It’s been a rip-roaring few months for the Financial Commission. Established in 2013, the organisation acts as a self-regulating body for the retail trading industry.
And with offshore jurisdictions becoming more popular in the wake of the European Securities and Markets Authority’s product intervention measures, there is a growing need for holding unregulated firms accountable to their customers.
Headed up by Peter Tatarnikov, the Financial Commission has been trying to do just that. The regulatory body has signed up almost 40 trading firms to its different codes of conduct over the past few years.
Most recently, Tatarnikov’s organisation announced the creation of a new system aimed at regulating and grading brokers’ percent allocation management module (PAMM) offerings.
This Thursday, we sat down with Tatarnikov to get an idea of what the Financial Commission has been up to and why it introduced this new grading system.
What is the reason for the increasing popularity of PAMM platforms?
The popularity of financial markets is growing by leaps and bounds, and with it, the audience of people who want to use the opportunities of financial markets is growing.
Of course, a wider audience has a lower level of knowledge about [financial markets]. Because of that, services such as investing in PAMM and copy-trading are becoming more popular.
This is something that’s happening across the globe. People everywhere do not have enough time to study and do it themselves, so they prefer to us PAMM trading.
Why is there a need for the independent certification of PAMM platforms?
The main goal of the Financial Commission is to create an efficient and transparent market. Unfortunately, popular products and services that are in demand by the general public are always exploited by fraudsters.
This leaves a bad mark on the service in particular and the industry as a whole.
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Thus, we believe verification is necessary for the market. As a leading and independent organization that is trusted and has a high level of expertise, we simply could not avoid this issue.
With this initiative, we want to solve three main tasks: to provide clients with a platform for choosing a real and effective service, minimize fraud disguised as a PAMM site and help quality service providers with professional positioning of their sites and services.
Who will be able to use the PAMM platform certification service launched by the Financial Commission?
Any technology provider, including brokers who provide their own technology to customers, can apply for certification.
What specific criteria should the platform meet in order to receive your certificate?
We check such things as the technical aspect of copy-trading and PAMM accounts and their functionality; the process of distribution of funds, calculations and reporting procedures for the results of the auction; security policy and KYC, including any possible restrictions; rules for evaluating the effectiveness of an authorized trader or investor’s account.
In other words, we achieve maximum transparency of the information provided to customers so that they can make informed decisions when investing their own funds. Each client must understand their real risks, conditions, and cost of the offered service, as well as have the necessary tools to manage their investments.
Did you base your certification on any other regulations?
Not exactly – we really are the first group to have developed specific regulation for PAMM solutions.
In the most developed countries, from the point of view of financial regulation, this service falls under the regulation of trade advisors and financial managers, which, in essence, means the mandatory obtaining of a license by the managers themselves.
On the other hand, in developing countries, such services are not regulated at all or are completely prohibited.
Anyway, there is such a service, and it is in demand among private investors, which is why we are taking a proactive position on this issue, offering voluntary certification of such platforms.
And finally, the most important thing. What risk is there when investing with PAMM platforms?
I would say that for a person who does not have experience in trading on financial markets, the risks of investing in PAMM can be much lower than with independent trading. But it is very important to note here that the risks may be lower provided that a trader chooses truly professional managers to manage their funds.