Unregistered forex exchanges are a challenge for regulatory bodies across the world as they create a high risk for traders. The broker could be running a scam or they could defraud clients and potentially get away with it if they are unregistered and therefore, unregulated.
The United States Commodity Futures Trading Commission (CFTC) launched an investigation and action against an unregistered forex firm named JAFX LTD aka JAFX, EOOD in 2018. While the action against the forex firm is still ongoing, it seems as if the Commission and the broker are close to reaching a resolution.
In a report filed with the Utah District Court on the 29th of July, 2019, the CFTC said that the Commission’s counsel and JAFX have been engaged in good faith negotiations trying to come to a resolution on the matter of the allegations raised by the Commission against JAFX.
Through these discussions, the regulatory body and the broker have come to an agreement that sees the entry of a Consent Order of Permanent Injunction and Other Equitable and Statutory Relief. The Consent Order is aimed at resolving liability issues surrounding JAFX and states that the broker will pay disgorgement and a civil monetary penalty which is yet to be determined.
The discussions between the two parties are ongoing as they try to find solutions for the remaining issues and due to the positive signs coming out of the negotiations, a resolution is expected soon. The complaints against JAFX are that the broker operated as an unregistered foreign exchange dealer and also failed to provide customers with Risk Disclosure Statements as is required of every exchange.
Implications of the Consent Order
The Consent Order entered by the Commission and JAFX restrained JAFX permanently enjoined and prohibited the exchange from soliciting or accepting orders from U.S residents non-ECPs. The restrictions are applied in connection with leveraged or margined forex transactions and any actions or offerings that are the counterparty to the forex transaction. The order also states that the companies are prohibited from opening trading accounts for U.S retail customers in the absence of a written disclosure statement which clearly states all the required disclosures.
Further restricts have also been placed on JAFX with regards to commodity interests. According to the Consent Order, JAFX is permanently restrained, enjoined and prohibited from engaging in any transactions involving commodity interests through its personal accounts or any other accounts which it has a direct or indirect interest in. The broker is also not allowed to have any other broker trade any commodity interests on its behalf.
Forex trading in the US
Forex trading is becoming a popular industry in the U.S and the CFTC and other concerned regulatory bodies are trying to ensure that clients in the country are protected from unregistered forex brokers. Restrictions are tight in the U.S and the country has ordered a number of exchanges to stop doing business with American citizens. Firms such as JAFX pose a threat to the finances of traders as the absence of registration means the brokers are unregulated. It is important that traders engage in business with registered and approved trading platforms.