Warning Signs of a Fraudulent Broker
Most brokerage firms are legitimate places of business that can give people access to the Forex market. Unfortunately, there are unscrupulous companies that attempt to scam traders. New traders are particularly vulnerable to these types of companies. The Forex market remains largely unregulated so new traders cannot rely upon governmental regulations or safeguards to protect them from these scam artists.
But the Commodity Futures Traders Commission (CFTC) has developed warning signs to help traders protect themselves from unscrupulous dealers. All traders should be aware of these signs and report this type of activity to the CFTC or the National Futures Association.
Warning Signs
- A company that guarantees large profits
- A company that promises little or no financial risk
- A company that claims to trade in the Interbank market
- A company that refuses (or delays) giving their performance track record
- A company that engages in high-pressure tactics
- Any company that encourages quickly transferring money by overnight delivery or the Internet
- Any company that contacts you by unsolicited phone calls, particularly using offshore salespersons
Not every company that engages in these activities is fraudulent. However, any type of high pressure sales activity, particularly involving the transfer of cash, is a cause for concern. And, of course, any opportunity that sounds too good to be true should also be cause for concern.
A trader can investigate a brokerage firm that they suspect could be engaged in fraudulent activity. Any individual can perform a search on the National Futures Association online directory. The NFA will have information (including complaint and disciplinary history) on every member broker. This information can be very useful. However, since membership is voluntary, some legitimate companies do not belong to this organization.
Otherwise, a trader can check on a company through the Commodity Futures Trading Commission (CFTC), the Better Business Bureau, or Consumer Protection bureau.
