The Indian central bank has issued a warning on Thursday against locally unregulated forex trading platforms that are advertising extensively to gain retail clients from the sub-continent.
The Reserve Bank of India (RBI) specified that these unauthorized electronic trading platforms (ETPs) are running ad campaigns on social media platforms, search engines, video streaming websites and other digital platforms. Indeed, they are even hiring popular faces like sportspersons and actors for endorsements.
Furthermore, the forex trading platform agents even directly contact the potential clients and pursue them to open accounts and trade with promises of high returns.
“There have also been reports of such ETPs engaging agents who personally contact gullible people to undertake forex trading/investment schemes and entice them with promises of disproportionate/exorbitant returns,” the central bank’s notice stated. “Further, there have been reports of fraud committed by such unauthorized ETPs/portals and many residents losing money through such trading/schemes.”
No Strict Rules
India does not license or regulate retail margin forex and contracts for differences (CFDs) trading platforms. However, it does not have any strict regulatory restrictions to ban these platforms. It has prompted many offshore forex trading platforms to tap the lucrative Indian client base.
However, the monetary regulator is trying to restrict the movement of funds from Indian bank accounts to these foreign-held accounts by imposing restrictions on the remittance schemes.
“The RBI cautions the public not to undertake forex transactions on unauthorised ETPs or remit/deposit money for such unauthorised transactions. Resident persons undertaking forex transactions for purposes other than those permitted under the [Foreign Exchange Management Act] or on ETPs not authorised by the RBI shall render themselves liable for penal action under the FEMA,” the notice added.
RBI’s latest warning is the first alarm bell against these forex trading platforms. Earlier, two of the country’s largest securities exchanges warned investors against unregulated trading products like margin forex, CFDs and binary options.
