Investor Alert – Forex Trading Can Be Lethal

 

SEC Commissioner Luis Aguilar called for the SEC’s Office of Investor Education and Advocacy to issue an investor alert warning retail investors about the risks of trading off-exchange foreign currency contracts. This comes in the wake of the SEC’s recent approval of a temporary rule allowing the sale of retail forex contracts to unsophisticated investors until the SEC decides whether or not to issue more comprehensive rules. (“SEC Official Seeks Investor Alert on Retail Forex,” Reuters, CNBC.com).

Explaining his affirmative vote on the temporary rule, Commissioner Aguilar issued a statement saying: ” I am concerned about the risks to retail investors’. My support of the promulgation of an interim final temporary rule was subject to the condition that the Office of Investor Education and Advocacy be directed to issue an investor alert warning investors about the potential risks and conflicts inherent in off-exchange foreign currency transactions.”

Over the years, the retail foreign exchange market has been a market favored by fraudsters, according to the article. The Massachusetts securities division recently filed two Administrative Complaints against unregistered broker-dealers that allegedly perpetrated foreign-exchange investment scams. “In these uncertain economic times, it is tempting to range far and wide in search of better returns,” Massachusetts Securities Commissioner William Galvin was quoted as saying, adding: “But the searchers can fall prey to schemes that flourish in just such times.”

Additionally, the use of leverage in such transactions (as high as 50:1) vastly increases the risk of loss.

The Dodd-Frank law requires regulators to impose rules on the retail forex dealers they oversee. If the regulators do not promulgate such rules, then retail forex dealing would be prohibited.

The SEC could either propose new rules to protect consumers, allow retail brokers to operate as they do today, and or prohibit retail foreign exchange trading altogether.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in forex litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions.