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Screenshot of a breaking news alert e-mail from Q2 2017
Led by The International Organization of Securities Commissions (IOSCO), World Investor Week is a week-long, global campaign to raise awareness about the importance of investor education and protection and highlight the various initiatives of securities regulators in these two critical areas.
From 2-8 October 2017, IOSCO securities regulators and other IOSCO members on six continents will provide a range of activities, such as launching investor-focused communications and services, promoting contests to increase awareness of investor education initiatives, organizing workshops and conferences, and conducting local/national campaigns in their own jurisdictions.
World Investor Week offers a unique opportunity for IOSCO members to work in collaboration with all investor education and protection stakeholders, at both the local and international level.
New Zealand regulator FMA is using the opportunity of World Investor Week to highlight the danger of opening accounts and trading with unlicensed, offshore brokers, and in particular binary options brokers.
As part of the protection message, the FMA is highlighting the case of Diana [last name withheld], who lost USD $5,000 after trading in unregulated binary options. Her case reflects many of the issues raised with the FMA by investors in this area, such as:
- click-through internet advertisements about ‘making easy money from home’
- aggressive sales tactics
- companies refusing to return money
- cold calling and get-rich-quick schemes.
The FMA is reinforcing to investors in New Zealand that selling financial products by cold calling is illegal.
The FMA has licensed more than 200 financial services firms in New Zealand since 2013.
Paul Gregory, FMA Director of Investor Capability, said,
Baked into the FMA licensing process are some basic protections for investors. Investors should expect to be communicated to clearly about the benefits and risks of a product. They can complain to a dispute resolution service if they have any issues with a financial service provider. Licensing also means we are able to hold providers to account for the way they treat their customers.
To gain a licence, businesses and individuals must meet a number of requirements including:
- showing the FMA they can provide the service effectively
- showing that the managers and directors are ‘fit and proper persons’
- there being no reason for the FMA to believe they are likely to contravene licence obligations
The FMA regularly receives complaints from consumers who have been caught out by slick websites and promises of high returns from off-shore. These complaints centre on products like binary options and foreign exchange trading. Where an unlicensed, unregulated company based off-shore withholds money from an investor, it is very hard for the FMA to help.
The FMA urges investors to do their homework. Don’t think a company is legitimate because their advertisement appears on what seems like a credible website.