Last year, the Securities and Exchange Commission (SEC) approved a temporary rule allowing the sale of retail Forex contracts to unsophisticated investors until it reaches a decision on whether it will issue more extensive rules. The SEC could impose new rules to protect investors, allow brokers to continue transacting as they are, or prohibit retailers from trading. In the interim, the SEC’s Office of Investor Education and Advocacy issued an alert to all retail investors warning them of the risks associated with trading off-exchange foreign currency contracts.

The Forex market is the global market in which participants buy and sell world currencies. Market participants include commercial banks, government banks, hedge funds, asset management firms, and retail Forex brokers and investors. There is a significant amount of speculation, and it is among the most efficient markets in the world due to its size.

Investors should be concerned about the risks of investing in the Forex market. On such risk is the fact that the Forex market has been flooded by fraudsters who have operated a slew of foreign exchange investment scams. In many cases, the perpetrators are not even registered as broker-dealers. Another risk is the use of leverage, which can go as high as 50:1. If the market does not trade in favor of the investor’s position, leverage can dramatically increase the risk of a complete loss of principal. Investors should also note that only 30% of retail trades are profitable.

During uncertain economic times, it is common for investors to seek higher returns through alternative means of investing. Forex trading is most certainly not the solution. Rather than listen to brokers who tout large returns or the need to diversify and hedge risk through Forex, investors should abide by the core principles of diligent and intelligent investing. This will effectively help avoid falling prey to the various schemes that attract investors during such times.

Have you suffered losses due to Forex trading? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.