BTW I fully agree with account managers being compensated. I am not at all against a pip commission. But I think that pip reward should exclude losing trades.
However, while brokers cannot check up on and be accountable for all of their traders and account managers, I believe they should be to some extent accountable for compliance to fraud if they do not at least warn clients of known scammers, suspicious account activity (for example an account manager suddenly making 500 trades in a day) and overall some system of more transparency with would be account managers.
For example, it could made be law that an account manager must disclose how long he has been running the current account. What his largest drawdown is, what the initial deposit was, and additional deposits or withdrawals, and of course they offer a track record of month to month gain/loss. Of course, maybe not all of these, but at least some providing some of these criteria could become law. And law could require that the brokerage firm confirm these given statistics.
Now, of course there are all sorts of rights, etc. And I am just throwing a ball in the air here. There are probably some better criteria that I haven't mentioned, and some shouldn't be included. And of course, I am only talking about account managers who would like to have investors put money into their accounts.
This might mean that account managers looking for investors would first have to get their accounts, profits/losses, etc verified through the broker BEFORE they could offer their services.
What would this mean. Most scammers would not legally be allowed to offer their services, as they would not be able to get verified. If the brokerage firm was compliant with a scammer, then they would be reprehensible for their involvement. (As a type of example, the US postal law makes it illegal to use US Post for fraud activity.)
Of course this would not be possible world-wide, but in countries like the US, Britain, Australia, NZ, just to name a few it should be quite possible to do. And in my opinion, something along these lines are quite necessary.
If I opened a shop and started selling illegally made products that were falsely advertising what the product was made of, and what the product could do, I would be prosecuted under law. Well, brokerage firms and account managers are selling products. IMHO his industry needs to be more closely regulated.
Face it, we all have a right to be protected from fraud.
The trading industry is not an easy one to regulate, especially with the internet and home computers.
But it is still an emerging and ever changing market. Laws should try to keep pace with the industry.
They can't regulate every trader, but they can regulate the brokers.
Let me finish with this scenario: There are ten account managers with ten different brokers. Given that everything else was equal (spreads, commissions, etc), but one broker did not pay pip commission on losing trades, and would verify an account manager's fund, which account manager and broker would you choose? If one broker firm gave this service, all the would be investors would look for account managers with this broker, and then honest account managers would use this brokerage firm. Eventually, more brokers would have to offer the same services.
So, how would we go about lobbying the government agencies to bring about better regulation to the industry?
