I’m never sure if I love to hate the CFTC or hate to love the CFTC. On the one hand, they’ve been really ramping up enforcement actions against scammers that steal money from traders and investors. On the other, they are more than happy to run around wasting time and taxpayer money to restrict the rights of US citizens and residents to deal with brokers from other countries.
It’s bad enough that there are so many pointless government restrictions, such as no hedging, FIFO, and leverage restrictions that make US traders want to get their accounts to offshore brokers. Sadly, our government in the land of the (formerly) free keeps chasing any broker that dares to accept US clients without subjecting itself to US restrictions.
FxOpen has been ordered to pay $140,000 and to stop dealing with US clients. The “crime” was not registering as a Retail Foreign Exchange Dealer (RFED) with with the CFTC. At least the penalty was minimal. I’ll wager this was done to convince other offshore brokers to quietly give up and accept a slap on the wrist instead of putting up a proper legal fight against these unjust rules.
HELLO GOVERNMENT AND REGULATORS! I’m thrilled that you kicked FXCM in the teeth for differential slippage being used to snatch money from traders. I’m ecstatic that you’ve caught and heavily fined other US brokers for using malicious plugins for MT4. I’m grateful that you’ve taken actions against scam brokers who try to rip off US clients. I applaud you for all the onshore Ponzi Schemes you’ve hunted down and closed.
I’m less than happy that those same regulators and regulations that are being used to protect investors and traders from obviously undesirable actions also contain provisions that limit the rights of traders to make trading decisions in their US brokerage accounts and also are designed to keep all that investment money inside the USA.
Government regulations should be designed to protect people in the least restrictive way possible. Traders need to be aware of risks, not be prevented from taking risks. Sure, dealing with a broker in another country is, on average, more risky than dealing with one in the USA. Then again, trading forex is more risky, on average, than trading stocks or buying bonds. I am happy to have the government warn me of danger. I am thrilled when the government goes after financial criminals, at home and abroad. What I don’t need the government doing is tying my hands and telling me which brokers I can and can’t trade with and what trading style I have to use. It’s my money and I should be free to place it with the broker of my own choice and to trade in a style I prefer.
Imagine for a moment if all governments worldwide started making rules like this. Imagine not being able to conduct financial investments outside your own country unless the brokerage or other investment company was registered with and subject to the regulations (possibly contradictory regulations) of all the countries where it did business. Imagine of this extending into other areas of international commerce. We are supposed to be living in an age of globalization, yet the US government is desperately trying to throw the wheels of progress into reverse while using “protecting people” as an excuse.
So much for freedom being a core value in the United States.
I have a suggestion for the US Congress and the CFTC. Freedom and safety don’t have to be in conflict if rules are written competently. Americans need justice, not tight control. Dump these silly restrictions on forex trading and focus on penalizing brokers that rip off clients. If an offshore brokerage is caught stealing from US traders, them ban that brokerage from having US clients and work with other countries to fine the company and/or top shut it down instead of blocking all offshore brokerages. If you really want to keep investor money inside the USA, lighten up on the trading restrictions for US brokerage to make those brokers more competitive and maybe fewer US traders will be feeling the need to move their money offshore. Maybe offshore traders will open their accounts inside the USA instead.
Of course, it’s so much easier for the American government to keep careful track of money belonging to US citizens if it’s all safely kept inside of US banks and brokers. One might almost think that these offshore account restrictions were part of a larger plan to keep people from moving money overseas.