·
(b)
50.
In actual practice, however, such companies by and large tend to respect the regulatory requirements pending approval of their licences, as they are not in a position to forecast when a licence may be issued but will have to meet these rules once a licence is approved.
For this reason, since the introduction of the Ordinance, the number of complaints against the industry has fallen dramatically. The nature of the complaints has also changed from essentially fraud related complaints prior to the introduction of the legislation to essentially trade dispute related complaints since the introduction.
In the event of an application being rejected, the LFETO obliges the company to cease trading within 14 days and provides SFC with the necessary powers to ensure that investors' positions are closed out in an orderly manner and that their assets are protected.
Apart from the normal civil remedies, there is no protection for clients of an unlicensed leveraged foreign exchange trader in the event of a closure.
While the legal position is largely the same in respect of licensed leveraged foreign exchange companies, the combination of the capital requirements under the financial resources rules and the segregation of client assets requirements under the conduct rules which licensed companies are required to respect, is likely to afford an appropriate level of protection of client assets should a licensed company go into liquidation.
For this reason, in addition to its enforcement efforts, SFC has repeatedly urged investors to ensure that they deal only with leveraged foreign exchange companies which are authorised to conduct such activities. To assist investors, SFC has established a hotline service to advise whether the companies they are dealing with are indeed authorised.
End/Wednesday, June 14, 1995