An SEC official said the agency has received reports that several companies have been trading foreign currencies without the necessary license. "They can’t do that because the futures market has remained closed. In fact, we have yet to come up with the rules," the official said.
The same official warned the public to take special care to protect themselves from various kinds of fraud being perpetrated in today’s financial markets, including those involving "foreign currency trading."
He said these companies have been enticing investors to put their money in speculative futures currency trading market. Investors are normally assured that their investments will earn high profits with minimal risks.
"Be extremely wary of companies that guarantee profits with no extra effort on your part. In many cases, those claims are false," the official said.
Currency trading scams often attract customers through advertisements in local newspapers or attractive Internet sites.
The SEC official said the currency futures market is volatile and contains substantial risks for unsophisticated investors. "You can lose most or all of your funds in just a short period of time trading foreign currency contracts," he said.
In futures currency trading, the value of a currency, the US dollar in this case, is hedged on the expected exchange rate on a particular period. It allows one to purchase or sell a specified currency at a specified price on a specified settlement date.
If the rate is substantially lower, then the investor automatically loses but if it is higher, then he earns the margin.
The SEC official said the bogus operations of these companies are creating pressure on the foreign exchange rate.
Although the Philippine Dealing System (PDS), the country’s electronic currencies exchange, is directly under the supervision of the Bangko Sentral ng Pilipinas, the SEC is empowered to regulate corporations involved in the foreign exchange market.
Under Presidential Decree 902-A or the SEC Law, the commission is authorized to investigate, on complaint or motu propio (on its own), any act or omission of the board of directors/trustees of corporations, or of partnerships, or of other associations, or of their stockholders, officers or partners.
The power extends to probing fraudulent devices, schemes or representations in violation of any law or rules and regulations administered and enforced by the commission. After investigation, the commission can file an appropriate case in court and prosecute it in accordance with the law and SEC rules and regulations.