RECOMMENDED FOREX BROKERS
Do not invest more money than you can afford to lose.
Investor complaints against trading platforms for forex and binary options filed with the AMF have been constantly growing, reaching 1,656 in 2015 from 64 in 2011, according to the 2016 risk outlook analysis of the Autorite des Marches Financiers (AMF), France’s financial regulatory body, issued on Thursday. This is a significant jump of 2,487% and most of the complaints were in relation to unauthorized platforms.
The number of cases that AMF’s mediation department received also grew to 228 in 2015 from 46 in 2011. An interesting fact is that the majority of cases involve authorized brokers. Since the AMF only deals with authorized entities that fall under its jurisdiction, cases against non-authorized companies are referred to the public prosecutor.
In the past six years, French investors have lost about €4.0 billion to illegal forex and binary option sites and additional €500 million to fraudulent transfers over the past six years, the AMF said in the report, citing data from the Paris public prosecutor. Most of these cases involved organized crime.
The risks to savers who invest in forex and binary options are very high, regardless of whether the platforms they trade on are authorised, the AMF’s statement read. Those who use unauthorized platforms run a substantially higher risk of being scammed and suffering severe financial loss.
Some people are investing in forex and binary options without actually understanding the risks entailed in these products, thus losing a lot of money. One reason for this is the use of leverage, which results in losses higher than the deposited amount.Leverage is a type of virtual borrowing traders can get from brokers. It allows them to increase their buying power, but it also means higher risk.
Another reason is that trading platforms, especially speculative ones, attract a large number of investors through misleading online advertising. Full 44% of all investment advertising on the Internet in 2015 were for highly speculative platforms. Other popular means of advertising include social networks, smartphone-based advertising and sponsorship of soccer clubs. Such ads are highly effective. Some 44% of French citizens that took part in a 2015 survey said they have heard of web-based offerings. A total of 22% of the interviewees have been approached by companies with investment offerings. Those who invested in such offering made up 6% of the surveyed, while 4% said they have been swindled through these investments.
To prevent further losses, the AMF said it is working on a draft bill (known as the Sapin II Bill) on transparency and economic modernisation which envisions banning of advertising for internet platforms that offer high risk financial instruments. The raft legislation is currently before parliament.
The AMF, an independent public authority, is in charge of the supervision of the financial markets in France. It licenses financial service providers, sets industry rules, and monitors whether entities comply with them. The regulator makes sure French citizens receive adequate information and safeguards their investments in financial products.