Britain’s FCA is one of the most prominent, active and strict financial markets regulators, which is particularly vocal when it comes to hunting down scammers and protecting the investing public. It is not surprising therefore that it has felt the need to alert the public once again on the issue of Unauthorised Forex (FX) trading and brokerage firms, since at it mentions it has “seen a sharp rise in reports from consumers about unauthorised trading and brokerage firms.”
The British watchdog explains that such firms offer consumers the chance to trade in foreign exchange, contracts for difference, binary options and other commodities and that they promise very high returns, while also often talking about guaranteed profits either through a managed account where the firm makes trades on the consumer’s behalf or by enabling the consumer to trade themselves using the firm’s trading platform.
As firms offering such services in the UK need to be authorised by the FCA, the regulator underlines that many of the firms reported are not authorized, but rather, they falsely claim to be based in the UK and often provide a prestigious city of London address, when in reality, they have no physical presence in the UK and are not based at the addresses they provide.
Citing the experiences of many consumers the FCA that the scam, often works in the following manner: Consumers, “will initially receive some returns from the firm to give the impression that their trading has been a success. They will then be encouraged to invest more money and at this stage or soon after, the returns will stop, their account will be suspended and they will be unable to make further contact with the firm.”
Therefore, the FCA urges consumers wishing to trade in high risk investments such as foreign exchange and contracts for difference, to make sure they only deal with FCA authorised firms, and to verify this by checking the FCA register of authorised firms before dealing with any firm.
The FCA further warns that brokerages that are not authorised, are likely to be a scam and thus their customers are at risk of losing all their money. Hence, it urges all investors to be aware of bogus trading/ brokerage firms that pretend to be genuine and also raises attention to the fact that fraudsters keep adapting their tactic. This is why it encourages interested traders to make additional checks to confirm that they are dealing with the financial services firm in question and have the correct contact details – especially if they have been cold-called. This might include checking the details on the firm’s website, or with directory enquiries or Companies House.
Finally, the FCA reminds consumers that if they I deal with an unauthorised firm they will not be covered by the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong.