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Regulatory Review #2 – Warning lists issue and alternative means to enforce regulatory power

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The regulatory week ending May 22, 2020 saw a few interesting developments. While US and UK regulators have been quite busy with investor warnings and lawsuits, others like the Estonian FI or the French AMF have not issued warnings. The Italian CONSOB and the Spanish CNMV, on the other hand, have had typical weeks with 5 to 8 warnings each. The Austrian FMA has warned a German supplier of protective masks for an illegal offering of a healthcare bond.

The Warning Lists Issue

Warning lists must be the central element of a regulator in the fight for investor protection and against investment scams. We can agree on that, can’t we?

A major problem with many regulators’ websites, however, is that the warning lists are hard to find in the first place. While scammers and online fraudsters work across regulatory regimes there is no consolidated warning list at the EU (ESMA) level, for example. Each EU regulator has a different approach to the structure and the publication policy of warning lists. This is totally unsatisfactory for investors and actually facilitates scammers. Warning lists must be made for dummies!

While the UK FCA is a role model with an easy to find and easy to read warning list (one click on the front page), the complicated access of the German BaFin (three clicks from the front page) or the Australian ASIC (almost impossible to find) must be considered completely unsatisfactory.

BaFin warning list approach – three clicks from front page
FCA warning list approach – one click on front page

Warning lists must be easily accessible for investors (consumers and professionals) and must be found on the front page of the regulator’s website.

US CFTC

From our point of view, the aggressive approach of the US CFTC with its enforcement action regarding the Israeli binary options fraud scheme Yukom was remarkable. The competent US court has agreed to serve the defendants a respective CFTC complaint through alternative means. In particular, the three defendants Yossi Herzog, Kobi Cohen, and Shalom Peretz, all of them are Israeli citizens with unknown whereabouts, have been served via the publicly placed information on the complaint in The Times of Israel. This case should be an example for regulators in other jurisdictions. Only if scammers know that they will be prosecuted across all national borders prevention may be effective.

The UK FCA activities

The UK Regulator Financial Conduct Authority (FCA). The UK regulator issued no fewer than 26 investor warnings against unauthorized financial services providers until May 22, 2020. The two weeks before saw the issuance of 28 and 27 warnings respectively. Most of this week’s warnings have been issued against unauthorized bond brokers and wealth management firms. One warning has been related to the crypto market with unauthorized crypto broker Bit-Holdings.

German BaFin

The German Financial Market Authority BaFin had less stress this week and only issued a warning against the illegally operating payment processor P & B Modern Management (FinTelegram reported). No investor warning has been issued against scams or fraudulent schemes.

Spanish CNMV

The Spanish regulator issued a warning against six unauthorized brokers this week (FinTelegram reported) which is pretty much in line with the volumes of the weeks before.

Italian CONSOB

The Italian watchdog CONSOB already issued investor warnings against five unauthorized brokers at the beginning of the week.

  • Uptos Ltd (www.uptos.com);
  • Swissgems Ltd and Media Solutions Ltd (www.marketscfd.net);
  • Zurichbanc Ltd (website www.zurichbanc.co);
  • Platinum Pro Investment Ltd (https://platinumproinvestment.com);
  • Bitcoin-Trader (https://bitcointrader.software).

Platinum Pro Investment and BitcoinTrader are crypto brokers whereas the other unauthorized brokers offer Forex and CFDs.

Austrian FMA

The Austrian FMA has warned against the German ADCADA, a producer of protective masks for the unauthorized offering of a healthcare bond. The subscribers of the bond are promised an interest rate of 12%. The company apparently wants to profit accordingly from the COVID-19 crisis.

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