Australia has begun to take a draconian stance against FX firms which do not conform to the increasingly strict standards that the FX industry is required to operate under, culminating in the Australian Securities and Investments Commission (ASIC) Chairman Greg Medcalf last week having stated publicly that “FX brokers are picking off Australia.”
Mr. Medcalf’s bold and direct statement has been reflected in the numerous new rulings and surveillance measures which have been implemented by ASIC over recent months, including the ousting of certain firms from the industry, and strict real-time surveillance on the activities of all financial services companies, with a priority toward the monitoring of retail FX companies.
Today, a Senen Pousa, an FX fund manager and principal of Investment Intelligence based in Byron Bay, Australia, finds himself looking at a potential jail term for operating in Australia without an AFS license from ASIC.
Brisbane Magistrates Court on Thursday 26 March, following an ASIC investigation.
Mr Pousa was charged with aiding and abetting his company, Investment Intelligence Corporation to carry on a financial services business without holding an AFS licence between September 2011 and June 2012.
Section 911A(1) of the Corporations Act requires those carrying on a financial services business in this jurisdiction to hold an AFS licence, however if convicted, Mr Pousa faces a maximum penalty of 2 years imprisonment, a fine of $22,000, or both, with the Commonwealth Director of Public Prosecutions prosecuting the matter.
The matter was adjourned and is next scheduled for mention on 28 May 2015.
Investment Intelligence Corporation has been at the receiving end of regulatory censuring previously, when ASIC froze over (AUD) $3 million in suspect funds held by the firm in July 2012.
On 26 July 2012, ASIC obtained interim orders, by consent, in the Queensland Supreme Court over $3,092,799 held by St George Bank and $313,136 held by American Express Australia in the accounts of Investment Intelligence.
At that time, Investment Intelligence sold financial mentoring memberships through an internet platform called ProphetMax. The membership involved a number of web-based modules that included general financial literacy, life coaching and foreign currency trading advice.
ASIC understood at the time there are over 3,000 members worldwide, including Australia.
Investment Intelligence recommended that members engage in foreign currency trading through a broker called IB Capital registered, in New Zealand.
Members were then instructed by IB Capital to transfer their funds into an account with ING Bank in the Netherlands. It was believed that members were told that these funds would then be used for foreign currency trading by a company in the USA called Global Forex Management.
ASIC’s investigation at the time revealed that Global Forex Management was not registered with the Commodities Futures and Trading Commission (CFTC) in the US to trade in foreign currencies.
In December 2013, Mr. Pousa was ordered by the CFTC in the United States to pay $192 million in restitutions and fines for FX fraud.
In this particular case, the CFTC obtained a federal court default judgment Order awarding restitution for defrauded customers and civil monetary penalties of more than $192 million against Defendants Senen Pousa and Investment Intelligence Corporation which used the ProphetMax Managed FX scheme in connection with an off-exchange FX fraud in which Mr. Pousa and Investment Intelligence defrauded over 960 clients in the United States and abroad of over $32 million.
Judge Lee Yeakel of the U.S. District Court for Western District of Texas entered the final default judgment and permanent injunction Order on November 27, 2013, requiring Mr. Pousa and Investment Intelligence to pay restitution, plus prejudgment interest, totaling $33,299,821 to defrauded customers and Mr. Pousa and Investment Intelligence each to pay a $79.5 million civil monetary penalty.
The Order also imposes permanent trading and registration bans against Mr. Pousa and prohibits him from further violating the Commodity Exchange Act (CEA) and a CFTC regulation.
The Order stems from a CFTC Complaint filed on September 18, 2012, that charged Mr. Pousa and Investment Intelligence with fraud, misappropriation, and other CEA violations.
The CFTC stated at the time of delivering the order that from at least January 1, 2012, Investment Intelligence, through Mr. Pousa and its other agents, utilized “wealth creation” webcasts, webinars, podcasts, emails, and other online seminars via the Internet to directly and indirectly fraudulently solicit actual and prospective clients worldwide to open forex trading accounts at Investment Intelligence.
The ever vigilant Australian regulator is charged with ensuring that the interests of customers are prioritized, therefore the outcome of the Mr. Pousa’s forthcoming court appearance brought about by ASIC’s instruction will likely serve to reinforce the credibility of Australia’s dedication to consumer protection.
For the official announcement from ASIC, click here.