Time for forex portals self-regulatory organization?
We’ve all seen the flashy flickering forex websites promising excellent returns, hundreds or even thousands of percents a year and
We’ve all seen the flashy flickering forex websites promising excellent returns, hundreds or even thousands of percents a year and most of us told ourselves that there is no way that someone is buying that. But in fact there are such people and they are more than you can imagine. Many people see these sites or popping banners of this or that forex trading robot and just click and buy the software or invest in some unknown forex fund, and it’s probably the last they’ll see their money. It’s about time someone put a stop to it.
While most large regulated and non-regulated but respectable brokers monitor their own advertisements, lots of scammy little brokers and private scammers know that the only way they can profit is by promising huge profits to naive people. In fact the phenomena is so wide spread that the FBI has reported that the number of new HYIP (High Yield Investment Programs) investigations during fiscal year 2009 increased more than 100% over fiscal year 2008. And it’s just a drop in the sea.
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Last year NFA has issued a proposal for forex brokers to monitor their own content and websites, so far so good however forex brokers themselves account only for a fraction of the forex portals.
The US Financial Inustry Regulatory Authority (Finra) has lately warned investors to be on their guard against social media-linked ponzi schemes, in which scam artists use YouTube, Twitter and facebook to promote high-yield investment programmes (Hyips) with the promise of unrealistically high returns.
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The agency points to the recently exposed Pathway to Prosperity scheme, which allegedly defrauded over 40,000 investors in over 120 countries of $70 million and used online forums and blogs to brag about the returns available. Earlier this month, the Securities and Exchange Commission obtained an emergency asset freeze against a Canadian couple who fraudulently touted penny stocks through their website, facebook and Twitter.
Finra SVP John Gannon says: “Hyips are old-fashioned ponzi schemes dressed up for a Web 2.0 world. Some of these schemes encourage people to bring in new victims, while others entice investors to ‘ride the ponzi’ by attempting to get in and get out before the scheme collapses.”
And I’m saying that this is the time for a whole new level of forex portals, blogs and forums self-regulation. A forex portals Self Regulatory Organization (SRO) much similar to the NFA (but wiser) should be formed and should also be embraced by all legitimate forex brokers who will only advertise on domains which are subject to this self-regulation. This is a dual regulation in this case.
Let’s pick up the glove Francesc.
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Francesc, It’s an interesting idea but there is no way you can limit the brokers on where they can advertise – these guys have the money and they are going to spend it. The big problem in the forums and portals is that there is no transparency into what someone is actually doing and it’s limited by the technological ability that these sites were built on – it’s going to be impossible to review profiles and posts for hundreds of thousands of people and remove the ones that make unsubstantiated promises. Unfortunately it’s sad to admit it but this industry… Read more »
Sounds like an excellent idea that will sure help the forex industry more mature.
Hi Asaf,
I think the suggestion came from Michael rather than Francesc, but I digress somewhat.
Michael’s suggestion is based around a “Self Regulatory Organization” embraced by brokers and portals alike. The brokers themselves would limit where they advertised.
Like you, I don’t see it happening any day soon. However if it did I’d be only too pleased to sign up.
Jim
Jim,
My mistake – I thought the call for action at the end of the post was a signature of Francesc 😉
Brokers barely embrace the self regulatory body that regulates them (NFA) so I can’t see how they’d take part in limiting their advertisement opportunities.
There is a big gap between people’s perception of possible gains in this market and the reality and this is largely due to forex forums and blogs that enable and thrive from this.
— Asaf.
I don’t need to sign with an organisation to be self regulated.
I agree there is a lot of hype around Forex these days. Personally when I started I was amazed at the claims some people were making. Now I look for sites with good tools and no outragous claims. But this ‘regulation’ may be a good idea.
Likewise Arnaud.
However the regulators would evidently like the brokers and their “affiliates” to clean up their act.
The question then is whether the brokers see it as in their own best interest to be seen taking the lead here? Or not as the case may be!
Jim