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Screenshot of a breaking news alert e-mail from Q2 2017
The issuance of warnings to potential investors from one of Canada’s provincial regulators has been increasing recently, as the Ontario Securities Commission (OSC) is taking a more proactive and preventative course toward client protection in the province of Ontario, home to North America’s third largest financial center in the city of Toronto.
Yesterday, the regulatory authority issued a warning to the effect that a company whose last known address was in Nassau, Bahamas, operating under the company name of Global Proprietary Traders Inc (Global Prop Traders), doing business as www.globalproptraders.com and www.globalproptraders.ca is not registered to engage in the business of trading in securities or advising anyone with respect to investing in, buying or selling securities.
On investigating the services offered by the company, it is clear that this firm does indeed provide online trading services to retail clients, and it is possible to deposit funds with the company and trade as a retail investor, despite the company’s name which infers that it is a proprietary trading firm.
In most jurisdictions, including Ontario, companies which solicit for business from clients and provide them with trading facilities with which the clients can trade with their private funds requires licensing and regulatory oversight, whereas proprietary trading does not necessarily require such licensing due to the matter that proprietary traders do not take client funds, but instead trade their own account with their own private or company funds.
The OSC had clearly noticed this, and being responsible for the oversight of non-bank financial services companies, is raising its profile. Toronto has been long well known as a center for traditional financial services such as equities and stock, and unlike the United States, has never played a large part in retail or institutional FX.
On this basis, the regulatory authorities generally supervised Canada’s banking sector on a federal level, leaving financial services oversight to the small, regional regulatory organizations which remained relatively low profile until last year, when a number of clients, realizing that they had little representation with civil authorities, reported InvestTech FX to the Royal Canadian Mounted Police, who subsequently charged the company’s two senior executives Alan Zer and Rony Spektor with fraud, misappropriation of customer funds and operating a dishonest and illegal scheme which spanned over three continents.
The Royal Canadian Mounted Police issued a warrant to search the Toronto-based office of the company in November 2013, where they found evidence of boiler room activity. During the search by the Police, all individuals which were found working at the company’s office were released but were instructed to promise to appear at the Toronto West Courthouse in North York, Ontario on January 3 this year.
The Royal Canadian Mounted Police were intent on arresting Mssrs Spektor and Zer, although it was highly likely that they had left Canada in order to evade arrest and are still at large. This case highlighted a need to ensure that Canadian customers are protected and sufficiently warned about potential risks which can arise from becoming a client of either an unregulated or disreputable firm.
At the time of the case against InvestTechFX, Superintendent Dave Bellamy of the Royal Canadian Mounted Police demonstrated concern that ““Today’s frauds continue to grow more complex through the use of technology, which highlights the continued need for awareness and due diligence .We remain committed to detecting, disrupting and dismantling these types of organizations in our efforts to maintain investor confidence and protect the integrity of our economy.”
Mind how you go, as they say…