Regulators warn against currency trades |
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Mon, 07 May 2007 18:10
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WASHINGTON (AP) - Regulators are urging the public to be cautious before trading foreign currencies, saying the field is riddled with fraudulent operators.The federal Commodity Futures Trading Commission and the North American Securities Administrators Association, which represents state securities regulators, issued an investor alert Monday warning the public against foreign exchange schemes.The regulators said trading in foreign currencies, especially outside of big exchanges such as the Chicago Mercantile Exchange, is 'at best extremely risky, and at worst, plagued by outright fraud.'When an investor purchases a foreign exchange contract, he or she buys the right to purchase an amount of foreign currency at a fixed price in dollars.Investors hope to profit from ups and downs in currency markets. But sharp swings in prices can also cause large losses, especially when an investor borrows money to make an investment and can wind up owing more than their initial investment was worth.'If you are tempted to invest, make sure you understand these products and above all, only invest what you can afford to lose,' said Michael Dunn, chairman of the CFTC's foreign exchange outreach and education task force.The regulators said fraudulent schemes often come in the form of unsolicited phone calls and efforts to convince an investor to quickly transfer cash.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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