The US Securities and Exchange Commission (SEC) has announced that Forcerank, a New York-based company, has agreed to pay a $50,000 penalty for illegally offering complex derivatives products to retail investors through mobile phone games that were described as “fantasy sports for stocks”.
The announcement comes just a day after the SEC last made the headlines after fining Artis Hedge Fund over $9 million for insider trading, as reported by Finance Magnates.
The FM London Summit is almost here. Register today!
An investigation by the SEC found that Forcerank failed to file a registration statement for a security-based swap offering. The company also failed to sell the contracts through a national securities exchange, both of which are requirements under the Dodd-Frank Act to ensure that information about an offering is fully transparent to retail investors and the transactions are subject to the highest level of Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term.
Background
According to the SEC, Forcerank ran mobile phone games where players predicted the order in which 10 securities would perform relative to each other.
The Dodd-Frank Act sought to bring security-based Swaps
Swaps
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term activity out of the shadows.
Players won points and some received cash prizes based on the accuracy of their predictions. Forcerank kept 10 percent of the entry fees and obtained a data set about market expectations that it hoped to sell to hedge funds and other investors.
Forcerank’s agreements with players were security-based swaps because they provided for a payment that was dependent on an event associated with a potential financial, economic, or commercial consequence and based on the value of individual securities.
Michael Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit commented: “The Dodd-Frank Act sought to bring security-based swaps activity out of the shadows, including when it involves retail investors. We will continue to vigilantly scrutinize the market for improper offerings of complex security-based swaps that ignore the required safeguards to protect retail investors.”
Fantasy Stock Trading Warning
The SEC warned the public about fantasy stock trading and other similar websites in a June 2015 investor alert, noting that they potentially violate federal securities laws designed to protect investors from abuses in the swaps market.
The commission continues to evaluate whether new and evolving versions of such games, including paid and unpaid models, are being offered to retail investors in accordance with the federal securities laws, including the requirements of the Dodd-Frank Act.
Forcerank consented to the SEC’s order in violation of the relevant Securities and Securities Exchange Acts. The violations were identified by the SEC shortly after the offering process began, and Forcerank cooperated to quickly shut down the contests before any investor harm occurred, while paying a $50,000 penalty.
The US Securities and Exchange Commission (SEC) has announced that Forcerank, a New York-based company, has agreed to pay a $50,000 penalty for illegally offering complex derivatives products to retail investors through mobile phone games that were described as “fantasy sports for stocks”.
The announcement comes just a day after the SEC last made the headlines after fining Artis Hedge Fund over $9 million for insider trading, as reported by Finance Magnates.
The FM London Summit is almost here. Register today!
An investigation by the SEC found that Forcerank failed to file a registration statement for a security-based swap offering. The company also failed to sell the contracts through a national securities exchange, both of which are requirements under the Dodd-Frank Act to ensure that information about an offering is fully transparent to retail investors and the transactions are subject to the highest level of Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term.
Background
According to the SEC, Forcerank ran mobile phone games where players predicted the order in which 10 securities would perform relative to each other.
The Dodd-Frank Act sought to bring security-based Swaps
Swaps
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term activity out of the shadows.
Players won points and some received cash prizes based on the accuracy of their predictions. Forcerank kept 10 percent of the entry fees and obtained a data set about market expectations that it hoped to sell to hedge funds and other investors.
Forcerank’s agreements with players were security-based swaps because they provided for a payment that was dependent on an event associated with a potential financial, economic, or commercial consequence and based on the value of individual securities.
Michael Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit commented: “The Dodd-Frank Act sought to bring security-based swaps activity out of the shadows, including when it involves retail investors. We will continue to vigilantly scrutinize the market for improper offerings of complex security-based swaps that ignore the required safeguards to protect retail investors.”
Fantasy Stock Trading Warning
The SEC warned the public about fantasy stock trading and other similar websites in a June 2015 investor alert, noting that they potentially violate federal securities laws designed to protect investors from abuses in the swaps market.
The commission continues to evaluate whether new and evolving versions of such games, including paid and unpaid models, are being offered to retail investors in accordance with the federal securities laws, including the requirements of the Dodd-Frank Act.
Forcerank consented to the SEC’s order in violation of the relevant Securities and Securities Exchange Acts. The violations were identified by the SEC shortly after the offering process began, and Forcerank cooperated to quickly shut down the contests before any investor harm occurred, while paying a $50,000 penalty.
