- What is the role of the Forex Arbitration Panel?
The Forex Arbitration Panel has been established under law to assist resolving disputes between a licensed trader and its clients regarding leveraged foreign exchange trading in Hong Kong. The Panel's chairman, deputy chairman and other members are all appointed by the Financial Secretary.
If you wish to have your dispute in a leveraged forex trade arbitrated, you should first send a written notice to the Hong Kong International Arbitration Centre, which is the clerk to the Arbitration Panel. You are also required to submit a deposit of HK$1,000. Details of the arbitration procedures and workings of the Panel can be found in the Securities and Futures (Leveraged Foreign Exchange Trading) (Arbitration) Rules.
However, you should not confuse trading in leveraged forex contracts with dealing in currency futures. Under the SFC's licensing regime, an intermediary offering leveraged forex trading service has to be licensed for carrying out Type 3 regulated activity: leveraged foreign exchange trading. On the other hand, an intermediary providing dealing service in currency futures contracts has to be licensed for Type 2 regulated activity: dealing in futures contracts. You can check the "Public Register of Licensed Persons and Registered Institutions" on the SFC's website for the type of regulated activities an intermediary is licensed to conduct.
Currency futures are usually traded on overseas exchanges. The Forex Arbitration Panel does not hear disputes in relation to currency futures. In such cases, you may wish to bring your complaint to the complaints officer of the intermediary concerned. You can obtain the contact details of each intermediary's complaints officer in the aforesaid Public Register.
Investors should note that the SFC's focus in assessing complaints on possible misconduct of its licensees is on the law, rules and regulations that the SFC administers. The SFC can take disciplinary action against those licensees who have breached the rules. However, the SFC does not have the power to order compensation. Neither can the SFC arbitrate civil disputes between investors and intermediaries.
- Can I authorize my account executive to trade leveraged forex contracts for me?
If you wish to rely on the professional expertise of your account executive to trade on your behalf, then you need to set up a discretionary account by entering into a discretionary account agreement with the licensed trader. Your account will be designated as a discretionary account. You have to understand that once discretionary authority is granted, your intermediary or designated account executive will be able to act on its own initiative without asking you.
To stop anyone overtrading your account to earn more commission (this known as churning), make sure that you get regular statements showing your position in money and investment holdings. Review every transaction promptly to ensure it reflects your investment objectives.
The licence of an intermediary permitted to carry out leveraged foreign exchange trading may bear a condition that it cannot provide discretionary account service. As an investor protection measure, the SFC has set higher requirements for those licensed corporations and persons who seek to offer discretionary account service.
- Does the SFC supervise banks' leveraged foreign exchange operations?
No. Under the law administered by the SFC, banks are exempted from registering with the SFC for carrying out leveraged foreign exchange trading. The Hong Kong Monetary Authority supervises a bank's leveraged foreign exchange operation.
On the other hand, banks are required to be registered with the SFC as registered institutions in order to carry on securities and futures business. The Hong Kong Monetary Authority is the front-line regulator of banks' securities and futures operations.