Warning - Promises of high returns through foreign exchange (FOREX) may be deceptive

Investor warnings - News Securities

Montréal – The Autorité des marchés financiers (AMF) warns investors about unscrupulous firms operating in Québec promising returns of up to 20% through investments via the foreign exchange market (FOREX) and the sponsorship of new investors.

These firms urge investors to act as promoters for the sponsorship of other investors in exchange for a percentage of the fees earned on the funds collected. The promised percentage of monthly fees rises based on the funds collected from sponsored investors. This strategy might be behind a pyramid scheme in which investors are paid "earnings" out of money received from new investors. A pyramid structure constantly needs money from new investors to survive. However, the result is always the same: The pyramid ends up collapsing when there are no longer enough new investors and the fraudsters have maximized their profits.

A number of Québec investors are being contacted through e-mails, or through blogs or on-line classified ads. Contrary to statements made on certain blogs and websites, the firms are not registered with the AMF as securities dealers or advisers. As well, investor sponsors have not been issued approvals from the AMF as required and are liable to penal proceedings and administrative sanctions imposed by the AMF.

Moreover, foreign exchange trading, in which investors hope to pocket profits by exchanging one currency for another, is a complex and volatile market. Inexperienced investors can incur substantial losses.

The AMF reminds investors that they should always make sure that any firms or individuals proposing investments hold appropriate approvals from the AMF. "Investors should be careful when promised outstanding returns or offered opportunities for easy money by sponsoring other investors," said AnneMarie Poitras, AMF Superintendent, Client Services and Compensation. "And without knowing so, investors can place themselves in a very uncomfortable position by sponsoring other investors."

Ms. Poitras offered further advice to investors:

  • contact the AMF Information Centre to determine whether a firm is authorized to offer investments to the public and an individual recommending investments is licensed to practice in Québec;
  • ask for written confirmation of information provided orally;
  • be on your guard when strangers promise investment returns that are too good to be true.

More information is available in Watch out for securities fraud, which is available on the AMF website. The brochure will help you recognize several types of illegal activity and gives a few tips for being on the lookout for con artists.

If you believe you were the victim of fraud, contact the AMF Information Centre.

The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec's financial sector.

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