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Screenshot of a breaking news alert e-mail from Q2 2017
The Austrian Financial Market Authority (FMA) put out a warning today stating “the number of dubious providers in the Austrian financial market remains high” and backed it up with some interesting statistics. Examples provided include unregistered high-frequency trading schemes and others providing unrealistic returns.
First off, in 2016, the FMA reported they initiated a total of 162 investigations in relation to the combatting of unauthorized business vs. 218 in 2015 and concluded 204 investigations vs. 254 in 2015. As a consequence of the investigations, 33 warnings about dubious providers were published, 49 criminal complaints brought about, and 54 measures applied under administrative law (11 penal orders, 3 administrative decisions prohibiting the conducting of business, 40 procedural instructions).
As a consequence of the investigations, 33 warnings about dubious providers were published, 49 criminal complaints brought about, and 54 measures applied under administrative law (11 penal orders, 3 administrative decisions prohibiting the conducting of business, 40 procedural instructions).
The aim of the prevention of unauthorized business operations is to banish unserious providers from the Austrian financial market. In the case that someone provides financial services that require a license without holding the requisite authorisation of the Austrian Financial Market Authority (FMA) then they will be prohibited from doing so by means of an administrative decision and sanctions imposed for the legal breach. If this cannot be enforced, such as in the case of the provider operating from a foreign country, with the consequence that official measures taken by the FMA cannot take effect, the FMA instead issues a warning, published in the Gazette of the Wiener Zeitung as well as on the FMA website.
Investor Warning instrument is effective
For example, on November 18th, 2016, the FMA published an investor warning stating that:
“Dr. Peter Müller, Internet: www.system-mueller.com, E-Mail: email@example.com, Königsallee 60F, 40212 Düsseldorf, is not authorized to provide banking transactions requiring a license in Austria”.
The website was advertising the possibility to invest money in high-frequency trading (HFT) with a return of more than 15% per month on average. The investigations conducted by the FMA, however, found that the alleged Dr. Müller did not hold the necessary banking license in either Germany or Austria, and also that neither the person nor the company existed at the addresses provided.
Following the publication of the investor warning message, the FMA established that Austrian investors had already invested money with the provider. The FMA, therefore, pressed charges on the grounds of suspected breach of trust or fraud. The tracing of financial transactions ultimately showed that the money was received by a Czech citizen, who then transferred it into private accounts in foreign countries.
The FMA’s Executive Directors Helmut Ettl and Klaus Kumpfmüller commented:
The investor warning instrument has proven itself to be an effective one. Anyone who is contacted by a provider that they do not know of should immediately check on the FMA Website whether an investor warning has already been published about this provider, and as applicable distance themselves from any business relationship with the provider, and inform the FMA without delay about the offer that they have received.” Doing so ensures that the FMA is able to warn about dubious providers quickly, and is thereby able to contain damage being sustained by investors as soon as possible.
Promises of unrealistic returns
FMA’s Executive Board warned:
Against the background of the prevailing low-interest environment, it has been increasingly frequently observed in recent years, that investors have fallen for unrealistically high promised returns in their search for returns. Double-digit or even three-digit returns are promised, in particular from high-frequency trading, contracts for difference (CFDs) or foreign currency derivatives (Forex trading). Such returns cannot be earned or can only be earned by taking extremely high risks und the currently prevailing economic conditions.
As a rule, such financial transactions also constitute financial services that require a license. You should, therefore, check whether the provider is even authorized to conduct such financial transactions,” the FMA Executive Board warned. The FMA’s database licensed undertakings can be checked at any time by anyone via the FMA website.
The FMA Executive Board reiterated: “If something sounds too good to be true, then it generally isn’t true.”
To view investor warnings on the FMA website click here.