Aguilar was speaking after the SEC passed a temporary rule on July 15, which will allow brokers to continue selling forex products to retail investors until next year, pending further discussion with market participants on appropriate regulation. In a written statement, Aguilar expresses concerns about investor protection in the retail market, highlighting investor awareness of the risks involved from leveraged forex trading. The market has often been easy prey for fraudsters too, he notes.
Aguilar says he only voted for the temporary rule on the understanding that a federal body, the Office of Investor Education and Advocacy, would issue an alert to investors about the potential risks and conflicts inherent in off-exchange foreign-currency transactions.
Under the Dodd-Frank Act, the SEC was required to pass rules concerning retail forex regulation before July 16 this year. The temporary rule will expire on July 16 2012, in effect giving the SEC another year to listen to market views on forex regulation.
The temporary rule has been passed to let the SEC “receive comments regarding practices in this area and to consider prescribing additional rules to address investor protection concerns (eg abusive sales practices, volatility and the riskiness of the forex market),” the final text read.
Comments must be received within 60 days, the US regulator says.