Trading the markets can be hard enough without worrying about poor broker performance or, even worse, falling victim to a scam. At Forex Traders, we receive messages from the trading community about traders that have unfortunately lost out to fraudulent brokers. It’s always worth reiterating the need to follow best practise when signing up or switching to a new broker, and this page is an excellent place to start for anyone considering doing that.
The good news for traders is that by following a few basic rules, most importantly ensuring your broker is on a list of regulated brokers, the safety of funds can be protected. That way, any profits made can be returned to traders promptly.
There is also the presence of regulators to consider. These authorities operate on a carrot and stick basis to ensure the markets function efficiently and fairly. Fines and other sanctions can be issued to offenders, and the SEC in the US has just announced updates on its whistleblower scheme. The sums involved are staggering and demonstrate the willingness of authorities to keep the financial system clean.
SEC’s Whistle Blower Scheme Strikes Again
A recent report issued by the SEC discloses that five individuals related to three cases were awarded a total of $2.6m for their cooperation in bringing rogue firms into line. One of the whistleblowers received $1.2m for their efforts which included providing a complex algorithm that resulted in a successful enforcement action.
The SEC’s scheme has been operating since 2012, and a total of 203 individuals have to date been provided with cash rewards. The total outlay is over $959m, and the funds don’t come out of the public purse. Instead, the program is funded by “monetary sanctions” paid to the SEC. One example of the sources of funds was August’s action against Blockchain Credit Partners, which was found guilty of misleading customers. The firm was forced to return $12m in disgorgements, and the two bosses were fined $125,000 each.
The sums paid to whistleblowers might appear chunky but are only part of the total taken by the SEC. Individuals who voluntarily provide the commission with reliable information that leads to successful enforcement action can receive 10-30% of any money collected by the SEC when the total size of the sanction is more than $1 million.
The Basic Rules Still Apply
In global terms, the SEC is one of the most formidable regulators. When legit brokers make sure all the t’s are crossed, and i’s are dotted, particular attention is given to filings submitted to the US regulator. The size of the incentives offered to whistleblowers is quite staggering but is matched by the stringent penalties the regulator applies.
This is all provides some comfort for traders, but the protection only really kicks in if they follow the golden rule of only signing up to a regulated broker.
If you have been the victim of a scam, suspect fraudulent behaviour, or want to know more about this topic, please contact us at [email protected]
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