Statement by SEC Commissioner:
Regarding Interim Final Temporary Rule 15b12 1T — Brokers or Dealers Engaged in a Retail Forex Business
by
Commissioner Luis A. Aguilar
U.S. Securities and Exchange Commission
July 13, 2011
The Commission has approved a temporary rule that will, for the next 12 months, permit broker-dealers to continue to engage in certain foreign exchange transactions with retail customers.
Under Section 742(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), a regulated financial institution is prohibited, beginning July 16, 2011, from entering into certain foreign exchange transactions with its retail customers, unless and until the institution’s regulator has promulgated rules specifically addressing such transactions. The Commodities Futures Trading Commission has already adopted rules[1] because, in part, it had “observed a number of improper practices that have raised concern, among them solicitation fraud, a lack of transparency in the pricing and execution of transactions, unresponsiveness to customer complaints, and the targeting of unsophisticated, elderly, low net worth and other vulnerable individuals.”[2]
I am concerned about the risks to retail investors, given these observations. My support of the promulgation of an interim final temporary rule was subject to the condition that the Office of Investor Education and Advocacy be directed to issue an investor alert warning investors about the potential risks and conflicts inherent in off-exchange foreign currency transactions. I urge that such an investor alert be promptly issued.
The Commission should also propose rules to accomplish Congress’s intent in adopting Section 742(c) of the Dodd-Frank Act. I look forward to considering such rules at the earliest practicable opportunity.
[1] Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries, 75 FR 55410 (Sept. 10, 2010).
[2] As the CFTC noted in its proposing release, “Between December 2000 and September 2009, the [CFTC] has filed 114 forex-related enforcement actions on behalf of more than 26,000 customers. Those efforts have thus far resulted in the award of approximately $476 million in restitution and disgorgement, and $576 million in civil monetary penalties. An overwhelming majority of these cases have involved solicitation fraud.” Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries, 75 FR 3282, 3286 n.44 (Jan. 20, 2010).
http://www.sec.gov/news/speech/2011/spch071311laa.htm
