Chile Gets Closer to Regulating the CFDs Wild West

Chilean ‎authorities move towards regulating what was a haven for unregulated forex and CFDs operators.

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.  ‎

Join the iFX EXPO Asia and discover your gateway to the Asian Markets

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.‎

‎‎Serious Fallout

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).‎

Suggested articles

Asia Exchange Empowering Traders Through New OpportunitiesGo to article >>

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.

Wake-up Call

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.‎


Got a news tip? Let Us Know