AZ Investor

What Every Investor Should Know

What is forex (foreign currency) fraud?  Foreign currency exchange rates, commonly known as "forex," are the costs to exchange one country's currency for another country's currency.  Since currency exchange rates fluctuate, traders can participate in the forex market as speculators (individuals and companies who buy and sell foreign currencies) hoping to profit from changes in the currency rates.

Like any investment, forex investments can be abused.  So, how does an investor know if the forex investment program advertised on the radio, newspaper or website is a potential scam?  Here are some warning signs:

1. Get-rich-quick claims with little money down.
   Claims such as "you can make six figure profits within a year" when they involve forex investments tend to be fraudulent.  Be leery of promises that sound too good to be true.
2. Guaranteed profits, little-to-no-risk.
   Forex markets are volatile and are considered to be high-risk investments.  Invest only what you can afford to lose.
3. High pressure sales tactics.
   Steer clear of anyone who tries to convince you to send or transfer cash immediately by  overnight delivery companies, the Internet, by mail or special courier.  Take your time to verify the background of the salesperson and company with a regulator.
4. Claims of better trades in the "interbank market."
   Question any firm that claims that potential investors can obtain better prices by trading in the interbank market since this type of market is typically reserved for large corporations, investment banks, and other financial institutions, not the general public.

Obtain important background information about forex dealers and their salespeople from the National Futures Association (NFA) at www.nfa.org. 

Read more about forex fraud and what questions you need to ask when buying forex investments.