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June 20, 2003
NFA President briefs congressional committee on potential danger of off-exchange retail forex activity
June 20, Washington, DC - In testimony Thursday before a subcommittee of the House Committee on Agriculture, Daniel J. Roth, President and Chief Executive Officer of National Futures Association (NFA), warned of potential consumer fraud in the area of off-exchange foreign currency (forex) products being sold to retail customers.
"In passing the Commodity Futures Modernization Act of 2000 (CFMA), Congress attempted to clear up jurisdictional issues over off-exchange forex contracts sold to retail customers," said Daniel J. Roth. "Unfortunately, the actual wording of the statute may have closed one loophole and opened another."
The CFMA language leaves open the possibility that entities actually working the phones selling the product may be completely unregulated.
"This is just what has happened," said Roth. "Hundreds of unregistered and unregulated entities are currently soliciting retail forex customers. In fact, NFA has received information that several individuals that we charged with fraud in the futures industry are linked to these soliciting firms."
NFA has taken an aggressive approach to combating the rise of consumer fraud in the retail forex arena. The Association has taken three emergency actions against NFA Members for forex activities within the last 20 months. In addition, NFA's Board of Directors recently adopted several rules designed to protect forex customers against unethical business practices and loss of funds due to insolvency or related problems. These rules are currently being reviewed by the CFTC.
"We hope our proposed rules will help close any loopholes that may have been created," said Roth. "NFA will, of course, continue to carefully monitor these activities. If at some point we determine that our rules are not effective and that congressional action may be called for, we will certainly communicate those concerns both to the CFTC and to Congress."
NFA encourages consumers with questions or concerns regarding forex sales solicitations to contact the Association either through its Web site, www.nfa.futures.org or by calling the NFA Information Center at 800-621-3570.
A copy of the oral testimony is available on NFA's Web site at http://nfa.futures.org.
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