to carry on a financial services business "in this jurisdiction", that circumstance being that the person engages in conduct which is intended to influence people "in this jurisdiction" to use the financial services provided by the person; third, s 5 of the Corporations Act relevantly defines "this jurisdiction" as meaning Australia; fourth, a construction of s 912A(1)(a) which extends its territorial reach beyond "this jurisdiction" (i.e. Australia) would, so it was submitted, be inconsistent with s 912A(1)(c), which imposes on a licensee an obligation to comply with financial services laws, all of which (by virtue of the definition of financial services laws in s 761A) are to be found in Australian legislation; and fourth, the fact that the objects of Ch 7 of the Corporations Act, as set out in s 760A, are, so it was submitted, directed towards regulating financial services and markets in Australia for the benefit of Australian consumers.
Fourth, the amicus submitted that if, contrary to the primary submission, the statutory hinge of s 912A(1)(a) could not be identified, the presumption against extraterritoriality would apply. The amicus also submitted that, by virtue of s 21(1)(b) of the Acts Interpretation Act 1901 (Cth), the expression "financial services" should be construed as meaning financial services provided to consumers in Australia.
There are, in my view, several reasons why the submissions of the amicus in respect of the territorial limits of s 912A(1)(a) of the Corporations Act cannot be accepted.
First, the starting premise of the submissions of the amicus - that there is no express provision in the Corporations Act which addresses the territorial reach of s 912A(1)(a) - cannot be accepted. Section 5 of the Corporations Act deals expressly with the general territorial application of the Corporations Act. Section 5(3) provides that each provision of the Act applies in "this jurisdiction", which, by virtue of s 5(2), essentially means in Australia and each State. Significantly, however, s 5(4) provides that, subject to s 5(8) (a provision that is of no present relevance), "each provision of this Act also applies, according to its tenor, in relation to acts and omissions outside this jurisdiction". Moreover, s 5(7) provides that each provision of the Act applies according to its tenor to, relevantly, natural persons whether resident in "this jurisdiction" or Australia or not.
The effect or operation of the words "according to its tenor" in ss 5(4) and 5(7) is that those provisions will apply in terms to any given provision of the Corporations Act unless there is something in the words or tenor of the provision which suggest any limitations such that the clear words of ss 5(4) and 5(7) do not apply to it: PCH Offshore Pty Ltd v Dunn [2009] FCA 553; Waller v Freehills (2009) 177 FCR 507; [2009] FCAFC 89 at [53]-[54].
I am unable to see anything in the words or tenor of s 912A(1)(a) which would suggest that the general position provided for in s 5(4) and s 5(7) should not apply to it. Section 912A(1)(a) in effect imposes a statutory duty on a financial services licensee to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly. There is nothing in the text of s 912A(1)(a), or the relevant context, to suggest that the statutory duty in s 912A(1)(a) only applies to financial services that the licensee provides to consumers in Australia. The language used in s 912A(1)(a) is wide enough to encompass all financial services provided by the licensee that are covered by the licence. There is no requirement that the services be provided in Australia, or that they be provided to a consumer or customer in Australia. Nor are there any apparent textual or contextual considerations which would suggest any legislative intention to narrow the statutory duty to apply only to financial services provided in Australia to Australian consumers. Rather, the apparent legislative intent or purpose is that, once a person is issued with an Australian financial services licence, the person is subject to a statutory duty to ensure that the services they provide under the license are provided efficiently, honestly and fairly, wherever, or to whomever, they may be provided.
It should also be noted in this context that the Corporations Act does contain provisions which expressly modify the territorial reach of certain provisions. One example is s 908DD of the Corporations Act, which expressly specifies the geographical scope of certain offences and civil penalty provisions relating to the manipulation of financial benchmarks. There is no provision in the Corporations Act which expressly limits the geographical or territorial scope of s 912A(1)(a). The Full Court in Waller v Freehills reasoned (at [57]), in effect, that the existence in the Corporations Act of provisions which expressly modify certain provisions of the Act reinforced the conclusion that other provisions which are not subject to express modification apply extraterritorially in accordance with s 5(4) and s 5(7).
If, as I have found, s 5(4) applies to s 912A(1)(a) of the Corporations Act, there is no need to go in search of the statutory "hinge" as submitted by the amicus.
Second, even if it was necessary to go in search of the statutory "hinge" of s 912A(1)(a) in order to determine the territorial scope of the provision, I am not persuaded that the statutory hinge of the provision is one which carries with it a territorial limitation to the effect that the provision of financial services covered by s 912A(1)(a) must be provided in Australia to consumers or customers in Australia. In my view, the relevant hinge, or central conception of s 912A(1)(a) is the regulation of financial services provided by a financial services licensee, being services covered by the license, wherever, or to whomever, those services may be provided. That hinge is not subject to any territorial limitation to the effect that the financial services in question be provided in Australia to a customer or consumer in Australia as contended by the amicus.
As has already been noted, the submissions advanced by the amicus rely heavily on the fact that s 911A(1) provides that a person who carries on a financial services business "in this jurisdiction" must hold an AFSL which covers the provision of "the financial services". The amicus also relied on the fact that s 911D(1) provides that a financial services business is taken to be carried on "in this jurisdiction" by a person if the person engages in conduct that is intended to induce people "in this jurisdiction" to use the financial services, or is likely to have that effect. The submission of the amicus is, in short, that because the requirement to hold an AFSL is based on whether the financial services business is carried on in "this jurisdiction" (which for present purposes may be taken to be Australia), and because a person is taken to carry on a financial services business in Australia if the person engages in conduct relating to people in Australia, it must follow that s 912A(1)(c), which relates to the conduct of a licensee, must be limited to the provision of financial services to a person in Australia.
I do not accept that submission. It may of course be accepted that, by virtue of s 911A(1), a person is only required to hold an AFSL if they carry on a financial services business in Australia. Section 911D(1) also specifies one circumstance in which a person is taken to carry on a financial services business in Australia. It is, however, clear from the terms of s 911D(2) that a person may be found to carry on a financial services business in Australia in other circumstances. It is in my view equally clear from the very wide definition of "financial service" in s 766A, the equally wide definition of dealing in a financial product in s 766C, and the definition of making a market in s 766D of the Corporations Act, that a person may be found to carry on a financial services business in Australia if they issue a financial product in Australia, or make a market for a financial product in Australia, even if persons outside Australia may trade in those financial products, or trade in the market made by the Australian based financial services business. The question whether a financial services business is carried on in Australia does not necessarily depend on the location of the client: Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503 at [389] and [393].
There is also nothing to suggest that, upon being issued with an AFSL, the licensee is somehow limited to providing financial services to customers in Australia, or limited to the provision of financial services of the kind referred to in s 911D(1). While the services provided by the licensee must be covered by the AFSL, that is not to say that the financial services covered by the licence are limited to financial services provided in Australia to a person in Australia. The AFSL issued to USG is a case in point. It is not, in terms, so limited. It extends to providing general financial product advice for derivatives and foreign exchange contracts, dealing in those financial products and making a market for those financial products. There is no territorial limitation in respect of the provision of those services.
Section 912A(1)(a) is not, in terms, limited in operation to the provision of financial services either in Australia, or to customers in Australia. It extends to any "financial services covered by the licence". As already indicated, the financial services covered by USG's AFSL were not limited to financial services provided in Australia or provided to Australian customers. The construction favoured by the amicus effectively involves reading the words "in Australia to Australian consumers" after the word "provided" in s 912A(1)(a).
Third, I am not persuaded that the terms of s 912A(1)(c) of the Corporations Act assists the argument advanced by the amicus. The fact that one of the duties or obligations created by s 912A is limited in terms to Australia's financial services laws does not mean that all the other duties and obligations in s 912A are limited to the provision of financial services in Australia to persons in Australia. Section 912(1) contains 13 separate duties or obligations, each of which operates in accordance with its terms. The fact that some of those obligations might contain a territorial limitation provides no basis for construing s 912(1)(a) as being subject to such a limitation. In any event, many financial services laws have, by virtue of s 5(4) and s 5(7), an extraterritorial operation.
Fourth, I am equally unpersuaded that, as contended by the amicus, the broad objects of Ch 7 of the Corporations Act, as outlined in s 760A, are limited to financial services or financial products provided to Australian consumers. The objects include promoting "the provision of suitable financial products to consumers of financial products" and "fairness, honesty and professionalism by those who provide financial services." There is no reason to suppose that those objects are limited to financial products or financial services provided to Australian consumers in Australia, particularly where those financial products or financial services are provided by a person who holds an AFSL.
It follows that, if it were necessary to discern the statutory hinge or object of concern in respect of s 912A(1)(a), I do not accept that the hinge or object of concern is one which carries with it a territorial limitation which limits the reach of the provision to financial services provided in Australia to Australian consumers.
The submissions advanced by the amicus appeared at times to fall back on the proposition that the territorial hinge of s 912A(1)(a) was one which carried with it a limitation that the financial services provided by the licensee were provided in Australia, even if not to a person or persons located in Australia. The short answer to that proposition, or that suggested construction of s 912A(1)(a), is that, even if that were the relevant statutory hinge and territorial limitation of the provision, it would not follow that the relevant conduct engaged in by USG in this matter was outside the scope of s 912A(1)(a). That is because the conduct engaged in by USG in issuing Margin FX Contracts and CFDs, and the making of a market in respect of those financial products, involved the provision of financial services in Australia, even in those instances where the customers who traded in those financial products, or traded in the market made by USG, were located in China.
As adverted to earlier, a person provides a financial service if they, among other things, deal in a financial product or make a market for a financial product: s 766A(1)(b) and (c) of the Corporations Act.
A person deals in a financial product if they, among other things, issue a financial product: s 766C(1)(b) of the Corporations Act. Margin FX Contracts and CFDs are financial products: ss 763A and 766A(1)(c) of the Corporations Act. Section 9 of the Corporations Act defines "issue" as including "circulate, distribute and disseminate". In Re EncoreFX (Australia) Pty Ltd in Liq (No 2) [2021] FCA 27, Colvin J noted (at [53]) that the definition in s 9 expanded the usual meaning of the term "issue", which includes where a "company itself offers … financial products to those interested in acquiring those products". Section 761E of the Corporations Act defines when a financial product is issued to a person. Relevantly, s 761E(2) provides that a financial product is issued to a person "when it is first issued, granted or otherwise made available to a person" and s 761E(3) (and item 3 in the table to that subsection) provides that a derivative is issued when "the person [to whom it is issued] enters into the legal relationship that constitutes the financial product".
It is difficult to see how it could be concluded otherwise than that USG issued the relevant Margin FX Contracts and CFDs in Australia, even if some of the customers who traded in those products were physically located overseas. USG was an Australian registered company, with an office in Australia. It held an AFSL. It offered or made its Margin FX Contracts and CFDs from Australia. The money that USG received from the persons to whom the products were issued was received in Australian bank accounts. The legal relationship that constituted the relevant financial products were in those circumstances most likely entered into in Australia, even in those cases where the persons to whom the products were issued were located overseas.
In relation to making a market, s 766D of the Corporations Act deals with the meaning of making a market for a financial product. Section 766D(1) provides that a person makes a market for a financial product if, among other things, the person, "either through a facility, at a place or otherwise … regularly states the prices at which they propose to acquire or dispose of financial products on their own behalf". There could be little doubt that when USG stated the prices at which it proposed to acquire or dispose of the Margin FX Contracts and CFDs it issued, it did so in and from Australia. As already noted, USG's office was in Australia and it was undoubtedly from its Australian office, or through the facility (its website or trading platform) which it operated from that office, that USG regularly stated the prices at which it proposed to acquire or dispose of those financial products.
It follows that, even if s 912A(1)(a) of the Corporations Act is subject to the territorial limitation that the relevant financial services were provided in Australia, that territorial limitation was satisfied or met in the circumstances of this case, even though some of the customers who ultimately took advantage of those services were physically located in China. It was in Australia that USG issued the Margin FX Contracts and CFDs which those customers traded in. It was also in Australia that USG made a market in respect of those financial products. USG therefore provided the relevant financial services in Australia.
In all the circumstances, I reject the contention advanced by the amicus that USG cannot be found to have contravened s 912A(1)(a) of the Corporations Act in respect of the provision of financial services to customers located in China. In my opinion, ss 5(4) and 5(7) of the Corporations Act apply to s 912A(1)(a), with the result that s 912A(1)(a) can apply both in relation to acts or omissions of a financial services licensee which occur outside Australia and to natural persons who reside outside of Australia. I am not persuaded that the tenor, or the text and context, of s 912A(1)(a) contains any limitations which would suggest that ss 5(4) and 5(7) do not apply to it.
Alternatively, if it were necessary to identify the hinge or central conception of s 912A(1)(a), that hinge or central conception is the regulation of financial services provided by a financial services licensee, being services covered by the license. That hinge is not subject to any territorial limitation that the financial services be provided in Australia to a customer or consumer in Australia. If, however, that hinge is subject to a territorial limitation to the effect that the financial services be services provided in Australia, the relevant financial services which were provided by USG were provided in Australia, even where the consumers who ultimately took advantage of those services may have been located in China.

[316]

Can the provision of financial services in contravention of a foreign law result in a contravention of s 912A(1)(a)?

The amicus also submitted that, even if s 912A(1)(a) could be construed as applying in the case of the financial services provided by USG to customers in China, USG could nevertheless not be found to have contravened s 912A(1)(a) in relation to those services as contended by ASIC. That was said to be because the duty in s 912A(1)(a) is not, or cannot be, informed by the content of a foreign law. Put another way, it was contended that foreign law, in this case the domestic law of China, cannot be incorporated into Australian domestic law by construing the duty in s 912A(1)(a) as including that foreign law.
I do not accept that contention.
In my view, a financial services licensee may be found to have failed to ensure that its financial services were provided efficiently, honestly and fairly in circumstances where the licensee knew, or ought reasonably to have known, that its provision of the financial services to customers located in a foreign jurisdiction may result in it and its customers contravening the law in that jurisdiction. That is particularly if the licensee failed to warn the foreign based customers that it may be exposing them to civil or criminal liability.
That is not to say that the statutory duty is informed by the content of foreign law in question, or that the foreign law is somehow incorporated in Australian domestic law. The contravention of s 912A(1)(a) in those circumstances is not made out simply on the basis that the foreign law was contravened. Rather, it is made out on the basis that, by exposing its customers to potential civil or criminal liability, and failing to warn the customers of that potential liability, the financial services licensee, as a matter of fact, failed to ensure that its financial services were provided efficiently, honestly and fairly. The words "efficiently, honestly and fairly" are of wide import. I can see no reason why the statutory duty created by those words is not sufficiently broad to effectively require a licensee to take reasonable and appropriate steps to ensure that, it in providing its financial services, it not expose its customers to civil or criminal liability, or that it at least warn its customers that they might be so exposed, even if that liability might only arise under a foreign law.
As noted earlier, a breach of s 912A(1)(a) of the Corporations Act does not depend on any contravention of a separately existing legal duty or obligation. That is not to say, however, that a financial services licensee cannot be found to have breached s 912A(1)(a) because, in providing its services, the licensee breached a separately existing legal duty. In my view, a licensee may be found to have failed to provide the services covered by its AFSL "efficiently, honestly and fairly" if its provision of those services contravened a separately existing legal duty or obligation. Moreover, I can see no reason why there could not be a breach of s 912A(1)(a) in those circumstances where the separately existing legal duty or obligation was one established by a foreign law, accepting of course that a contravention of that foreign law could not itself directly give rise to any liability in Australia. It should also be noted in this context that ASIC did not contend that any breach of a foreign law would necessarily result in a contravention of s 912A(1)(a) of the Corporations Act.
The fact that ASIC was unable to point to any previous case in which a financial services licensee had been found to have contravened s 912A(1)(a) of the Corporations Act by exposing its customers to civil or criminal liability in a foreign jurisdiction is in my view neither here nor there. The question whether a financial services licensee failed to ensure that its financial services were provided efficiently, honestly and fairly is a question of fact to be decided in any given case. As Beach J observed in AGM Markets at [519], the statutory duty in s 912A(1)(a) can be applied to "an infinite variety of corporate delinquency and self-interested commerciality".

[318]

SUMMARY OF FINDINGS AND CONCLUSIONs

As was noted at the outset, the parties agreed, and the Court ordered, that issues concerning liability be heard and determined separately and before any issues relating to relief. This judgment has accordingly only addressed whether USG, EuropeFX and TradeFred contravened the Corporations Act and ASIC Act as alleged by ASIC. For the detailed reasons that have been given, I have found that USG, EuropeFX and TradeFred engaged in various forms of conduct in contravention of both the Corporations Act and the ASIC Act.
In the case of EuropeFX, I have found (including in respect of admitted contraventions) that EuropeFX:
Contravened s 911A(1) of the Corporations Act on 185 occasions by providing personal advice to customers, through its account managers or representatives, in circumstances where it was not licensed to do so.
Contravened s 12DB(1) of the ASIC Act on 190 occasions by making, in trade or commerce, in connection with the supply or possible supply or financial services, or in connection with the promotion of such services, false or misleading representations that the services were of a particular standard or quality, or that the services had certain performance characteristics or benefits.
Contravened s 12DA(1) of the ASIC Act on 18 occasions by engaging in conduct, in trade and commerce and in relation to financial services, where that conduct was misleading or deceptive, or likely to mislead or deceive.
Contravened s 12CB(1) of the ASIC Act on one occasion by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services, where that conduct comprised or constituted a system of conduct or pattern of behaviour that was, in all the circumstances, unconscionable.
Contravened s 12CB(1) of the ASIC Act on eight occasions by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services to a person, where that conduct was, in all the circumstances, unconscionable.
In the case of TradeFred, I have found that it:
Contravened s 911A of the Corporations Act on 20 occasions by providing personal advice to customers, through its account managers or representatives, in circumstances where it was not licensed to do so.
Contravened s 12DB(1) of the ASIC Act on 54 occasions by making, in trade or commerce, in connection with the supply or possible supply or financial services, or in connection with the promotion of such services, false or misleading representations that the services were of a particular standard or quality, or that the services had certain performance characteristics or benefits.
Contravened s 12DA(1) of the ASIC Act on 2 occasions by engaging in conduct, in trade and commerce and in relation to financial services, where that conduct was misleading or deceptive, or likely to mislead or deceive.
Contravened s 12CB(1) of the ASIC Act on one occasion by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services, where that conduct comprised or constituted a system of conduct or pattern of behaviour that was, in all the circumstances, unconscionable.
Contravened s 12CB(1) of the ASIC Act on four occasions by engaging in conduct, in trade and commerce and in connection with the supply or possible supply of services to a person, where that conduct was, in all the circumstances, unconscionable.
In the case of USG, I have found that it:
Contravened s 12DB(1) of the ASIC Act on 56 occasions by making, in trade or commerce, in connection with the supply or possible supply or financial services, or in connection with the promotion of such services, false or misleading representations that the services were of a particular standard or quality, or that the services had certain performance characteristics or benefits.
Contravened s 911A of the Corporations Act on 306 occasions, those being contraventions arising from the fact that, on each of the occasions when EuropeFX and TradeFred engaged in conduct that contravened s 911A of the Corporations Act, they did so as agents of USG by reason of s 769B(1)(a) of the Corporations Act.
Contravened: (a) s 12DB(1) of the ASIC Act on 282 occasions; (b) s 12DA(1) of the ASIC Act on 20 occasions; and (c) s 12CB(1) of the ASIC Act on 14 occasions; those being contraventions arising from the fact that, on each of the occasions when EuropeFX and TradeFred engaged in conduct that contravened ss 12DB(1), 12DA(1) and 12CB(1) of the ASIC Act, they did so as agents of USG by reason of s 12GH(2)(a) of the ASIC Act.
Contravened s 912A(1)(a) of the Corporations Act by failing to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly.
It will be necessary to convene a further hearing to receive evidence and hear submissions concerning the granting of appropriate relief in respect of those contraventions. I will order that the proceeding be listed for a case management hearing in the near future for the purpose of making appropriate procedural orders in respect of the conduct of that further hearing. I certify that the preceding 1806 numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.

[319]

Appendix A - Defined Terms The following terms are defined in the Reasons for Judgment (paragraph references are to paragraphs in the Reasons): * 1. A Book: [54] an internal categorisation at USG for customer trades, including those made via a CAR, which were hedged with a hedging counter-party; 2. AFSL: [1] an Australian Financial Service Licence, which authorises the licensee to provide particular financial services; 3. B Book: [54] an internal categorisation at USG for customer trades, including those made via a CAR, which were not hedged with a hedging counter-party; 4. Bank Account Representations: [942] a category of representations that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate greater returns by investing their money with EuropeFX or TradeFred (as the case may be) by trading CFDs or Margin FX Contracts than by keeping it in a bank account, i.e. an account with an Australian deposit-taking institution; 5. Bonus Representations: [958] a category of representations that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that customers would receive and would be reasonably able to access "Bonus Credits" when they deposited a certain amount of money to their trading account; 6. CAR: [31] a corporate authorised representative, a status which authorises the CAR to provide particular financial services on behalf of the holder of the AFSL, subject to the terms of the AFSL; 7. CFD or Contract for Difference: [1], [76]-[78] an "over-the-counter" derivative financial product, being a contract between a market maker and a trader to exchange, at the closing of the contract, the difference between the opening and closing prices of the underlying asset, multiplied by the number of units of that asset specified in the contract. 8. Deposit Statement: [817] a category of alleged personal advice statements, comprising statements to the effect that customers should deposit further funds to, or not withdraw funds from, their trading account; 9. Equities Representations: [938] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that, by reducing investments in equities (including those held in a superannuation account) and increasing investment in the derivatives products offered by EuropeFX (or TradeFred as the case may be): (i) customers would reduce their exposure to risk; or (ii) it was reasonably likely, or there was a reasonable prospect, that customers would increase their returns; 10. Location Representations: [954] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that: (i) EuropeFX (or TradeFred, as the case may be) had main offices, headquarters or offices from which it conducted a substantial part of its business located in Australia; or (ii) the account managers were located in Australia; 11. Loss Recovery Representations: [934] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that: (i) positions that had moved against a customer represented only "temporary" losses, and that it was reasonably likely, or that there was a reasonable prospect, that such positions would become profitable; or (ii) it was reasonably likely, or there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts, profits sufficient to recover realised and unrealised losses suffered by the customer from their trading; 12. Margin FX Contract or Margin Foreign Exchange Contract: [1], [79] an "over-the counter" derivative financial product, being a contract between a market maker and a trader to exchange, at the closing of the contract, the difference between the opening and closing value of one currency relative to another currency, multiplied by the number of units specified in the contract. 13. Money Risk Representation: [926] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that, with regards to the risk associated with depositing money to a trading account: (i) by increasing the amount of money in the customer's trading accounts, customers would reduce the level of risk to which they were exposed; (ii) the risk associated with transferring additional funds to the customer's trading account would carry an equivalent risk to holding money in a bank account, i.e. an account with an Australian deposit-taking institution; or (iii) only those funds in the customer's trading account used to open CFD or Margin FX Contract positions would be exposed to adverse movement in the price of the asset underlying the relevant position; 14. MT4: [36] the online trading platform through which EuropeFX offered trading in CFDs and Margin FX Contracts. 15. PDS: [33] a Product Disclosure Statement for a financial product; 16. personal advice statements: [103] - [104] statements that were alleged to constitute "personal advice", as defined by s 766B(3) of the Corporations Act, comprising the categories of Deposit Statements, Position Statements, Signal Provider Statements, and Trading Strategy Statements. The personal advice statements were particularised in Annexure A.1 to the SOC; 17. Statement of Narrowed Case: [846] the Statement of Narrowed Case with respect of EuropeFX, filed by ASIC on 22 August 2024; 18. Plan Representations: [946] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that a plan would be developed, or had been developed, for the customer which was designed to meet the customer's objectives or needs and improve the customer's financial position; 19. Position Statements: [810] a category of the alleged personal advice statements, comprising statements to the effect that customers should open, close or leave open specific CFD or Margin FX Contract positions; 20. Profit Representations: [917] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that it was reasonably likely, or that there was a reasonable prospect, that customers would generate, from trading CFDs or Margin FX Contracts: (i) profits consistent with a specific figure or percentage return on investment stated by the account manager; (ii) income sufficient for the customer's trading to be their main source of income; or (iii) income sufficient to constitute a "secondary income"; 21. Regulation Representations: [950] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that EuropeFX or TradeFred (as the case may be) were "regulated" by ASIC, such that the customer was exposed to less risk that would otherwise be the case; 22. Revenue Representations: [921] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that: (i) USG would not make a market for any CFD or Market FX Contract positions opened by the customer; (ii) EuropeFX (or TradeFred as the case may be) would generate revenue when the customer made money; (iii) EuropeFX or TradeFred would generate revenue based solely on commissions or fees which applied when a customer opened a CFD or Margin FX Contract position (such as spread or commission) and/or when a customer kept open a CFD or Margin FX Contract position (swap charges); (iv) EuropeFX or TradeFred would not make money when a customer lost money; or (v) the account managers would earn commission based solely on commissions or fees which applied when a customer opened a CFD or Margin FX Contract position (such as spread or commission) and/or when a customer kept open a CFD or Margin FX Contract position (swap charges); 23. Rob Clayton Reports: [1181] the alleged reports which were the subject of the Rob Clayton Report Representations and the Rob Clayton Representations; 24. Rob Clayton Report Representations: [1179], [1181] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising statements to the effect that an analyst engaged by USG named Rob Clayton prepared reports (the Rob Clayton Reports) which would be emailed to the customer and: (i) would provide the customer with advice regarding opening particular positions, including details such as when to buy or sell particular assets, or details such as the stop loss or take profit which should be used on particular positions; and/or (ii) would result in an accuracy or success rate of 80% or greater if followed; and/or (iii) were circulated to the major Australian banks; 25. Rob Clayton Representations: [1179], [1182] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising statements to the effect that an analyst engaged by USG named Rob Clayton was: (i) in his previous role at Westpac, the head, or the head technical analyst, of Westpac and/or responsible for advising or directing Westpac as to what the bank should trade; and/or (ii) paid by USG millions of dollars a year to write the Rob Clayton Reports; 26. Signal Provider Statements: [814] a category of the alleged personal advice statements, comprising statements to the effect that customers should open, close or leave open CFD or Margin FX Contract positions in accordance with indicators on third-party websites; 27. SOC: [103] the Statement of Claim filed by ASIC on 12 April 2021; 28. Trading Strategy Statements: [820] a category of the alleged personal advice statements, comprising statements to the effect that customers should adopt a trading strategy as advised by the account manager in relation to CFD or Margin FX Contracts; 29. USG Profit Representations: [1179], [1180] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that customers trading CFDs or Margin FX Contracts: (i) would make a profit, either by reference to a specific figure or percentage return on investment; or generally (ii) would earn "income" of $100 to $200 per week; or (iii) would be able to close 90% or more of their trades in a profitable position; 30. Withdrawal Representations: [930] a category of statements that were alleged to constitute false or misleading representations or to amount to misleading or deceptive conduct, comprising representations to the effect that customers would be able to withdraw money deposited into their trading accounts: (i) in the same manner as money held in a bank account, i.e. an account with an Australian deposit-taking institution; or (ii) within a particular period of time as specified by the account manager, including immediately or at any time;

[320]

Appendix B - Key Individuals & Entities The following key individuals and entities are referred to in the Reasons for Judgment (paragraph references are to paragraphs in the Reasons): * 1. Addnet Solutions Pty Ltd: [34] the sole shareholder of EuropeFX, of which Mr Sasso was the sole director and shareholder (as trustee for Maxiflex); 2. AFCA: [51] the Australian Financial Complaints Authority; 3. Affilimedia Global Pty Ltd: [38] a company, apparently based in Belize, to which EuropeFX outsourced its "e-marketing"; 4. Ms May Ajaz: [154] a former employee of EuropeFX during the relevant period, who was employed as a "quality control" officer and supervised by Mr Martin; 5. Mr Gal Amar: [34] a person who was said to be an adviser to Maxiflex and from whom Mr Sasso took instructions in relation to the conduct and management of EuropeFX's business during the relevant period; 6. amicus curiae: [8], [1728] Ms Sera Mirzabegian SC (with Ms Talia Epstein) appointed pursuant to orders of 13 December 2022; 7. Mr Ari Amsalem: [51] an employee of Maxiflex who was responsible for managing EuropeFX's complaints and dispute resolution process; 8. ASIC: [3] the Australian Securities and Investment Commission, the plaintiff; 9. BAFF Affiliate Networks Ltd: [38] a Cypriot company which provided services to EuropeFX aimed at attracting new customers through online traffic; 10. Mr John Blundell: [59], [780] the Head of Compliance at City Index and ASIC's expert witness with respect to trading in over-the-counter derivatives trading, as well as retail customer engagement in relation to trading in those financial products; 11. Ms Julie Boden: [477]ff one of the EFX8, referred to as EFX9; 12. Bolacom Ltd: [38] like BAFF, a Cypriot company which provided services to EuropeFX aimed at attracting new customers through online traffic; 13. Capital Unit Media Ltd: [68] a company likely located in Israel and apparently engaged by TradeMagnet to provide sales services to TradeFred, including the provision of sales representatives to contact prospective customers and account managers to engage with onboarded customers in respect of their trading; 14. CSRC: [1746] the China Securities Regulatory Commission; 15. City Index: [155] the trading name of StoneX Financial Pty Ltd, the employer of ASIC's expert witness, Mr Blundell, and an Australian company which provides trading in over-the-counter derivatives to retail customers. 16. Mr George Dowd III: [88], [781] an experienced discretionary foreign exchange, stock index and commodity derivatives trader and EuropeFX's expert witness with respect to derivatives and derivatives trading; 17. EFX8: [12] the group of eight EuropeFX customers who provided affidavit evidence and testified at the hearing in this proceeding, comprising Mr Wilson (EFX1), Ms Love (EFX2), Mr Kalusinghe (EFX3), Ms Elford (EFX4), Ms Nikiforos (EFX6), Ms Sapor (EFX8), Ms Boden (EFX9) and Ms Kuhn (EFX11); 18. EFX22: [12] the group of 22 EuropeFX customers in respect of whom ASIC tendered evidence in this proceeding, but who did not provide affidavit evidence or testify at the hearing, comprising Ms Miriam Battersby (EFX5), Mr Paul Bonini (EFX7), Mr Darren Singleton (EFX10), Ms Xiaodong (Joan) Liu (EFX12), Ms Toni Aldous (EFX13), Mr John Isaacs (EFX14), Mr Sami Ayoub (EFX15), Ms Anne Marie Robinson (EFX16), Mr Lewis Stubna (EFX17), Ms Zina Curtin (EFX18), Mr David Grubb (EFX19), Mr Ken Geering (EFX20), Mr Nathan Lapham (EFX21), Mr Adam Cartwright (EFX22), Mr James Chircop (EFX23), Ms Jessica Green (EFX24), Ms Ariel Larsen (EFX25), Mr Patrick Hillier (EFX26), Ms Zina Sofer (EFX27), Ms Margaret Scott (EFX28), Mr Mark Dand (EFX29) and Mr Joe Costa (EFX30); 19. EFX30: [12] the EFX8 and EFX22 collectively; 20. Ms Deborah Elford: [347]ff one of the EFX8, referred to as EFX4; 21. EuropeFX: [1] the trading name or abbreviation of Maxi EFX Global AU Pty Ltd, the second defendant in this proceeding and a corporate authorised representative of USG; 22. ForexCT: [477] a trading business through which Ms Boden had previously traded currencies prior to her derivatives trading with EuropeFX; 23. Mr John Fraser: [169] one of the TF4, referred to as TF1; 24. Global Win Solutions Ltd: [40] a company based in Belize which provided call centre services for EuropeFX, including the provision of sales representatives to contact and "onboard" prospective customers; 25. Dr Andrew Godwin: [1745] ASIC's expert witness with respect to the relevant operation of Chinese domestic law; 26. Ms Dolores Goodey: [169] one of the TF4, referred to as TF2; 27. Mr James Spencer Greene: [161] a database expert who formatted certain EuropeFX trading data so that the trading positions of nine EuropeFX customers were able to be reproduced into a readable spreadsheet; 28. Mr Prasanna Kalusinghe: [299]ff one of the EFX8, referred to as EFX3; 29. Ms Leanne Kuhn: [535]ff one of the EFX8, referred to as EFX11; 30. Mr Xu (Kidd) Liu: [154] a former employee of EuropeFX during the relevant period, who was employed as a "quality control" officer and supervised by Mr Martin; 31. Ms Lesley Love: [244]ff one of the EFX8, referred to as EFX2; 32. Mr John Martin: [29], [34] USG's "Responsible Manager" in respect of its AFSL and its Head of Compliance, as well as a director of EuropeFX during the period from 20 September 2018 until 30 April 2019; 33. Maxiflex Global Investments Limited (or Maxiflex Limited): [34] a company based in Cyprus or Israel, which was the beneficial owner of Addnet Solutions. 34. Ms Fiona Musgrave: [169] one of the TF4, referred to as TF6; 35. Ms Jennifer Nikiforos: [391]ff one of the EFX8, referred to as EFX6; 36. Mr Steven Parry: [153], [753] a prospective EuropeFX customer who provided affidavit evidence and testified in this proceeding; 37. Ms Sandrine Sapor: [419]ff one of the EFX8, referred to individually as EFX8; 38. Mr Pedro Sasso: [34] a director of EuropeFX during the relevant period, including as sole director prior to 20 September 2018 and after 30 April 2019; 39. TF4: [169] the group of four TradeFred customers who provided affidavit evidence in this proceeding, comprising Mr John Fraser (TF1), Ms Dolores Goodey (TF2), Ms Mensch Zdraveska (TF5) and Ms Fiona Musgrave (TF6); 40. TF16: [128] the 16 TradeFred customers in respect of whom ASIC tendered evidence in this proceeding but who did not provide affidavit evidence; 41. TF20: [128] the TF4 and TF16 collectively; 42. TradeFred: [1] the trading name or abbreviation of BrightAU Capital Pty Ltd, the third defendant in this proceeding and a corporate authorised representative of USG. Its sole shareholder was TradeFred Holdings Pty Ltd; 43. TradeMagnet UK Limited: [68] a company incorporated in England and Wales and a subsidiary of TradeFred Holdings that conducted sales support, customer account data and marketing activities for TradeFred, including engaging Capital Unit to provide sales services for TradeFred; 44. USG: [1] Union Standard International Group Pty Ltd, the first defendant and the holder of the AFSL, in relation to which EuropeFX and TradeFred were each authorised as CARs; 45. Mr Trent Whitbourn: [162] a digital forensics expert who forensically reproduced copies of EuropeFX's former website; 46. Mr Ben Wilson: [206]ff one of the EFX8, referred to as EFX1; 47. XYX Media Technologies Ltd: [45] a company based in Israel which provided call centre services for EuropeFX, including the provision of account managers to engage with customers in relation to their trading; 48. Mr Shay Zakhaim: [29] the Chief Executive Officer of USG during the relevant period; 49. Ms Mench Zdraveska: [169] one of the TF4, referred to as TF5.

Australian Securities and Investments Commission v Union Standard International Group Pty Ltd

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Judgment (320 paragraphs)

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