Securities regulator alleges that self-employed "Forex" trader committed fraud
VANCOUVER, Aug. 6, 2013 /CNW/ - The Executive Director of the British Columbia Securities Commission has issued a notice of hearing alleging that a self-employed trader in foreign exchange (Forex) committed fraud by concealing how he earned commissions, offered clients false guarantees to reimburse them for any losses, and engaged in unregistered trading.
The notice alleges that between April 2009 and June 2011, Hong Liang Zhong met with 14 B.C. residents about trading Forex on their behalf. Zhong is a B.C. resident and has never been registered to trade securities in B.C.
The notice states that Zhong filled out electronic applications to open trading accounts for his Forex clients at two online brokerage firms. In the account applications, Zhong listed himself as a referring broker so he could receive commissions from the brokerage firms based on the volume of trading in the Forex clients' accounts. As Zhong would not be eligible for the referring broker commission if he had trading authority over the accounts, he made his spouse the apparent trading agent. However, BCSC staff maintains that it was Zhong, not his spouse, who executed trades on behalf of the Forex clients.
Zhong told his Forex clients that he would only get paid by taking a share of the profits, while concealing from them that he was actually receiving commissions as a referring broker based on trading volume alone. Zhong conducted high volume trading in the client accounts and earned at least US $108,408 in commissions as a referring broker. He lost USD $268,305 of the USD $403,012 that his Forex clients invested. BCSC staff contends that by misrepresenting the true nature of his commissions to his Forex clients and to the online brokerage firms, Zhong perpetrated a fraud.
The notice also alleges that Zhong guaranteed at least four of the Forex clients that he would return their full principal if they suffered trading losses. These clients invested USD $115,062, and Zhong lost USD $102,721 of their money. Despite being asked to do so, Zhong has not reimbursed them for their losses.
These allegations have not been proven. Counsel for the executive director will apply to set dates for a hearing into the allegations before a panel of commissioners on September 3, 2013 at 9:00am.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the notice of hearing on our website www.bcsc.bc.ca by typing Hong Liang Zhong or 2013 BCSECCOM 303 in the search box. Information regarding disciplinary proceedings can be found in the Enforcement section of the BCSC website. Please visit the Canadian Securities Administrators' Disciplined Persons List for information relating to persons disciplined by provincial securities regulators, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA). For media inquiries, please contact Richard Gilhooley, media relations, 604-899-6713. For public inquiries, please call 604 899 6854 or 1 800 373 6393 (toll free). Learn how to protect yourself and become a more informed investor at www.investright.org
SOURCE British Columbia Securities Commission