Caveat Emptor! New Zealand FMA Warns About Attempt To Dupe Clients

Shortsightedness or naiveties often do not combine well with investing in financial markets. Despite, the easy access to so much readily available information displaying the caveats of dubious schemes, which retail investors can study in order to avoid their hard earned readies falling into the clutches of unscrupulous Ponzi scheme operators.

Unfortunately, there are still parties who get taken in, therefore the world’s regulatory authorities conduct research to preempt complaints from those who have fallen foul. The latest example of this, is today’s warning issued by the New Zealand FMA to the public about the potential risk of investing with Phoenix Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term, a company registered in Auckland, the nation’s largest city.

Up Front Fees Spark Suspicion

The warning issued by the New Zealand FMA focuses particularly on what the regulator describes as a foreign exchange trading system being offered by Phoenix Forex Limited, and that the New Zealand FMA believes that Phoenix Forex’s claims about the level of returns made by its trading system are untrue, and that Phoenix Forex is misrepresenting the profitability of, and risks associated with its trading system.

The regulator goes on further to explain that investments promising unusually high returns are often not legitimate offers. Therefore, the New Zealand FMA urges caution by anyone considering dealing with Phoenix Forex.

Phoenix Forex is providing access to a foreign exchange trading system under the designation of Oak FX. Under this system, the investor opens an account with a third party broker and the investor’s account is traded for the investor using algorithmic trading software. Phoenix Forex undertakes extensive advertising, as well as making unsolicited cold-calls to potential investors. FMA understands Phoenix Forex requires investors to pay a substantial up-front fee of up to $25,700 to subscribe to the system.

The Rise Of The HYIP

Since the demise of Liberty Reserve earlier this year, and the onset of increasing stringency among regulators in the Asia- Pacific region, of which the New Zealand FMA is one example having evolved from having very little authority at all, to being a fully respected regulatory authority with legal jurisdiction over its registered entities, the perpetrators of nefarious activity have moved their activities away from purely laundering money, or concealing their true identity to operating High Yield Investment Programs (HYIPs) and other assorted Ponzi schemes.

In June this year, Forex Magnates reported that forex related HYIPs are usually based on some sort of magic trading strategy that can return world beating results and offers investors access to managed accounts. In our research of forex related Ponzi schemes, firms often posted fictional MetaTrader 4 reports on their websites showing the fraudulent gains. In addition, many of the firms providing these products create websites to resemble those of brokers and brandish some sort of license to add more ‘authority’ to their offering.

The scheme to which the New Zealand FMA’s warning refers to, appears to reflect this particular line of thinking in carrying high upfront costs and unusually high returns. In the New Zealand FMA’s experience, it is highly unlikely that this kind of investment can deliver such high returns.

Phoenix Forex has not been able to provide any evidence to support its claims of having achieved these returns. Further, investments of this nature carry a high risk of loss of some or all of an investor’s capital, and losses can exceed the amount of the original investment.

According to the regulatory authority, Phoenix Forex has previously advertised returns of between 50% to 65% per annum, and continues to promote the trading system as providing high returns.

Targeting Senior Citizens

Additionally, there is a more sinister aspect to this particular firm’s targeting of clients, as it angles its offering toward senior citizens. The company offers access to the OakFX trading system, which makes claims via its dedicated website that “Phoenix Forex Ltd is dedicated to the passive and semi-passive lifestyle income generation of its clients.”

The description continues that “being the sole NZ distributor for the OakFx Trading Platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools. In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools. Read this Term and working in strategic alliance with other wealth management and online trading businesses, financial advisors and accountants, Phoenix Forex is ideally placed for growth, working with an aging population that seek an opportunity to make money working from their home computers.” The company claims that no market understanding is necessary and that client should simply switch it on and let it trade their account automatically, requiring something of a leap of faith.

As far as the regulatory status of the firm is concerned, the New Zealand FMA advises that any person who is in the business of providing financial services must be registered on the Financial Service Provides Register, and a company which is in the business of dealing in futures contracts, including margin foreign exchange products, must be authorized by the New Zealand FMA. Phoenix Forex is not registered as a financial service provider, and has not been authorized or licensed by the New Zealand FMA for any service.

The New Zealand FMA further recommends that prospective customers conduct their own due diligence on a person or company before engaging any financial service provider or paying any money with respect to a financial service or investment.