December 18, 2007
Forex: Risky Business?
Recently, there has been a rise in Forex transactions. Forex trading can involve a high degree of risk and may be more suitable for market professionals rather than the average retail investor. Forex, stands for foreign exchange trading. It usually means the right to buy or sell a certain amount of foreign currency at a fixed price in US dollars. In order words, you are betting on the way exchange rates will change.
Check To See If Brokers And Firms Are Licensed
Brokers and firms that trade Forex must be licensed with the National Futures Association (NFA). To check if the broker or firm that you are working with is licensed, please visit the National Futures Association BASIC Search. Forex may be traded on an exchange that is regulated by the Commodity Futures Trading Commission (CFTC) or off-exchange.
Investigate The Details Before Investing
Forex transactions generally are not guaranteed or insured and are risky. Investors who invest on margin, or take out a loan for part of the investment, should be especially careful. They could lose their investment as well as have to pay back the loan. Off-exchange transactions are especially risky because many Forex scams are modeled to look like legitimate off-exchange transactions.
To protect themselves from unnecessary risk, investors should investigate before they invest, be on the lookout for red flags, get the transaction details in writing, ask the salesperson if they are licensed with the NFA or the CFTC, and verify with the NFA and the CFTC. Red flags include “guaranteed” returns, promises of outrageous returns, statements that Forex is low risk, statements suggesting that the investor should cash out other investments or refinance their home to invest, and secret or special investment arrangements.
If You Think You're A Victim, File A Complaint
Depending on its structure, a Forex transaction may be regulated by the CFTC, the NFA, or DFI. If you think that you are a victim of a fraudulent Forex scheme contact an attorney and file a complaint with the CFTC , the NFA , and DFI.
To learn more about Forex, please visit the CFTC Forex page.
More Investor Education Information Available
DFI has more information and resources available on its investor education webpage. Avoid becoming a victim of fraud by educating yourself.