SEC Issues Investor Bulletin on Retail Forex Transactions; 2011-150; July 20, 2011
The SEC issued a warning about the high risks of retail forex trading for individual investors and implemented a one-year interim rule to delay a Dodd-Frank prohibition, seeking time to evaluate regulatory actions—no fraud allegations or enforcement actions were made.
On July 20, 2011, the SEC released an investor bulletin cautioning retail investors about the substantial risks and potential for loss in foreign exchange (forex) trading, noting it is not suitable for all investors. To prevent an automatic ban under Section 742(c) of the Dodd-Frank Act, the SEC enacted an interim final temporary rule allowing registered broker-dealers to continue retail forex transactions for one year. No fraud, charges, fines, or specific dollar amounts were cited—this was purely an advisory and regulatory pause to gather data for future rulemaking.
On July 20, 2011, the SEC issued an investor bulletin warning that retail forex trading poses substantial risks of loss and is not appropriate for all individual investors due to the market’s complexity and volatility. The bulletin followed the adoption of an interim final temporary rule that permitted registered broker-dealers to continue offering retail forex transactions for one year, thereby avoiding an automatic prohibition set to take effect under Section 742(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC emphasized that its goal was not to accuse any party of misconduct but to buy time to collect additional data on retail forex activities and assess appropriate regulatory measures. No enforcement actions, fines, or fraud allegations were mentioned, as the bulletin was purely informational and precautionary. Director Lori J. Schock urged investors to fully understand the risks and consult financial advisers before engaging in forex trading. The SEC acknowledged the forex market’s legitimacy for institutional hedging but stressed that retail participants often lack the expertise to navigate its risks. This regulatory pause reflected a proactive, non-punitive approach to investor protection pending further analysis and potential rulemaking.
Exhibits & Attached Documents (2)
Extracted insights
- agency director of the sec's office of investor education and advocacy
- person lori j. schock
- person retail forex transactions
- agency Securities and Exchange Commission
- SEC issued Investor Bulletin on Retail Forex Transactions
- SEC issued interim final temporary rule
- Lori J. Schock is Director of the SEC's Office of Investor Education and Advocacy
- Retail Forex Transactions would have been prohibited July 16, 2011
- Dodd-Frank Wall Street Reform and Consumer Protection Act contains Section 742(c)
- Registered Broker-Dealers permitted to engage in retail forex transactions for up to one year
- SEC issued Press Release 2011-150
SEC Issues Investor Bulletin on Retail Forex Transactions FOR IMMEDIATE RELEASE 2011-150 Washington, D.C., July 20, 2011 — The Securities and Exchange Commission today issued an investor bulletin highlighting some of the most significant risks that foreign currency exchange (forex) transactions may pose for individual investors. Additional Materials Investor Bulletin: Forex Trading for Individual Investors The forex market is a large and generally liquid financial market. Banks, insurance companies, and other financial institutions as well as large corporations use the forex markets to manage the risks associated with fluctuations in currency rates. However, the risk of loss for individual investors who trade forex contracts can be substantial. “Forex trading can be very risky and is not appropriate for all investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Individual investors considering forex trading need to fully understand the unique characteristics of this market and consult their financial adviser before making any investment decisions.” Last week, the Commission issued an interim final temporary rule to permit registered broker-dealers to continue to engage in retail forex transactions for up to one year under the existing regulatory framework that applies to them when effecting such transactions. Under Section 742(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, retail forex transactions would have been prohibited as of July 16, 2011, in the absence of Commission action. The interim rule provides the Commission with time to collect additional information regarding the retail forex activities of broker-dealers and take such regulatory action as may be appropriate to reduce forex risk for investors purchasing or selling foreign securities. # # # http://www.sec.gov/news/press/2011/2011-150.htm Home | Previous Page Modified: 07/20/2011
SEC Issues Investor Bulletin on Retail Forex Transactions FOR IMMEDIATE RELEASE 2011-150 Washington, D.C., July 20, 2011 — The Securities and Exchange Commission today issued an investor bulletin highlighting some of the most significant risks that foreign currency exchange (forex) transactions may pose for individual investors. Additional Materials Investor Bulletin: Forex Trading for Individual Investors The forex market is a large and generally liquid financial market. Banks, insurance companies, and other financial institutions as well as large corporations use the forex markets to manage the risks associated with fluctuations in currency rates. However, the risk of loss for individual investors who trade forex contracts can be substantial. “Forex trading can be very risky and is not appropriate for all investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Individual investors considering forex trading need to fully understand the unique characteristics of this market and consult their financial adviser before making any investment decisions.” Last week, the Commission issued an interim final temporary rule to permit registered broker-dealers to continue to engage in retail forex transactions for up to one year under the existing regulatory framework that applies to them when effecting such transactions. Under Section 742(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, retail forex transactions would have been prohibited as of July 16, 2011, in the absence of Commission action. The interim rule provides the Commission with time to collect additional information regarding the retail forex activities of broker-dealers and take such regulatory action as may be appropriate to reduce forex risk for investors purchasing or selling foreign securities. # # # http://www.sec.gov/news/press/2011/2011-150.htm Home | Previous Page Modified: 07/20/2011