The Regulation of the Forex Markets
The National Futures Association and the Commodity Futures Trading Committee are in charge of creating, enforcing and regulating Forex investments. NFA membership is required by law for all brokers who trade these currencies. The CFTC is the government level enforcer of these regulations created in the mid 1970s by the U.S. Congress. This article outlines these regulations.
First, it is a requirement for all providers of Forex to obtain a national license from their home country and/or the country from which they intend to sell or market these accounts to buy and sell foreign currencies. Secondly, the approval of both the NFA and CFTC is required for any company providing these services. This regulation is in place to ensure the quality and fairness of the organization and any investments made with that company.
Each company selling forex accounts are frequently audited and will undergo evaluations from the ground floor up to ensure that all regulations and laws are being closely followed at all times. An abundance of funding must be available to customers in order for these customers to enter contracts with your organization. These contracts executed cannot be signed and/or legal without the intention of completely exercising the specifications of the contract in its entirety.
Each of these representative is required to fully disclose to their customers all possible risks involved in trading and/or investing in these foreign denominations. These representatives are not allowed to solicit customers without this full disclosure. There does not exist any guarantee that profits will be made from this or any other investment. Any misrepresentation that implies a guarantee is not only illegal but actionable if customer losses a large amount of money based on this misleading information. The organization that makes such a claim will also find themselves in legal trouble with both the CFTC and NFA. Not only will these solicitors find themselves stripped of their license but can also face criminal prosecution on the high court level. The broker’s license will also be revoked if that broker does not complete each and every contract entered with a forex client. This also includes customers who enter into multiple contracts.
These regulations and restrictions cannot completely stop all unethical activity within the lucrative forex industry, but they go a long way toward establishing ethical baselines and protecting innocent investors investing in the forex markets.
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