Alleged Ponzi schemes may have cost the Chilean people millions of dollars, and a congressional commission investigating the matter fears it may have only scratched the surface. The president of the commission told Bloomberg today that it will propose giving powers to banking and stock market regulators to oversee the forex and CFDs providers in a bid to avoid more collapses.
Compared to the strict markets such as in the US or Europe, where such instruments are off-limits to retail investors or highly regulated, in Chile, where the contracts are perfectly legal and trading in them has exploded, virtually anyone can sell or buy CFDs, regardless of their financial means or experience.
Chile’s securities regulator, the Superintendencia de Valores y Seguros, justifies the regulatory vacuum by saying that these people are not selling stocks, bonds, futures or funds so they fall outside the agency’s purview. Also, the regulator seems to not have enough resources or powers to police such activities given the large number of inquires and complaints it receives, which exceed 15,000 every year.
Finance Magnates reported on many occasions about the Ponzi schemes in Chile where companies such as AC Inversions and IM Forex were able to operate for years, offering returns of as much as 40 percent a year without any oversight by regulators.
The first and most notorious case involved a firm called AC Inversions, which promised monthly returns of between 2.5 percent and 7.5 percent to some 5,000 victims, who have reported losses of about 50 billion pesos ($74 million).
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Later in March 2016, Chilean police charged another company, called IM Forex, with being connected to the AC Inversiones’s Ponzi scheme, that reportedly defrauded 1,500 people for a total of $100 million.
So finally, the Chilean regulatory system has woken up to the significant legal vacuum and decided that it needs to appear to do something that may prevent these situations. However, the latest steps seem more like a reaction to the steep losses incurred by local investors rather than providing a comprehensive frame to regulate the loose trading industry as a whole.
Aldo Cornejo, president of the congressional commission, said: “We are already late for many investors, but the only way to avoid more collapses is to increase the powers of the regulators.”
”As long as we don’t regulate it, the risk of the situation repeating is there every day,” he added.