By Jason Enzler
There is a new program in town to help investors protect themselves from fraud. The U.S. Commodity Futures Trading Commission has starting publishing the identities of foreign entities that the CFTC believes may be involved in illegal practices in what the Commission calls the RED List.
With the RED List, investors are now able to go online to investigate whether companies have come under scrutiny by the agency. In order to “make the list,” the foreign entity must have failed to register with the CFTC, but be soliciting or accepting funds from U.S. investors. These practices raise a red flag because the foreign entities are generally required to register with the CFTC, but instead are operating with no oversight by the CFTC and often with no physical presence in the United States.
The CFTC Chairman, Tim Massad, has hailed the RED List as “an important new tool that will further protect customers from bad actors,” and he is probably right. Although registration does not immunize investors from fraud – just see here and here for two recent examples of apparently registered wrongdoers – it does seem like quite a few of the fraud schemes the CFTC uncover involve unregistered entities (here, here, here, and here are just four recent examples).
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