The US Commodity Futures Trading Commission (CFTC) has obtained a federal court consent order that permanently bars defendant InterForex, Inc, of Tortola, British Virgin Islands, from soliciting or accepting orders to trade foreign currency (forex) from US customers who are not Eligible Contract Participants (ECPs).
The order also permanently bars InterForex from offering to be the counterparty to US customers’ forex transactions, without registering with the CFTC.
The order, entered on 2 February, 2012, by Judge Rebecca R Pallmeyer of the US District Court for the Northern District of Illinois, also requires InterForex to prominently display a notice on its website that InterForex does not provide services for US customers.
The order settles CFTC charges that InterForex unlawfully solicited US customers to engage in forex transactions and operated as a Retail Foreign Exchange Dealer (RFED) without being registered with the CFTC.
Specifically, the order finds that between 18 October, 2010, and 8 September, 2011, InterForex solicited orders from US customers who were not ECPs to open leveraged forex trading accounts through its website. During the period, InterForex’s website did not impede US residents from applying for forex accounts; however, InterForex did not accept orders from any US customers, according to the order. The order finds that InterForex acted as an RFED by offering to take the opposite side of retail customers’ forex transactions (ie, offered to act as a counterparty) without being registered as an RFED and also solicited US customers to open a variety of forex trading accounts without being registered, in violation of the Commodity Exchange Act (CEA) and applicable CFTC regulations.
In the forex market, entities known as RFEDs as well as entities known as Futures Commission Merchants (FCMs) may buy forex contracts from, or sell forex contracts to, individual investors. Under the CEA and CFTC regulations, an entity acting as an RFED or an FCM must register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, record-keeping, and compliance. Further, with a few exceptions, such an entity also must be registered with the CFTC if it solicits or accepts orders from US investors in connection with forex transactions conducted at an RFED or FCM.
