Some ‘forex’ funds are smoke and mirrors, warn Ontario advisors

Toronto man’s arrest and OSC warning sets off alarm bells with advisors

Investors should keep their eyes peeled and wallets sealed to certain foreign exchange funds, warn some Ontario financial advisors.

This is in reaction to two separate forex-fraud incidents announced in the province over the last week.

“There’s so many alternative investments coming onto the market and some of these are going on in other countries that are not necessarily approved,” explains Victor Lamba, a consultant with the Investors Group in Toronto. “Investors don’t necessarily know that.”

Last Wednesday, police arrested a 50-year-old Toronto man, who allegedly defrauded his clients of more than $7 million in a foreign currency trading scheme between October 2009 and July 2013. According to police, Stephan Novak posed as a foreign-currency investor and convinced referral-based clients to invest in his pool of funds. Five people have come forward, but police believe there are more victims and have taken the investigation internationally.

Meanwhile, last Thursday the OSC warned investors of unregistered trading firms Youtrade Investments MA Ltd. and You Trade Holdings Limited (YoutradeFX) based out of the U.K. and Mauritius. The firms are accused of soliciting investors to open trading accounts to conduct electronic trades on foreign exchange markets and to invest in certificates for difference (CFDs). The same warning was issued by regulatory boards in the B.C. and Quebec back in 2011. (continued on Page 2.)


“Anytime you say here’s my money, go do something with it, you are always taking a risk,” says Daniel Hanzelka, financial advisor and coach at Financial Reset. “The biggest thing I say to (my clients) is ‘what is your exit strategy?’ Getting into something is the easy part, but how do you get out?”

It may be premature to call ‘forex’ fraud the new trend, but advisors aren’t shy to say Canada’s regulatory boards should get with the program and coordinate their efforts to combat it more efficiently.

“The truth is it’s great to have independent provincial regulators to ensure best practices for advisors….,” says Chris Karram, advisor and partner with Safebridge Financial Group. “….but having a more amalgamated or communicative presence would go a long way for everyone.”

Hanzelka disagrees, arguing that regulators have too much control and that investors should do their own research to fully comprehend the risks they are taking.

“To me, the governments are overseeing way too many things already,” he says. “It’s taking the onus from the individual investors. They need to understand what they are really getting into.”

Canada is presently the only well-developed country without a national securities regulator. One is apparently in the works, according to the federal government, but it is not expected to be up and running until 2015.

Do you think provincial regulatory boards need to better coordinate their efforts? Tell WP your thoughts in the comment box below.