The Forex - "Forex" and Disadvantages to be regulated and monitored effectively by the International control entities

FOREX, OFFERING OF CURRENCY EXCHANGE SERVICES

2009049712-002 Concept of July 1, 2009.

Summary: 

To the extent that the investor contracts directly with the institution from outside the conditions and terms under which investments are executed subject to the provisions in the contract and under the protection of the laws of the country of origin of the institution from outside accordingly. As the offer or promotion made third service foreign currency exchange (FOREX) to residents in the country by persons other market intermediaries should be noted that the Board of the Bank of the Republic has established that such activity is subject to the conditions referred to in the 2558 Decree 2007. It is up to investors know the risks and bear the consequences of the decisions taken, since the society outside the contracting is not subject to any inspection, supervision or control by the Superintendency and the legality of transactions is limited to the current regulations in the country of origin.

"(...) Raises the following concerns: "(..) itself (the) mediation, administration or management is / pray is exercised by an individual foreign securities Colombian (sic) that such person agrees to buy from an established entity abroad and the negotiation is also abroad, incurring an illegal activity? Note: foreign securities to which I refer are to try to buy and sell currencies in the spot market, through a broker established abroad (...)"

In this regard, this Office considers necessary to clarify first that any activity involving the management of public resources is reserved for entities supervised by the Superintendency and can not be exercised by one who does not have that quality.

Therefore anyone who has not been subject to the supervision of the Superintendency can perform "intermediation, administration or management of securities" for third parties.

As to service foreign currency exchange (FOREX), are relevant

Following considerations:

1. Definition of Forex Market. Financial investments abroad through it.

In this regard, the Board of the Central Bank has issued 10,679 JDS concept in which states:

FOREX Market

First, to state that in Colombia there is no legal definition of the FOREX market. However, given its characteristics, it can be understood as an electronic currency market where currencies are bought and sold spot or future (eg currency futures contracts). Transactions conducted using electronic trading platforms and common currencies are the U.S. dollar, Euro, Yen and British Pound.

FOREX country has no specific recruitment if it is operated by Dealers or agents known as market makers "on line". The ability to offer this kind of operations, both by those who act as counterparts, for those who act as intermediaries, depends on the regulation of the country of origin of such agents, as well as the regulation of the country they are from customers or consumers or where lie the effects of such contracts.

In this context, the ability to perform operations of this nature by residents must be viewed in the light of regulatory changes applicable to foreign agents abroad, and the Colombian regime.

So, it must be noted that to operate in the Forex market, the investor contracts directly with the respective foreign institution, from its own resources, assuming the consequences of investment decisions taken.

Likewise, we see that to the extent that the investor contracts directly with the institution abroad, the conditions and terms under which investments are executed subject to the provisions in the contract and under the protection of the laws of country of origin outside of the institution concerned.

So that it is up to investors know the risks and bear the consequences of the decisions taken, since the society outside the contracting is not subject to any inspection, supervision or control by the Superintendency and the legality of the operations is limited to the current regulations in the country of origin. It is clear that in the event that a natural or legal person under the pretext of offering the opportunity to participate in the Forex market, run activities involving the administration of public resources without being an entity supervised by the Superintendency would incur illegal practice of this activity, since its implementation is limited to surveillance sector entities.

2. Service offering foreign currency exchange (FOREX)

Moreover, in offering or promoting third party service to perform foreign currency exchange (FOREX) to residents in the country by persons other market intermediaries should be noted that the Board of the Bank Republic has laid down in Article 31 of Resolution 4 of 2009, such activity is subject to the conditions referred to in the 2558 Decree 2007. Indeed, Article 31 of the said resolution reads: "The offer to residents in the country, as distinct from market intermediaries, service negotiation or record currency transactions across platforms and in particular the service offering foreign currency exchange (FOREX) is subject to the conditions referred to in the 2558 Decree 2007.

The products or services offered through these platforms can only be promoted or advertised in Colombia through representative offices, stock brokerage firms or financial corporations, on the terms and conditions established by the Superintendencia Financiera de Colombia". In connection with the arrangements provided for in said Decree 2558 of 2007, it should be noted that this rule establishes the system of representative offices of financial institutions, reinsurers and foreign stock market and other provisions.

Paragraph 3 of Article 2 of Decree in question, provided that the promotion and advertising in Colombia or to Colombian residents, products and services overseas stock market, you should use either of the following:

a) Establishing a representative office

b) Hold a correspondent agreement with a stock brokerage company stock or a financial corporation.

These are the only authorized mechanism for this activity. Given the above, it is evident that the work of promotion and advertising of the service exchange foreign currency in particular are regulated exclusively and allows 2 types of alternatives, from which it follows that this activity can only be made exclusively entities supervised by the Superintendencia Financiera de Colombia.

The inspection and monitoring of this entity in the terms set forth by Decree 2558 of 2007, fall on the representative office or stock brokerage company or financial corporation, as applicable, in respect of advocacy and conduct publicity and enforcement of the rules contained in the decree date, these efforts do not extend to the institution of providing services outside the Forex market.

Furthermore, it should be noted that Colombian law does not contemplate the possibility that individuals or legal entities may receive funds from third parties to operate in the Forex market on behalf of such third parties. This activity was not authorized for representative offices or for stock brokerage firms and / or financial corporations under contract correspondent. (...). "