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Delays in Dodd-Frank retail forex rules unacceptable-SEC official
July 12, 2013 / 1:35 AM / 4 years ago

Delays in Dodd-Frank retail forex rules unacceptable-SEC official

WASHINGTON, July 11 (Reuters) - The U.S. Securities and Exchange Commission should stop dragging its feet and adopt rules to protect mom-and-pop investors from risks arising from trading in off-exchange foreign currency contracts, a top official said Thursday.

Luis Aguilar, a Democratic SEC commissioner, said he was frustrated at the SEC’s decision to postpone until July 2016 the rule-making on retail forex required by the 2010 Dodd-Frank Wall Street reform law.

The SEC has yet to finish dozens of about 100 laws mandated by the Dodd-Frank reform law three years after it went into effect. The law will mark its third anniversary this month.

“It is simply not acceptable for the Commission to continue to delay the fact-finding and decision-making process,” Aguilar said. “Though retail forex transactions may provide benefits, they can pose great risks to investors.”

Retail forex is a niche market that lets average investors bet on the direction of currency price movements, but in recent years it has also has been favored by fraudsters. Regulators are also concerned about leverage risks.

The SEC’s sister agency, the Commodity Futures Trading Commission, adopted in 2010 retail forex rules for the firms it regulates that include measures to cap leverage for major currencies.

But Dodd-Frank requires other regulators, including the SEC, to impose similar rules on retail forex dealers that they oversee and the SEC has yet to propose any rules. If no regulatory regime is established for these transactions, retail forex dealing would be prohibited.

In July 2011, the SEC adopted a temporary measure to prevent a ban on retail forex from going into effect, and that reprieve has been extended several times.

Aguilar said the SEC now expects the Financial Industry Regulatory Authority, the self-regulator for the brokerage industry, to take the lead on rule-making for retail forex.

“It is my expectation that the Commission and the SEC staff will work in earnest to assess this market and either adopt new rules that accomplish Congress’ intent or allow the law to go into effect,” Aguilar said.

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