Broker Closed for Fraudulent Practices

[forexjudge]

Well, this is a question that I saw at other forums and I thought I need answers as well.

Does the regulatory bodies have the power to close down a broker for fraudulent activities and guarantee the refund of traders' money?

 

[timoti]

Does the regulatory bodies have the power to close down a broker for fraudulent activities and guarantee the refund of traders' money?

They sure give them HELL if they want to, most of the time they just fine them though.

This is why I don't fancy regulation.

Yep, you're right regulation is not to be fancied but it's worth thinking over it. If your off-shore registered broker suddently disappears your strategies will not bring your money back

 

[highbury fx]

Well, this is a question that I saw at other forums and I thought I need answers as well.

Does the regulatory bodies have the power to close down a broker for fraudulent activities and guarantee the refund of traders' money?

They have the power to suspend or terminate the permissions for which they originally regulated you. They have the power to place their own chosen individuals into your organisation for stability and transparency. They have the power to alter the permissions they originally granted.

The compensation scheme is different from regulator to regulator. The FSCS is proven to work. They have stepped in and paid out for MF Global and World Spreads clients and that should provide all of the confidence you need assuming you are a retail client with less than £85,000 of cash (or cash + mark to market positions).

 

[daytrader221]

Well, this is a question that I saw at other forums and I thought I need answers as well.

Does the regulatory bodies have the power to close down a broker for fraudulent activities and guarantee the refund of traders' money?

I believe that technically the broker could have their licensed revoked and if the broker kept on operating without a license in that jurisdiction then the owners would be in court quickly and potentially face jail time.

In reality it would not be likely to get so far, especially in reputable regulatory jurisdictions like in EU, US or Australasia. The brokers get charged with a fee simply when a complaint is filed then they potentially could get fined. The owners often have huge investments to care for and should have no reason to risk everything by operating in a fraudulent way. If we are talking about brokers based in some Caribbean island then that's another story.

 

[forexjudge]

They have the power to suspend or terminate the permissions for which they originally regulated you. They have the power to place their own chosen individuals into your organisation for stability and transparency. They have the power to alter the permissions they originally granted.

The compensation scheme is different from regulator to regulator. The FSCS is proven to work. They have stepped in and paid out for MF Global and World Spreads clients and that should provide all of the confidence you need assuming you are a retail client with less than £85,000 of cash (or cash + mark to market positions).

I never heard or read about this. There are lots of MF Global clients complaining all over the internet. None of them spoke of compensation. Can you please give me a link where I can read about this?

 

[forexjudge]

If we are talking about brokers based in some Caribbean island then that's another story.

Now do you think it is the obligation of every broker operating in some islands to get license from regulatory bodies in another country? It does not make sense to be regulated by one country when your office is situated in a different country. I guess this is why offshore brokers see it as not necessary for them to submit to external bodies. or what do you think?

 

[highbury fx]

I never heard or read about this. There are lots of MF Global clients complaining all over the internet. None of them spoke of compensation. Can you please give me a link where I can read about this?

Here's 1 link although a quick google search will give you dozens more:

http://citywire.co.uk/new-model-adviser/mf-global-uk-asset-return-kicks-off-with-54m-payout/a605389

 

[daytrader221]

Now do you think it is the obligation of every broker operating in some islands to get license from regulatory bodies in another country? It does not make sense to be regulated by one country when your office is situated in a different country. I guess this is why offshore brokers see it as not necessary for them to submit to external bodies. or what do you think?

There is no obligation for brokers to get regulated in certain jurisdictions, however if they want clients that have a prerequisite of being financially protected (like the FCA/FSCS or CySEC/ICS can offer) then its a no brainer that there is a huge benefit for brokers being regulated in these regions.

The FCA/FSCS in the UK can offer up to £85k and in Cyprus CySEC/ICS can offer €20k in protection should a client lose their money due to broker bankruptcy etc.

Actually the biggest and most reputable brokers are usually regulated in multiple jurisdictions. FXCM are a US company that are regulated in the US so can accept US clients but internationally the US restrictions do not make them so competitive. Therefore, they also have FXCM UK so that they can compete internationally better in addition to having their clients protected by the FSCS.

IBFX also has US regulation as well as Australian regulation for international clients.

The best example is Alpari that has FCA regulation for international clients, NFA/CFTC regulation for US clients and an unregulated sister company in St Vincent & the Grenadines for Russia and to give their PAMM account to any fund manager (regulated or not).

I guess if brokers want to attract clients from certain countries then they need the right licenses, but yet there is no obligation for them to do so.

 

[billyjean]

Well, this is a question that I saw at other forums and I thought I need answers as well.

Does the regulatory bodies have the power to close down a broker for fraudulent activities and guarantee the refund of traders' money?

it depend on which broker regulated body, theres many case where brokers force to refund, and paid for clients loss, regarding their legal activity, mostly price market, requote, cancel profit, slippage, and even freeze account. as result several brokers adapt and registered on multi regulated, on different country. NFA in US and FCA at uk, both have different rule, for example the leverage at NFA are 1:50 maximum.
be wise in choosing your brokers, even regulated one are not always honest, go check on ff or fpa, each months several clients are scammed, by an honorarby fx company.