I am posting herewith excerpts from a Public Notice issued by the US Commodity Futures Trading Commission entitled "Proposed Changes to Net Capital Requirements for Forex Dealer Members" , datelined July 23, 2008 which I lifted from the web site of the National Futures Association of the US (http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=2165).
July 23, 2008
Proposed Changes to Net Capital Requirements for Forex Dealer Members
The CFTC Reauthorization Act of 2008 (Reauthorization Act) increases the adjusted net capital requirement for certain forex counter party Futures Commission Merchants and Retail Foreign Exchange Dealers to $20 million. This increase is phased in, with the first increase scheduled for 120 days after enactment or at such later date as the Commodity Futures Trading Commission (CFTC or Commission) proposes and finalizes rules regarding retail forex transactions. If implemented under the 120 day schedule in the Reauthorization Act, NFA's Forex Dealer Members would be required to have $10 million as of September 19, 2008, $15 million by January 17, 2009, and $20 million by May 16, 2009.
RAISE THE NET CAPITAL REQUIREMENT! A simple solution to this plaguing problem!
This requirement filters out the scam operators from the ranks of the legitimate brokers. A surefire measure adapted earlier by the Hong kong Securities and Futures Commission in the early '90s.
Hong kong was where most of these scrupulous operators started a long time ago. So, when these fly-by-night scam artists could no longer operate there (HK)because of the stringent capital requirement, they farmed out to the neighboring countries to include the Philippines, Singapore, Malaysia, Thailand, India, and even Australia. But these countries except the Philippines, followed Hong Kong's example immediately and raised the net capital requirements of forex brokers in their own countries forcing these scam artists to migrate once more elsewhere. A lot of them tried to operate in the U.S. and for a while they were sprouting like mushrooms in the West Coast. Everywhere they went in the "land of milk and honey", they were leaving behind a trail of lawsuits and a heap of shattered dreams. Now, US authorities are seriously after them and are constantly making it harder and harder for them to operate there. This new regulatory requirement and the US authorities' vigilance on the issue are indeed a welcome break for all forex investors.
In the meantime, back in the Philippines where they feel secured behind the protection of corrupt officials, blanketed by a platoon of known top legal personalities, and fronted by known business figures, these scam artists continue to stalk Philippine investors, lurking like hungry vultures waiting for an opportune time to strike again. Some are still operating in the open seemingly taunting the helpless authorities. In the meantime, authorities and legislators have remained complacent to the issue and will only show up in the media only to grandstand when another scam puts the issue once more in the limelight.