Tags: US | Currency | Trading | Sweep

US Says 11 Currency Traders Operating Illegally

Thursday, 08 Sep 2011 02:29 PM

 

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Federal regulators are suing 11 firms they say broke the law by selling foreign-currency contracts to the public without being registered with a government agency.

The lawsuits announced Thursday were the second "sweep" by the Commodity Futures Trading Commission under regulations that took effect last October as mandated by the financial overhaul law. The commission is seeking to stop the firms from operating unless they register with it, and it wants civil fines and restitution.

Seven of the 11 firms are incorporated outside the U.S. The CFTC's first such action targeted 14 firms in January.

The agency urged all investors to check whether any firm they invest with is registered. If not, members of the public should be wary, the CFTC said.

The rules requiring foreign-currency trading firms to register are intended to protect investors from potentially fraudulent operations, the agency said.

When an investor buys a foreign-currency contract, he or she buys the right to purchase an amount of foreign currency at a fixed price in dollars. Investors hope to profit from ups and downs in currency markets, but they also can suffer losses from sharp price swings.

The CFTC and state regulators have previously warned the public to be cautious before trading foreign currencies in general — especially outside of major exchanges such as the Chicago Mercantile Exchange — saying it can be very risky.

The lawsuits announced Thursday were filed in federal courts in Illinois, New York, Utah and Wyoming. In each case, the CFTC alleges that the firm solicited or accepted orders from U.S. investors for foreign-currency trades, a violation of the law because the firm wasn't registered.

The firms named were 1st Investment Management LLC, incorporated in Wyoming; City Credit Capital (UK) Ltd., United Kingdom; Enfinium Pty Ltd., Australia; GBFX LLC, New York state; Gold & Bennett LLC, New York state; InterForex Inc., British Virgin Islands; Lucid Financial Inc., Utah; MF Financial Ltd., Belize; OCM Online Capital Markets Limited, British Virgin Islands; Trading Point of Financial Instruments Ltd., Cyprus; and Windsor Brokers Ltd., Cyprus.

Of the 14 firms sued in January, 11 have either settled the charges or failed to respond to them and were therefore ordered by courts to pay, the CFTC said. The cases against the other three firms are pending.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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