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Directory > Regulators > Forex Due Diligence


This is a must reading before entering in any foreign exchange transaction especially margin foreign currency trading.


  • Commodity Futures Trading Commission (CFTC) was created by United States Congress in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States. The agency protects market participants against manipulation, abusive trade practices and fraud. Through effective oversight and regulation, the CFTC enables the markets to serve better their important functions in the nation's economy—providing a mechanism for price discovery and a means of offsetting price risk.

  • National Futures Association ( NFA) National Futures Association ( NFA) - is a a congressionally authorized self-regulatory organization for the U.S. futures industry, provides innovative regulatory programs and services that ensure futures industry integrity, protect market participants and help its Members meet their regulatory responsibilities. NFA also offers a variety of cost-effective regulatory services to electronic markets - services that sustain market integrity, increase user confidence and add to the value of the markets.

  • Capital Markets Compliance®, LLC - specializes in providing regulatory guidance for firms that offer securities products as well as banks requiring market risk management reviews. Clients range from one-person retail broker-dealer operations to full-scale multi registered representative broker-dealers, investment advisers, investment bankers, bank affiliated broker-dealers, state and national chartered banks, and financial holding companies. 



The Commodity Futures Trading Commission (CFTC) has witnessed increasing numbers, and a growing complexity, of financial investment opportunities in recent years, including a sharp rise in foreign currency (forex) trading scams. A new federal law enacted in December 2000, called the Commodity Futures Modernization Act of 2000 (CFMA), makes clear that the Commission has the jurisdiction and authority to investigate and take legal action to close down a wide assortment of unregulated firms offering or selling foreign currency futures and options contracts to the general public. In addition, the CFTC has jurisdiction to investigate and prosecute foreign currency fraud occurring in its registered firms and their affiliates.

In light of the CFMA, the CFTC has issued an Advisory concerning the offering and trading of foreign currency futures and options contracts involving the retail public, and also revised and re-issued its 1998 Consumer Alerton foreign currency trading to help the retail public identify foreign currency trading scams. The CFTC’s Advisory reaffirms that off-exchange trading of foreign currency futures and options contracts with retail customers by a counterparty that is not a regulated financial entity as set forth in the CFMA is unlawful.

In its separate Consumer Alert, the CFTC warns consumers of sales solicitations appearing in newspapers, radio or television promotions, or attractive Internet websites, touting high-return, low-risk investment opportunities in foreign currency trading, and of highly paid currency-trading employment opportunities. The CFTC urges the public to be skeptical of such claims and suggests some "red flags" to look for, and cautionary steps to take, before trading foreign currency products.

In addition to this Advisory and Consumer Alerts, the CFTC has also issued the following Consumer Alerts that are posted on its Website at http://www.cftc.gov/cftc/cftccustomer.htm:

Updated May 26, 2001 



Basics Of Futures Trading

Trading commodity futures and options is not for everyone. It is a volatile, complex, and risky business. Before you invest any money in futures or options contracts, you should:

  • Consider your financial experience, goals, and financial resources and know how much you can afford to lose above and beyond your initial payment.
  • Understand commodity futures and option contracts and your obligations in entering into those contracts.
  • Understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
  • Know who to contact if you have a problem or question.

The CFTC brochures will provide you with general information about trading commodity futures and options. We encourage you to ask more questions and gather more information before you open an account.

The CFTC also issues consumer advisories to alert the public to warning signs of possible fraudulent activity and offer precautions individuals should take before committing funds. We encourage you to review these advisories before you trade. 

Additionally, you may wish to visit the National Futures Association (NFA) Investor Services web site for more information and related publications.

Broker Registration and Background Information

Before you open an account, you should always check on the company's or individual's status:  

Background Affiliation Status Information Center (BASIC)
Through this online system, National Futures Association (NFA) makes available registration information and futures-related actions contributed by NFA, the CFTC and the U.S. futures exchanges. If you need registration information that's not available in BASIC, you can contact NFA's Information Center at (800) 621-3570.

Administrative Sanctions in Effect List
This list contains the names of firms and individuals that currently have registrations and trading sanctions in effect as a result of administrative and statutory disqualification proceedings.

Reparations Sanctions in Effect Lists
These lists contain the names of individuals or firms who have not paid awards which were levied against them as a result of reparations proceedings. 

Proceedings Bulletin
This bulletin contains information about the Commission's administrative and injunctive enforcement actions and its statutory disqualification-from-registration proceedings.


Before you invest your risk capital with any firm, perform due diligence by researching the background of the company and management team, and ensure that your money is appropriately protected.

NFA's Background Affiliation Status Information Center (BASIC).

US Commodity Futures Modernization Act of 2000

  • Testimony of Patrick M. Parkinson,  Associate Director, Division of Research and Statistics Regarding The H.R. 4541, the Commodity Futures Modernization Act of 2000 Before the Subcommittee on Finance and Hazardous Materials of the Committee on Commerce, U.S. House of Representatives July 12, 2000


  • "Trading in the Retail Off-Exchange Foreign Currency Market - What Investors Need to Know" By NFA Futures, Copyright 2004, click here to download. This booklet presents an overview of the retail off-exchange foreign currency market and provides other important information that investors need to know before they invest in the off-exchange foreign currency market.

  • "Background Affiliation Status Information Center (BASIC): An Information Resource for the Investing Public" By NFA Futures, click here to download . This booklet describes how to get important background information about futures firms and individuals from NFA's Background Affiliation Status Information Center (BASIC).



  • Testimony of Patrick M. Parkinson,  Associate Director, Division of Research and Statistics Regarding The H.R. 4541, the Commodity Futures Modernization Act of 2000 Before the Subcommittee on Finance and Hazardous Materials of the Committee on Commerce, U.S. House of Representatives July 12, 2000








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