Posts Tagged ‘pfec’



August 21, 2008


Speaking of on-line forex brokers, who can be called “fakes” or “scammers” , and who are not?

A business registration in the country where it holds office surely is not enough basis for anyone to conclude that a company is operating above board, or is not engaged with anything illegal. Having several accounts with prestigious and known banks is also not a guarantee of one’s business propriety. We’ve seen this happen over and over again in the past. We’ve seen how PIPC, a duly registered entity established in the like manner by the same person (Michael Liew), and operates in the same way as the “now-still-existing” Performance Foreign Exchange Corporation, (the company which shall be the subject of my critical blog review today) duped Filipino investors.

Many people would want to invest in the foreign exchange market anonymously for various reasons of their own. They are those who’d prefer to open accounts incognito (known only to the servicing company they deal with). There are also those who invest through the “hard sell” tactics of some forex brokers who utilize the services of marketing representatives with well- heeled family and social connections. More often than not, in their haste to establish foreign currency trading accounts, and in their effort to keep their identities concealed, they forget about doing a due diligence on the company at the onset ( a must-do prerequisite for all prospective investors).

Who then can we call fake forex brokers?

Trust, more than anything else, is the most important, yet the most abused word in all business transactions (specially so with on line investing). It is imperative that trust and confidence is present in any transaction between the investor and his broker. And, in online foreign currency trading, it is imperative for the forex broker to go out of his way to prove the legitimacy of his business through the published pages of his web site. ( I have always maintained that the burden of proof always lie in the hands of the soliciting broker.) To gain the trust and confidence of its prospective investors, an on line broker must therefore make a full disclosure of all the relevant facts pertaining to their company and the conduct thereof. All these must be clearly stipulated and can be easily found in their websites. Pertinent data such as bank references, accreditations and affiliations with respectable and acceptable financial institutions must be published prominently in their web sites. Failure to do so, to me, is intentional concealment of pertinent facts needed by a prospective investor to make a fair and square assessment of the company. In my opinion, non publication of these pertinent data on a website is equivalent to misleading the public and is no different from the malpractice of providing false information to their clients.

Bank References

If a broker deals directly with a bank (meaning if it courses all its forex transactions directly to a bank), then the broker must publish verifiable information about his account (and about the bank as well) in his website. (For all you know, the particular bank may not even have a foreign currency trading window, or, the account opened is not a trading account but merely a standard depository account.) Should issues of confidentiality be raised, the least that the broker must do is to publish a statement in the web site stipulating that such documents are available on request. Given this, prospective investors will have the chance to fairly decide whether to take the risk or not with the broker.

Verifiable Accreditation

Brokers, by definition are intermediaries. They act as agents of certain financial institutions such as banks, currency exchanges, large financial investment houses. Also, they often are required to submit to the jurisdiction and supervision of regulatory agencies in such established countries like in the U.S., Australia, Great Britain, Germany, Singapore, Malaysia, and Hongkong. Legitimate on line brokers must surely have at least one such verifiable affiliation, membership, or accreditation. Those without should be suspects and immediately discarded from your list. Those who make false claims can now be more easily exposed and avoided.


If I were to invest money on online foreign currency trading and PFEC happens to be one of the many brokers I am considering, this is how I assess their website

Pros: <a href=”; target=”_blank”><img src=”; border=0 ></a>

  • Has an attractive, professional looking web-site (makes you stay longer and do a deeper snooping of the site)
  • Offers practically all the necessary tools and services an investor needs to be able to manage his own account.
  • easy to navigate website with a fast download link to its user friendly trading platform interface

Cons <a href=”; target=”_blank”><img src=”; border=0 ></a>

  • misleading claim #1: “PERFORMANCE FOREIGN EXCHANGE CORPORATION (PFEC) was registered with the SEC on 23 June, 1998 primarily to operate as an agent between market participants in transactions involving but not limited to foreign exchange, deposit,..” Due diligence would easily ferret out the truth that this company is registered as as information, service and facilities provider only and not as a broker.(I still don’t know how they got away from with these with the SEC when the website clearly states they are engaged in brokering services (a business activity requiring a different licensing requirement)
  • misleading claim #2:TestimonialsThe following are testimonials of clients of Performance Foreign Exchange Corporation or any of its country affiliates/subsidiaries. As a rule these testimonials are unsolicited gratis from people we do business with.” Easily, one will sense a deliberate ploy to mislead readers here with the inclusion of its “affiliates and subsidiaries. The testimonials may be from other sources and not theirs but the inclusion of such rejoinder is a ploy to be able to publish favorable testimonials from other sources and make it appear as their own.
  • misleading claim #3: PFEC has claimed affiliation with this company “SolidGold Financial Services, Inc. (U.S.A.) , Registerered: Futures Commision Merchant, Commodity Trading Pool Operator, Commodity Trading Advisor.” The claim is false! No record of this company exists with the CFTC or with NFA. Anyone can easily get this information from the websites of both agencies.

I still have much more to discuss, but again because of limited space, I need to end this blog for now. Besides, if I were the investor, what I have so far discussed is enough for me to decide not to deal with a company that deliberately mislead its prospective clients and make false claims about its accreditation.

(This is my opinion. What is yours? Please feel free to post your comment below.)



August 18, 2008

If you try to do a google or a yahoo search for “forex trading” you’d be swamped with a search result spanning several pages and containing hundreds (perhaps even thousands)  of companies offering on line forex trading services, all purporting to be legitimate forex brokers. But how would you really determine who is legit and who is not?

Retail spot foreign currency trading (as it is officially termed in the U.S.) or forex as it is commonly known here and about, started from the need of some major participating financial institutions to spread out the entailing risks of rapid and wide foreign currency exchange fluctuations among a wider base of participating investors. (It should be noted that foreign currency trading used to be the exclusive turf of huge banks and large financial institutions since transactions here are in volumes impossible for the ordinary investor to manage.)  The introduction of the leveraged trading system (or margin trading) to the interbank spot foreign currency market opened the doors of the once exclusive foreign currency trading to ordinary individual investors. With the use of modern, internet based technology, linkages between the individual investors and participants of the interbank currency market were established using duly designated financial intermediaries such as brokers and investment houses.

However, taking advantage of the same, readily available technology and operating incognito through   well designed and user-friendly web sites, boiler room operators continued to ply their trade facelessly, bleeding unsuspecting investors dry. These “scammers”  uses trading platforms that simulates actual interbank trading linkages which were even designed by known software developers.  The ordinary users of these trading platforms will really have no way of knowing whether or not their orders were actually executed with a participating bank or institution in the interbank currency market. For all you know, the orders may have ended up in a secretly guarded link in Macau  while the invested funds remained in the hands of these scrupulous sweat shop operators. (As early as1990, the HK based company I used to work for and the other scam operators like the Solidlink Group – now SolidGold – to which the Infamous Michael Liew belonged, had set up a computerized trading network (which simulates the interbank currency market) based in some fancy office in the Portuguese Colony.

At this point, you may want to ask:

So what if it is not bank based as long as the reference rate of exchange  on which a particular trade is “executed” is based on the spot market rates? True. True enough. However, the risk of investing money with a scam operator is not with the seemingly real trading being done using their platform but with the fact that they can always ran away with your money anytime and you will be left holding an empty bag with no clue as to  how  and where you can seek redress, as in the case of PIPC in the Philippines.

How then can we avoid these?  How would we know who is a legitimate forex broker and who is not when the only information we have is what we get from their web pages? Precisely, never trade through a broker who does not provide you with the necessary information about their  company.

But what information about the broker must I have to know if my money would be safe to invest through them? Among other things (like length of existence as a broker, licenses and certifications collected from legitimate financial institutions and known clients) you must also demand to know if the company or the company it is affiliated with is a member of the US National Futures Association and is registered with the US Commodity Futures Trading Commission. If they are not US based, they must instead provide you information and proof of their trading linkages with a prestigious bank or financial investment house. Make it a general rule not to deal with internet based forex broker who does not provide these information on their web pages.

But they can always falsify these information? you can easily check them out with NFA.  Accredited members of NFA proudly display their membership id in their web sites. Whether they provide you with the id or not, you can always check on them easily at the NFA website ( Again, if they or their affiliate is not US based, they must provide you with verifiable documentation of their bank or financial institution’s linkages.



August 16, 2008

In the old days, “boiler rooms” referred to the back room operations of scrupulous brokers. So called “boiler rooms” because they are usually found in the cramp, secluded, steaming hot back rooms of small offices to

keep their illegitimate operations away from the prying eyes of authorities. In Hongkong, they were called sweat shops. Through the years the term boiler room became synonymous with scams and swindling operations. However, they now operate in style from well furnished offices situated in prime business districts. The boiler rooms of the old were usually situated in some obscure addresses.

Today, as if flaunting their ill gotten capital from extended years of scamming operations, they set up fully equipped plush offices, and this was for good measure – to hoodwink clients into believing their businesses are legit. Where did these people come from? And how are they able to operate almost anywhere with impunity?

Hong Kong and Macau were the centers of their scam operations before. Starting out with commodity futures trading they soon shifted to the much bigger foreign exchange market after the world embraced the open trade policy in early-1990’s.

During that time international foreign currency cash transactions were done only through big banks, and between and among the central banks of different countries, huge multi national corporations and giant insurance companies whose global operations were liven up by the open market policies embraced by almost all nations at that time. The transactions were usually in large volumes hardly imaginable by individual investors. Forwards or currency futures contracts were then traded through established exchanges like the International Monetary Market (IMM) of the Chicago Board of Trade and the London International Financial Futures Exchange. As global trade increased, so did the volume of foreign currency transactions which also brought about rapid and frequent swings in the rates of exchange of the different currencies. Entities involved in cash transactions found it necessary to hedge their risks with currency futures. Currency futures brokers on the other hand found it necessary to source their requirements for maturing obligations from the cash market. And that developed the linkages between the two markets – one , an informal network consisting of banks, multinational companies, and insurance giants linked electronically with each other, the other the established financial futures exchanges around the globe.

The increasing risks from exchange rate fluctuations forced some of the smaller banks dealing in spot cash transactions to find a way to spread out the risks. They needed volume. They needed more participants to partake the risks. So they adopted the leveraged trading system (margin trading) of the financial futures exchanges. Retail, off exchange foreign currency trading was thus born,

The boiler room operators were quick to identify this evolving opportunity for them in the rapidly changing financial market place. Leveraged trading was their forte and by experience, they knew that the unlearned investors would easily fall prey to another get-rich-quick scam specially so if they can easily pass it off as being bank-based! But are they?

One clear cut difference between a legitimate broker dealing in retail foreign currency trading (leveraged forex trading) and the forex boiler room operator is the fact that legitimate brokers are accredited investment intermediaries of either a bank or a member broker of an established currency futures exchange, while the boiler room operator operates on his own, faking off the linkages to the legitimate currency market participants with the use of sophisticated trading software and subscription to live market data feeds from legitimate sources.

A system to stream live the actual spot foreign currency transactions of various major participating banks, financial institutions and currency futures exchanges worldwide was developed by both Dow Jones and Telerate years before they merged. Anyone may subscribe to these services for a fee. And true enough, these services were used to the hilt by boiler room operators world wide using their own trading platforms which simulates actual trading in the interbank spot currency market. However, the funds invested through them were never really coursed to the inter-bank spot currency network, much less to a bank or an exchange. the money was simply bucketed!

Performance Foreign Exchange Corporation uses the eForex Asia trading platform the parent company of which Michael Liew also helped establish. Why didn’t the authorities then push on the investigation all the way to eForex Asia. This would have shown that neither PFEC nor eForex Asia have legitimate linkages to the forex market place. This would have proven PFEC is indeed selling the investing public short. This would have proven that online forex trading through PFEC is no different from the online casinos you see sprouting everywhere.



August 16, 2008

The SEC had been ineffective in going after Performance Foreign Exchange Corporation which has remained operational up to now despite the numerous complaints filed against the company by many of its disgruntled investors, and inspite of successive raids made by the National Bureau of Investigation (the local counterpart of the US’ FBI) into their offices. PFEC even challenged the cease and desist order issued by SEC against it all the way up to the Supreme Court and won.

How can this happen? How can the SEC be rendered useless by a forex boiler room operator?

In my opinion, SEC’s helplessness in the issue of PFEC was its own making.

  • First, it failed to keep up with the many changes happening in the financial markets specifically in the foreign exchange markets towards the turn of the century. It failed to notice that with the advent of advanced computer technology, a parallel market to the established interbank foreign currency trading network was fast evolving.
  • Second, the Philippine’s SEC was playing to the hilt its assumed role of being a copy cat of its US counterparts. Online foreign currency trading in the US is considered as commodity futures trading and falls under the jurisdiction and oversight functions of CFTC (Commodity Futures Trading Commission), an independent entity established through an act of the US Congress to regulate commodity futures trading in that country. Why under the CFTC? Well, in the US there are commodity exchanges like the Chicago Mercantile Exchange which deals on financial instruments such as currency futures. Spot currency trading then used to refer to and was limited to the buying and selling of the spot month (current month) currency contracts in these exchanges. Control and oversight functions for spot foreign currency trading were therefore under the jurisdiction of CFTC. However, US authorities were also quick enough to notice the advent of and the proliferation of online, off exchange, spot currency currency trading done electronically through banks with networks that spans every corner of the globe. And so the US congress,on the recommendation of CFTC passed “The Commodity Futures Modernization Act of 2000 (CFMA) which made clear that the CFTC has jurisdiction and authority to investigate and take legal action to close down a wide assortment of unregulated firms offering or selling foreign currency futures and options contracts to the general public. ( Please refer to my earlier blog entitled Foreign Currency Trading Update, August 15, 2008.)

The Philippines SEC was lifting off and adopting policies and opinions from its US counterparts without studying its own local scenario falling into the age old colonial mentality of embracing the belief that “whatever it is that holds true in the US must hold true also in the Philippines. And so when SEC went up against PFEC in the courts of law, it was rebuffed by the highest court in the land (the Supreme Court) because it tried to pin down PFEC with the charge that it was illegally engaging in commodity futures transaction. (See my blog on this HANGING BY A THREAD (PART2 ) – (SEC BLUNDERED AND PFEC GOES SCOT FREE)•August 13, 2008 and HANGING BY A THREAD (PART1 ) – (OR HOW PFEC MANAGE TO REMAIN AFLOAT)•August 12, 2008)

The funny thing is from the advent of commodity futures trading in the Philippines in 1985 to its closure in 1997 which was followed by the influx of forex boiler room operators, the SEC was swamped with mounting complaints from forex investors. And take note, the revised Securities Regulatory Act of the Philippines was enacted in the year 2000, the SEC could have recommended revisions to the securities code as early as then but they didn’t.

Now, two years after the PIPC scam, it has not made any move at all to recommend revisions in the code which must incorporate clarificatory provisions that will define SEC’s jurisdiction and oversight functions over unregulated firms dealing with the buying and selling of spot currency contracts to include firms offering subsidiary forex services such as consultancy services, research, and forex trading platforms.

The US made its move in the year 2000 to regulate on line, off exchange spot currency trading. What has the Philipines’ SEC done?



August 13, 2008

Just recently, the Philippine Supreme Court threw out SEC’s bid to stop Performance Foreign Exchange Corporation from continuing to defraud Philippine Investors on a mere technicality, a major blunder by the regulatory body. This now opens the floodgates to other forex scam artists to rush in and once more “rape” the country with impunity.

The SEC’s biggest mistake was to try to pin down PFEC for engaging in commodity futures trading and for engaging in the marketing of financial derivatives. This was effectively and legally rebutted with PFEC’s argument that spot foreign currency trading is not done in an exchange and the buying and selling of forex does not necessarily involve actual delivery of the contracted instruments in stark contrast to foreign currency cash transactions done through banks. On this basis, the Supreme Court made the precedent setting decision that forex contracts can not be considered as commodity futures contracts. They further blundered when they alleged that PFEC ‘s main product, spot foreign currency trading is a financial derivative (the height of stupidity). They were now forced to seek the Central Bank’s clarification on the issue since trading in financial derivatives is well within the Central Bank’s jurisdiction. However, the Central Bank is more up to date with developments in the financial markets and had no choice but to declare the fact that spot foreign currency trading is not a derivative of any financial instrument (not a financial derivative) which is what it is, a totally unique financial instrument traded freely and electronically between banks and/or their intermediaries.

However, there is no denying the fact that foreign currencies, when traded for speculative profits only are deemed as securities and therefore falls within the jurisdiction of the SEC’s regulatory and oversight functions as mandated by Republic Act 8799. But how then do we discern speculative trading from cash transactions as is done in the banks? Simple! Speculative foreign currency trading is done through what they call as a margin system while cash transactions are done straight off, one on one, based on the current rates of exchange. The SEC could have crafted its own regulatory policies in this context to regulate spot forex trading within the framework of Republic Act 8799 as early as late 1980’s when they started to receive mounting complaints from investors. They never did.

The problem with these Chinese scam artists in the Philippines goes way back to 1985 when the Manila International Futures Exchange was established. From that time up to the present, countless lawsuits and complaints were filed against various forex scam artists (Incidentally, none of the decisions favored the complaining investors!). And, as I said in my earlier blogs, the SEC was playing ” cats and dogs” with these forex scam artists all this while. Inspite of that, the SEC never really learned their lessons well!

The Securities Act was revised and made into a new law in the year 2000, more than a decade from the advent of commodity futures trading in the Philippines in 1985, and the influx of forex “boiler room” operators into the country in the ’90s. After more than a decade of deception and fraud by these scam artists, after billions of dollars have been lost by investors to them, after thousands of lawsuits have been filed by losing investors to no avail, the SEC is still groping around, looking for a way to finally catch these scam artists. Or, are they ……