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CompareForexBrokers Launches First FMA Regulated Comparison

CompareForexBrokers is the first comparison site that strictly reviews brokers regulated by New Zealand’s Financial Markets Authority (FMA). The website's aim is to assist those looking for a new broker while reiterating the importance of trading with a licensed financial provider. Unlike other review sites that promote unlicensed entities, CompareForexBrokers only recommends FMA regulated brokers to kiwi traders.

Many new traders have entered the market since the outbreak of COVID-19 in March and the FMA is warning kiwis to be diligent when choosing a forex broker. Since the first lock down, 120,000 New Zealanders have signed up to an online broker. While the volatility caused by COVID-19 leads to attractive trading opportunities, scammers are also trying to capitalise on the chaos by targeting vulnerable traders.

While trading forex can be profitable, there are concerns regarding the number of scammers preying on vulnerable people and communities. Forex is a complex instrument that comes with a high risk of losing money, and financial authorities worry new traders may not fully understand the risks.

“The pandemic has exacerbated investor vulnerability to fraudulent activities, with scammers seeking to exploit conditions such as market volatility, investor uncertainty, and search for yield.” - FMA, 17 June 2020

Types of Scams

Scams and fraud were on the top of the list when the FMA identified the regulatory risks caused by the pandemic. As the international crisis continues, vulnerable individuals and communities are the primary targets of CFD and forex scammers.

In April, the FMA launched a campaign to raise awareness about scams targeting Pacific communities. Using false celebrity endorsements and fake news, scammers sold fraudulent cryptocurrency products to social media users.

Liam Mason, the FMA’s Director of Regulation, revealed that “although scammers don’t discriminate, targeting Kiwis of all ethnicities, there are certain scams that have been aimed specifically towards Pacific communities.”

There are a myriad of ways scammers are taking advantage of people in desperate situations due to COVID-19. The FMA reported the following scams throughout the year:

  • Fake celebrity endorsements or news, as seen in recent social media scams.
  • Fraudulent brokers falsely stating they are a FMA registered financial services provider.
  • Brokers or financial products offering guaranteed or unrealistic returns to lure people in.
  • Brokers are illegally requesting money before allowing people to withdraw funds from their trading accounts.
  • Scammers are impersonating registered, legitimate brokers to solicit funds from individuals. Recently, the FMA warned multiple scams were operating where the FMA itself was being impersonated.
  • Boiler room scams where people are receiving unsolicited cold calls from illegitimate financial services providers.
  • Ponzi and pyramid schemes are increasingly using Cryptocurrency products. Scammers are advertising misleading information about ‘safe haven’ products that are unregulated and high risk.

How to Spot a Scam

The FMA is warning anyone trading forex or CFDs to be on the lookout for scams. Fortunately, New Zealand’s financial authority is a well-respected, tier-1 regulator that actively monitors financial services providers and markets.

In July, the FMA’s Rob Everett stated that the organisation would be “taking quick action on reports of scams that seek to exploit the pandemic… We’ll be watching for issues such as the mis-selling of high-risk products and poor treatment of customers – especially those who are vulnerable to financial difficulty.”

While the FMA diligently updates its website to keep the public informed about current scams, it warns there are two key signs of a financial scam or fraudulent broker:

  1. Financial providers making unsolicited contact.
  2. Offering unrealistic returns and downplaying the risks.

To protect yourself against scams and fraudulent brokers, the FMA recommends avoiding offshore companies and instead using a licensed financial provider that is authorised to operate in NZ. You can find a list of FMA licensed entities on the regulator's website.

Finally, beware of comparison and review sites that promote brokers that are not licensed by the FMA. To find a broker that suits your trading needs, is the only review site that strictly recommends FMA regulated brokers to New Zealand retail traders.

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