Cracking Down on Forex Scams - Part 1
CRACKING DOWN ON FOREX SCAMS
Anyone who has ever watched late-night television, or listened to Options Insider Radio, understands that con artists are a growing problem in the derivatives business. As the derivatives markets continue to explode, it is inevitable that more shady operators will attempt to penetrate this marketplace. These hucksters incorporate a wide range of pitches, most famously straddle scams, to lure unsuspecting victims looking to make a quick buck.
However, there is a new angle on derivatives scams that goes beyond simply promising that you can ìmake money in any market condition.î These scams move to the next level by combining the complexity of derivatives with something else that retail investors typically do not understand ñ foreign currency trading.
NEW SHERIFF IN TOWN
The passage of the Commodity Futures Modernization Act of 2000 changed the world of derivatives fraud forever. This act gave the Commodity Futures Trading Commission (CFTC) the jurisdiction and authority to pursue a wide range of fraudulent activity, and forex scams are at the top of their list.
In an effort to educate investors about the growing wave of forex fraud, the CFTC has created the Forex Public Education and Outreach Task Force. Most investors already have a difficult time understanding the mechanics of derivatives trading. When you add foreign currency trading to the mix, their eyes truly begin to glaze over. It is this added layer of complexity that makes forex derivatives such easy pickings for scam artists.
POLICING THE ADVERTISING
One of the biggest problems is the deceptive way that forex investments are advertised. CFTC rules clearly state that forex advertisements canít be intentionally misleading. They also have to present a balanced perspective on the potential for profit and loss in forex investing. In other words, any discussion of the ìinsane, out-of-this-world or risk-freeî profit potential of forex has to be offset by a discussion of how forex trading can also empty your trading account in a hurry.
Unfortunately, anyone who watches television or listens to the radio knows that the CFTC's Forex Task Force has a great deal of work in store for them. The higher ends of the cable spectrum, along with more than a few talk radio stations, are dominated by advertisements and infomercials for dubious forex investments. Despite their misleading nature and obvious lack of balance, these advertisements continue to proliferate at an alarming rate.
To Be Continued...
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