Taiwanese Regulator to Punish Four Banks for Selling Complex FX Derivatives

The banking, securities and insurance regulatory body of the Taiwanese government, officially referred to as the Financial Supervisory Commission of the Republic of China, announced today in a legislative session that it is going to penalize three local banks over what it deemed improper selling behavior of complex foreign currency derivatives. This move comes just after two days when the regulator had already announced it is punishing another bank over similar charges.

The regulator has yet to announce which the additional three banks are involved in the recent case or what the penalty levied on them will be, but the first bank punished was SinoPac Financial. SinoPac was barred from issuing new FX derivatives products for one year two days ago. The official reason behind the penalties on the four banks according to the regulator, is failing to sufficiently warn clients of the risk of appreciation associated with complex FX derivatives investments.

In the Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term business every broker has to make sure to warn clients of the inherent risks of trading leveraged products with margin and it is therefore more than likely that the Taiwanese banks also received a risk warning as part of a lengthy trading agreement with their clients. This case shows that if the exact wording of the warning is not dictated by law or Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term in a jurisdiction a local regulator can always decide the warning is not sufficient.

With the Taiwanese financial markets opening up to China and integrating with it, more and more local investors were attracted to investing in the yuan to benefit from its rise. The underlying reason for the bank penalties are that the recent decline in the exchange rate of the Chinese currency must have led to many Taiwanese clients losing money on yuan derivatives and then complaining to the regulator that they did not know what they were getting into.