These powers, which are reserved for the customer and give him control over the account, do not detract from the conclusion that the account is "managed". If the customer executed a transaction, or instructed the manager to execute a transaction according to his wishes, or if the manager asked for the client's consent for an unusual move, the manager will not cease to be a manager. It is clear that the client's wishes dictate the activity. If we return to the Counseling Law, we will find a congruence between the definition found there and these things. By definition, management means "executing transactions, according to discretion...", discretion is said and not absolute discretion (cf. Afrimov, paragraph 43).
- What has been brought so far ignores a unique aspect that stems from the fact that the activity in the accounts in the case before us was by way of algorithmic trading by means of a "robot" that the defendant installed in the accounts. In fact, this was the unique feature of the defendant's activity. As explained above, the role of the robot is to execute transactions automatically according to a number of predefined characteristics. In the Afrimov case, the court comprehensively analyzed the question of "management" and in particular the issue of "discretion" in the context of algorithmic trading activity. Admittedly, the circumstances detailed there do not fully correspond to the circumstances of the case here, but it is possible to derive a number of insights that we can use, emphasizing that there was a civil proceeding and that we are interested here in a criminal proceeding with all that this entails.
- First, it should be emphasized that the robot's involvement in the account does not mean that the investment portfolio is not under any management, or that human judgment is not involved. Even if it is an algorithm, it was designed by a human factor. More importantly, the definition of how the robot executes the transactions is done by a human factor (Afrimov case, paragraph 32). In addition, the "shell decisions" related to the operation of the robot are made by a human factor. For example, the decision to choose and install a particular robot, the decision to put it into operation or stop its activity, and the ability to intervene in concrete transactions that it executes. Thus, even in the presence of a robot, the human factor is not absent, although judgment takes a different form.
- When we come to discuss the question of "discretion" in the context of the execution of trading, and in particular algorithmic robotic trading , we are required to consider a number of issues: First, we must give weight to the question of who chose the robot, as well as to the question of whether the robot was chosen by the customer from a variety of products offered to him or whether the service provider chose or directed the customer to one robot or a limited number of products (compare: the Afrimov case, Paragraph 36). Second, it is important to ask who defined the characteristics of the robot and the guidelines according to which it executes the transactions. To be precise, this does not refer to the definition or programming of the robot on the technical level, but rather to the essential aspect - the definitions related to the execution of transactions. Third, beyond defining the characteristics of the robot in advance, the question of the degree of involvement in the management of the account after installing the robot should be given importance. Did the service provider install the robot and thus end its function, or did it continue to be involved even after its installation? Additional considerations may assist in determining whether the service provider, as opposed to the customer, had "discretion" in managing the account, including the service provider's involvement in determining the amount of the investment, and conditions related to control of the account and access to performing the transactions therein.
- We will preface by noting that the evidence placed before me shows beyond any doubt that the defendant was involved in managing the investment portfolios in the clients' accounts.
- The defendant's activity focused on executing trading in accounts opened at Pepperton for clients. There is no dispute that the account was opened in the name of the client and by the client who deposited the amount in the account and the defendant was not involved in depositing the amount or withdrawing the amount from the account. As stated, these elements do not detract from the fact that the defendant is a manager. After opening the account, the defendant installed a robot through which the trade was carried out, and there is no dispute about this (P. 1.2023, p. 10). The defendant's "judgment" can be identified already in the early stages of the relationship between him and the clients.
The clients were referred by the defendant to the Pepperstone merchant arena and the clients were not presented with any other real option for opening an account in other merchant arenas. Although the defendant claimed in his statement that he offered a different trading arena, the customers testified that he directed them to Pepperstone. This was not in vain, since the referral of the clients to Fefferston yielded the defendant a benefit, which in turn accelerated the defendant to direct his efforts to this arena. Moreover, even according to the defendant himself, the choice of Pepperstone is inextricably linked to the installation of the robot, because unlike other arenas, Pepperstone allows the installation of a robot in the account.