CFTC’s RED List Warns U.S. Consumers: Be Aware and Take Care

Regulatory Announcement

“Today, the CFTC adds the names of 34 unregistered foreign entities to its Registration Deficient (RED) List. [See CFTC Press Release No. 8555-22]  The CFTC created the RED List in 2015 in an effort to increase transparency and identify foreign entities that may be operating in regulated markets without being properly registered.

In today’s global markets a foreign entity operating outside the United States may—with a few taps on a smartphone—reach potential U.S. customers through email, text message, IM, chat app, or social media, and solicit them to invest, transfer, or deposit funds, or otherwise transact via platforms created and maintained outside of the United States.  All too often, the CFTC has identified highly-organized fraudsters using these techniques and a perceived lack of oversight to prey on U.S. consumers.

Because they are not registered with the CFTC, customers engaged in transactions with these entities may not receive the benefit of the customer protections, safeguards, and guardrails long-adopted and deeply embedded in the CFTC’s oversight of the markets.  Transacting with unregistered entities, particularly those operating without such oversight and beyond our borders, may expose U.S. customers to significant and concerning risks.

The CFTC’s mission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.  Requiring derivatives markets intermediaries—such as Retail Foreign Exchange Dealers, Introducing Brokers, Commodity Trading Advisers, and Commodity Pool Operators—to register with the CFTC and comply with the CFTC’s regulations offers one critical tool for accomplishing our mission.  Publishing the Red List alerts the public to entities soliciting U.S. customers without registering with the CFTC when registration may be required.

Other regulators, including the Securities and Exchange Commission with its Public Alert About Soliciting Entities (PAUSE), have adopted a similar approach.  Further, the International Organization of Securities Commissions (IOSCO) has established an Investor Alert Portal on its website to receive and publish alerts and warnings from its members about firms that are not authorized to provide investment services in the jurisdiction that issued the alert or warning.  Nearly 50 countries issue similar lists, warning letters, or public statements.

I commend the Division of Enforcement and the Office of Customer Education and Outreach for their efforts in publishing and maintaining the RED List.”

Source: Commodity Futures Trading Commission

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