While being less prevalent than other type of fraud, Forex Broker scam are a reality in the same way that any industry will spawn some bad apples. There are many unscrupulous brokers who should be in business.
Before trading forex and investing through a broker, it is important to conduct some basic safety search and identify brokers who are trustworthy, reliable and viable. In order to do so the investor must go through a series of steps before depositing a large amount of capital
with a broker.
How does fraudulent Forex Broker operates?
Broker’s make gains on customer’s trading commissions. It is actually not in their interest to try to maximize these commissions at the expenses of their clients because it is better to have long-term clients who regularly trade and therefore, create a sustained revenue stream
that make them a profit.
Nonetheless, there has been report of unscrupulous brokers arbitrarily moving quoted rates in order to trigger stop orders when other brokers’ rates have not moved to that price.
How to protect yourself from fraudulent brokers?
To protect yourself from unscrupulous brokers, before making any decisions following these steps can be helpful:
Do an online search on the broker(s) you want to deal with. This step is very simple but it avoids a lot of bad surprises. Some former clients may have left review on said broker detailing their experience and if they had troubles of any types like complaints about not being able to withdraw funds. If so, one should contact the user and ask
them more about their experience.
A good supplement to this type of search is BrokerCheck from the Financial Industry Regulatory Authority (FINRA), which indicates whether a broker have outstanding legal actions against him.
Read through all the fine print of the documents when opening an account. A broker may offer strong incentives to open an account like a bonus amount of money for new accounts or for deposit. But at the same time states in the fine print that this bonus cannot be withdraw. Unwary customers may trade with the idea that they can still recover their initial investment only to find themselves in dire strait when they realize it is actually not possible and it was stated in the contract.
Once you find a broker that you deemed worthy after research, open an account with only a small capital at first and make trade for a couple months. Then attempt to withdraw your money. If everything goes well, it should be relatively safe to deposit more funds. If you have any problems, attempt to discuss them with the broker. If that fails, move
on and post a detailed account of your experience online so others can learn from your experience.
What to do if you have been victim of a fraudulent broker?
Unfortunately, options are very limited at this stage.
However, there are a few things you can do. First, read through all documents to make sure your broker is actually in the wrong. If you have missed something or failed to read the documents you signed, you may have to assume the blame?
Next, discuss the course of action you will take if the broker does not adequately answer your questions or provide a withdrawal. Steps may include posting comments online or reporting the broker to FINRA or the appropriate regulatory body in your country.