The U.K. Financial Conduct Authority, which is the watchdog of the British financial industry, recently released a few warnings on trading with clone brokers. Is this something you should be worried about?
Well, if you’ve coughed up your hard-earned cash to an unregulated broker, then you should definitely be concerned! If not, then you should still do a bit more reading to make sure that you’re really doing business with a regulated broker.
As it turns out, clone brokers are on the rise these days, with fraudulent companies setting up shop by using names of reputable companies to trick clients into thinking that they’re trading with a regulated forex firm. They even use the license number of regulated brokers to fool traders into opening accounts with them!
A few weeks back, the FCA uncovered the operations of three clone brokers, namely Sapien Capital Limited, PMG Forex, and Max Forex. These firms made use of site domains based on variations of the names of the real firms whose identities they are copying.
Although these firms are London-based, they appear to be targeting the Chinese market, as trading volumes continue to rise in Asia. In particular, these clone brokers had been attempting to get “investments” from retail forex traders in China.
Prior to this, the FCA had already issued warnings on Singapore-based clone brokers pretending to be affiliated with U.K. prime broker LCG. In similar fashion, these firms made use of variations of the real company’s name, such as London Capital Group Asia, LCGA Fxplatform, LCG Asia and LCG Forex.
As I always emphasize, constant vigilance is key in avoiding falling victim to these scams. Apparently, these firms also employ boiler room tactics by pressuring clients into opening accounts or depositing more funds. If something sounds too good to be true, then it probably is! Make sure you swing by our lesson on How to Protect Yourself from Forex Scams for more tips.