Just a thought, is anyone doing forex trading, using the online brokers and is it legal here
as the market is going down forever and i find it technical analysis might work better in forex,
give me your thoughts, if its legal why dont we try with 100 USD, which is the minimum to start with
or is there anyone tried,
Check out some forex trading scandals in Sri Lanka and some legal factors related to forex trading in Sri Lanka
Sri Lanka forex scam’s depositors still left unpaid
November 12, 2010
By J.A. Fernando in Colombo
Colombo, 12 November, (Asiantribune.com):
Nearly after 4 months of a reported bogus forex brokering firm’s closure of operation approximately 20 depositors are still being unpaid their deposits in Sri Lanka. “Still the money is there in the bank and it has to liquidated to be paid for our investors” said company’s former accountant who is now unemployed in the grounds of anonymity to Asian Tribune.
Two Hong Kong based Chinese individuals named Sam Shing T.P. (General Manager) and Mr. Lee (Finance Director) had said to be operating a Retail Forex Trading Broker firm in the name of Jackel Burnham Pacific (Pvt) Ltd. incorporated since 9th October 2009 in the heart of Sri Lanka’s Financial Capital Colombo at Level 12, Unit 01-03, West Tower, World Trade Centre, Echelon Square, Colombo 01, Sri Lanka.
Sri Lanka is a country which has put limits to forex trading and operations of retail forex trading brokers due to foreign exchange losses that could arise as a consequence of being exposed to higher risk involved in retail forex trading. Although, some licensed commercial banks are allowed by the regulators to provide retail forex trading for some high net worth individuals.
Forex Trading is the world’s biggest financial and capital market with an average daily turnover recorded to be US $ 3.2 trillion.
However according to sources the 12th floor of West Tower of the Colombo’s World Trade Centre is still inaccessible to visitors as the Jackel Burnham Office is sealed by the local police. The Chinese individuals said to have paid one year rental advance amounting to Rs.6 million to the office premises of Colombo’s West Twin Tower’s management at the inception of Jackel Burnham.
Later on 18th June 2010 both Hong Kong based individuals has disappeared from office taking Rs.30 million along with initial investment of the company out of the country. According to sources still a part of money is available in the company’s bank accounts which were maintained in two premier commercial banks in Colombo.
“They successfully ran the business accepting deposits amounting to US $ 3,000, US $ 6,000 and US $ 10,000 based on money market exchange rate with a counterfeited forex trading platform” said a former employee adding that the company was guaranteeing 60% return on investment (interest for deposits) for six months initially which later came down to 40% on May 2010.
“It is hard to believe how they were able to run the operations amidst being unnoticed by financial market regulators where the office of Securities and Exchange Commission of Sri Lanka is also located and even close to Criminal Investigations Department. Apart this company’s local team was headed by a 20 years old individual whose mother is working as the Human Resources Director of a reputed state owned subsidiary bank” said one victimized depositor of the forex scandal adding that the local police or neither criminal investigators has not been successful to trace the two Chinese men before who were resided at Capital Residencies at Dharmapala Mawatha in Colombo 07.
According to information available of the company profile Jackel Burnham Pacific (Pvt.) Limited was called to be a subsidiary of Jackel Brnham Northern Europe Groups Limited (founded in 1955 by Russel Davis, as Jackel Burnham (Copenhagen) Enterprise Ltd.) in Denmark that was authorised and regulated by the International Securities and Exchange Commission of the World.
The company was said to have 30 branches in United States, Peru, Brazil, Denmark, Switzerland, France, Greece, Germany apart from Sri Lanka which were later found out to be nonexistent. The company had been running a website titled http://www.jackelburnham.com, which is now stalled while the head office is said to be at Esthersroj 22C, 2.m.f., 2900 Hellerup, Denmark, 40464532, quoting a telephone number 004569960381 which later found out to be a bogus address although the telephone number had been working till 18th June.
Meanwhile in internet reports it says the on 12th September registration of the company’s official website www.jackelburnham .com registration service was provided by a company called SCICUBE LIMITED (Contact Number 00852.81143699,http://www.scicube.com)whilst the web administrator’s address of Jackel Burnham is said to be located at P.O. Box 97,Moergestel, null,5066 ZH, NL having the contact number 004536946676.
“Well, local authorities need to find out these kind of international fraudsters by at least digging them to their past records from cyberspace as these scammers are mostly involved in internet based enterprises” said another depositor adding that similar kind of financial scams that has happened in the country’s recent past has created a name to Sri Lanka as a land that any fraudster can runaway after committing any financial scam due to its local population’s enthusiasm on investing in higher interest earning financial products.
- Asian Tribune -
Sunday, July 4, 2010
Legitimacy of Forex trading in Sri Lanka
By Jithendra Antonio
For many and the common laymen the published foreign currency exchange rates in most of the national news broadcasts, national newspapers, commercial banks, authorised money changers are only important at the event they are travelling abroad to exchange local rupees to a desired foreign currency. Else an expatriate or a Sri Lankans working abroad at their return might be interested on foreign exchange rates to convert his earnings to local Rupees at the best rate offered in order get the best value for his money. There are also exporters and importers who are interested to get the best foreign exchange rate for a particular currency to maximise their revenues. However not even the poorest man in the world or even perhaps the richest entrepreneur in Sri Lanka or perhaps even the most professional banker or bank manager in a financial hub like in Colombo or the people categorised under the emerging middle class don’t know that foreign exchange rates are the most crucial information to create capital in an economic system. Only a small group of people among the world’s population know that there is a market called ‘FOREX’ and it is a key market place where you could create money to your portfolio in order to increase your earning potential and diversify your investments.
Have you ever thought of how commercial banks and largest financial corporations in our country and in the world offer us an interest rate to make us grow little by little in terms of financial strength? Can banks make such huge profits and investments from our public deposits and recoveries from borrowings? Well there is another unknown market place which is beyond our common laymen’s understanding where these banks and financial houses around the globe are making money while we are sleeping and while we are working hard to survive in an uncertain future.
That is the Market which is the ‘Biggest’ among all capital and financial markets and it is open usually 24 hours everyday except worldwide weekends operating round the clock in the globe. It is none other than the ‘Forex market’ where you get the news as it happen even before first and the fastest news service provider in our country-wide media broadcast news for us. ‘Forex Market’ completely operates based on financial, business, economic and disastrous news around the world and is very sensitive to know what is happening in this whole universe. Traders in Forex Market are news savvy and if they miss a news item it could make them lose thousands of money in small scale and millions and billions of money at large.
24/6 days open Forex market
The foreign exchange market — most often called the Forex market, or simply the FX market — is the most traded financial market in the world. Forex Market is a worldwide decentralised over-the-counter financial market for the trading of currencies. The primary purpose of the foreign exchange market is to assist international trade and investment, by allowing businesses to convert one currency to another currency. The Forex market is the crossroads for international capital, the intersection through which global commercial and investment flows have to move. International trade flows, such as when a Swiss electronics company purchases Japanese-made components, were the original basis for the development of the Forex markets.
Thanks to the Internet, tens of thousands of individual traders and investors all over the world are discovering the excitement and challenges of online trading in the Forex market. Yet in contrast to the stock market, the Forex market somehow remains more elusive and seemingly complicated to newcomers. Trading foreign currencies is a challenging and potentially profitable opportunity for educated and experienced investors. However, before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience, and risk appetite. Most important, don’t invest money you can’t afford to lose.
The Forex market is open and active 24 hours a day from the start of business hours on Monday morning in the Asia-Pacific time zone straight through to the Friday close of business hours in New York. At any given moment, depending on the time zone, dozens of global financial centres — such as Sydney, Tokyo, or London — are open, and currency trading desks in those financial centres are active in the market. Currency trading doesn’t even stop for holidays when other financial markets, like stocks or futures exchanges, may be closed. Even though it’s a holiday in Japan, for example, Sydney, Singapore, and Hong Kong may still be open. It might be the Fourth of July in the United States, but if it’s a business day, Tokyo, London, Toronto, and other financial centres will still be trading currencies. About the only holiday in common around the world is New Year’s Day, and even that depends on what day of the week it falls on.
As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements average daily turnover in global foreign exchange markets is estimated at USD3.98 trillion, as of April 2007. USD3.21 trillion is accounted for in the world’s main financial markets.
Grounds of Forex trading in Sri Lanka
In Sri Lanka, apart from a few of the Licensed Commercial Banks and Multinational Banks there are only 10-15 large scale Individual Forex traders who are trading currency on 24/6 days in millions as per our sources. Then there are individual Forex traders who have opened currency trading accounts with Licensed Commercial Banks which is an exclusive product for exclusive clients, and such banks do the trading behalf of those individuals.
However, with their little knowledge on Forex market there is also a relatively small community of people who have lost thousands of money in rupees while they have also made profits amounting to perhaps millions through trading online from Licensed Retail Forex brokers abroad via internet.
“I entered to this Forex market when I was 16 years old from the money I earned developing software and web sites for international companies. All I knew was internet and Information Technology. But when I came to know about Forex trading on internet it inspired me to make money by investing all the moneys I earned” said one of the smallest and youngest Forex traders in Sri Lanka, Vinesh Gurusinghe.
He went on to say that he started with Rs.200,000 and almost lost about Rs.600,000 in the beginning with little knowledge on world economics. “Somehow I made money from Forex and then I found out the best way to minimise my risk after trading in world’s highest riskier market. It was none other than Colombo Stock Exchange. Now I am twenty years and I am living happily and surviving after diversifying from Forex trading to Sri Lanka’s equity investments at the beginning of this year. Finally I invested all my profit from Forex in Colombo Stock Exchange at a time when Colombo bourse was booming. I am living on Colombo Stock Exchange and diversifying my capital gains in other businesses such as exports and distribution of fast moving consumer goods.” Added Gurusinghe highlighting that he has brought in international capital worth of Rs.3 million indirectly (via Forex trading) to Colombo bourse and is happy to say that he is an investor of Sri Lanka’s Capital Markets. ‘Now I am no more into Forex’ he concluded.
Not favourable for everyone
Forex market is not favourable for everyone; if one wins there is also a trader who loses. “I was a banker and I invested my savings after leaving my position in a multinational bank and I was extremely happy since I doubled my money within one day when I entered to Forex trading.” said Johan Fernando. “As humans we are sometimes greedy to earn money fast. So after two days I lost all my money when Euro fell due to Greek debt crisis in early March 2010. I had three positions with Euro in currency pairs and I lost as I missed the chance to log in to my trading platform when one of my relations were hospitalised as I was staying at hospital where there was no access to internet. I still remember one thing; Funny thing was that while I was walking down the street I found a 10 Rupee note lying on the ground while I was losing 443 Pips overnight in my Forex trading platform’s account. It was like a shock to me but I didn’t get a heart attack like some people who invested in unregistered financial institutes did face when they lost money due to mismanagement of such companies. Because I lost money with doing trade on my own risk.” said Johan sharing his sentiments on trading at Forex market adding that a person cannot sleep during first five days of the week if he is Forex trading on his own.
However, The Bottom Line was unable to get the views of a Sri Lankan large scale Forex traders as such people in this country are cautious on popularising their trade secrets and tax policies in this country.
But on the other hand, we came across a stock brokering professional, Eranda Ranasinghe who is running a website to promote an offshore Forex trading platform titled ‘eToro’ in Sri Lanka and he has advertised from Forex profits that he is opening a new fixed deposit in Sri Lankan banks on every month in his web site before; titled www.antharjalaya.com which is now parked free for domain sale at www.godaddy.com. “I have been trading Forex for over a year now. I have written few articles about this in my blog and many Sri Lankans were able to make use of those information. Sri Lankans easily fall in to scams like Sakvithi, Gold Quest, Seagull because they are not aware of legitimate money making opportunities. This is an attempt to introduce you to the real international money making world. You can verify the legitimacy of Forex trading with any authority before start trading.” Says Eranda in the website www.startforextrading.org where he is earning commissions from ‘eToro’ when others come and click those advertisements in his website.
Currently there is a Sri Lanka Forex Association where there are four types of memberships offered only to the people who are currently engaged in foreign exchange and money market activities in banks. The association is run by dealers and chief dealers of treasury departments of Sri Lanka’s licensed commercial banks and is also a member Association Cambiste Internationale (ACI) which is now The Financial Markets Association, the worldwide association of wholesale financial market professionals, contributing to market development and market practice.
The main motivation why people go for Forex market is that because it could bring you higher capital gains by a single large trade volume. Although there are lots of registered Retail Forex Brokers around the world due to the strict financial and monetary policies in Sri Lanka there is no single regulated Retail Forex Broker in the country.
By law, according to the Controller of Exchange in Sri Lanka, the country has only allowed to a limited number of parties to enroll with foreign exchange activities.
Exchange Control Act
The Exchange Control Act regulates dealings in gold, foreign currency and securities in Sri Lanka. The Central Bank of Sri Lanka (CBSL), as the agent of the Government, is responsible for carrying out the provisions of the Act. The powers, duties or functions conferred on the Central Bank are exercised or performed by the Controller of Exchange, subject to the direction and control of the Governor of the Central Bank. Thus, according to the Exchange Control Act there are authorised dealers, money changers and other persons to accept foreign currency in the country.
They are the licensed commercial banks authorised by the Minister of Finance in terms of section 4 of the Exchange Control Act shall act as an authorised dealer in relation to gold or any foreign currency, authorised dealers to approve certain transactions on behalf of the Controller under the Exchange Control Act subject to conditions imposed by him. However, before approving any transactions, authorised dealers are required to satisfy themselves about the bona fides of the applicant and the genuineness of the transaction by verifying the necessary documents.
The Central Bank has also appointed money changers who are authorised to purchase foreign currency notes and exchange them for any other currency.But they are not authorised to sell foreign exchange for Sri Lankan Rupees. Further the Central Bank has permitted: hoteliers, travel agents, duty free shops, hospitals, agency post offices which are approved by the Post Master General, harbour traders approved by the Sri Lanka Ports Authority, persons engaged in the gem and jewellery trade which are approved by the National Gem and Jewellery Authority, other persons engaged in or connected with the tourist industry, to accept foreign currency for services rendered and goods supplied to tourists subject to the conditions in the permit.
By rules an authorised dealer in Sri Lanka could open and maintain in its domestic banking unit the following accounts in foreign currency as a service for people and corporate entities: Non Resident Foreign Currency accounts (NRFC), Resident Foreign Currency accounts (RFC), Resident Non Nationals’ Foreign Currency accounts (RNNFC), Exporters Foreign Currency Accounts (EFCA), Foreign Currency Accounts for hoteliers (HFCA) and Resident Guest Foreign Currency Accounts (RGFC).
Apart from a few individuals who trade via online through Retail Forex Brokers around the world mostly paying by credit cards; In general, Sri Lanka operates more an offline Forex Market giving access to many who once in a while drop in at an authorised money changing jewellery shop or an authorise money changer to change their foreign currency notes to a higher rate of exchange or to exchange their Rupees at a lesser rate of exchange to another foreign currency or vice versa. Such people make profits on a relatively small or large amounts based on the volume of currencies they are exchanging.
Speaking on the grounds of allowing Retail Forex Brokers in Sri Lanka, Controller of Exchange, P.H.O. Chandrawansa said that so far the Central Bank of Sri Lanka and its Exchange Control Department has not allowed any Retail Forex Trading Broker to operate and carry out business in the country. “Foreign Exchange is a resource for the country, we cannot allow Retail Forex Trading Brokers to operate, because it is like gambling and it is the most risky business.” said Chandrawansa. When questioned about whether there is any possibility to a Retail Forex Broker to start operations with the approval of the Central Bank he said that it is unlikely to happen as there is a long procedure to start up such an operation according to the financial regulation practices in the country. “They could write to us about a proposal, but it has to be passed by the Board of Directors in order to consider” added Chandrawansa.
However, as a developing country which needs international capital and foreign funds, some say that Sri Lanka needs to form rules and regulations to bring up Retail Forex Brokers to enable Retail Forex Trading which in turn could indirectly create entrepreneurship opportunities and capital to develop the economy of the country and there could be also a higher risk factor as Forex and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking multiple independent advice if necessary.