14 Web Trading Firms Agree to Tone Down Profit Claims
Federal regulators said Monday that 14 online trading firms or their operators, including four in the Southland, have agreed to stop making claims that the strategies and systems they sell can make investors easy money with little risk.
The Federal Trade Commission, the Commodity Futures Trading Commission and the Securities and Exchange Commission announced settlements in which the firms agreed to shut down or alter their Web sites or to pay fines.
Much like a broader sweep conducted in March, Monday’s crackdown was aimed at driving home the fact that the same rules apply to online investment come-ons as to real-world ads, said Stephen Gurwitz, assistant director of the FTC’s marketing practices division.
“No matter where an advertisement is, you need to substantiate those kinds of claims,” Gurwitz said.
The cases also were meant to warn investors to question online trading offers more closely, regulators said. One company cited in the sweep claimed its systems had yielded returns of more than 300%, but failed to mention its trades were hypothetical; others did not convey that hidden costs, such as commissions, could eat into profits.
The Southern California firms and officers that settled are CompuTrade in Dana Point and its managing director, Bernard Lewis; New Age Trading Techniques in Studio City; Global Futures Exchange & Trading Co. in Sherman Oaks, and Mohammed Najib Taybi of Venice.
Global Futures paid a $10,000 fine, but admitted no wrongdoing, the CFTC said.
Taybi said he had revised his Web site to make it clear that the returns he projects are hypothetical, as the CFTC wanted. He contends he has a 74% success rate with his daily trading plan for Japanese currency futures.
CompuTrade, founded in 1998, sells would-be currency traders memberships for $3,800 a year, Lewis said. Members get software, access to investment reports and training on how to use them, as well as practice trading accounts.
Once members enroll, they receive written disclosures explaining that trading is risky and that there is no assurance of profit, Lewis said. But the FTC took issue with the absence of such disclosures on free areas of the firm’s Web sites that are used to draw in new customers.
On those pages, the company advertised that its software could signal when to buy and sell currencies so the user always made money and it touted annual “six or seven figure” trading profits, the FTC complaint said.
Under a consent agreement, CompuTrade promised either to suspend or to substantiate such claims. On Monday, the company’s Web sites bore “under construction” signs, and Lewis said they would soon bear the warning that currency trading is risky and can lead to heavy losses.
“Anyone who goes through the course gets full disclosure, but now it needs to be made a public display,” he said. “We will abide by what we’ve agreed to.”
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Bloomberg News contributed to this report.
