(a) Risk disclosure statement required. No banking institution may
open or maintain an account for a retail forex customer for the purpose
of engaging in retail forex transactions unless the banking institution
has furnished the retail forex customer with a separate written disclosure
statement containing only the language set forth in paragraph (d)
of this section and the disclosures required by paragraphs (e), (f),
and (g) of this section.
(b) Acknowledgement of risk disclosure statement
required. The banking institution must receive from the retail
forex customer a written acknowledgement signed and dated by the customer
that the customer received and understood the written disclosure statement
required by paragraph (a) of this section.
(c) Placement of risk disclosure statement. The disclosure statement may be attached to other documents as the
initial page(s) of such documents and as the only material on such
page(s).
(d) Content
of risk disclosure statement. The language set forth in the written
disclosure statement required by paragraph (a) of this section shall
be as follows:
Risk Disclosure Statement
Retail forex transactions generally involve
the leveraged trading of contracts denominated in foreign currency
with a banking institution as your counterparty. Because of the leverage
and the other risks disclosed here, you can rapidly lose all of the
funds or property you give the banking institution as margin for such
trading and you may lose more than you pledge as margin. You should
be aware of and carefully consider the following points before determining
whether such trading is appropriate for you.
(1) Trading foreign currencies is not on a regulated market
or exchange—your banking institution is your trading counterparty
and has conflicting interests. The retail forex transaction you are
entering into is not conducted on an interbank market, nor is it conducted
on a futures exchange subject to regulation by the Commodity Futures
Trading Commission. The foreign currency trades you transact are trades
with your banking institution as the counterparty. When you sell,
the banking institution is the buyer. When you buy, the banking institution
is the seller. As a result, when you lose money trading, your banking
institution is making money on such trades, in addition to any fees,
commissions, or spreads the banking institution may charge.
(2) Any electronic trading platform
that you may use for retail foreign currency transactions with your
banking institution is not a regulated exchange. It is an electronic
connection for accessing your banking institution. The terms of availability
of such a platform are governed only by your contract with your banking
institution. Any trading platform that you may use to enter into off-exchange
foreign currency transactions is only connected to your banking institution.
You are accessing that trading platform only to transact with your
banking institution. You are not trading with any other entities or
customers of the banking institution by accessing such platform. The
availability and operation of any such platform, including the consequences
of the unavailability of the trading platform for any reason, is governed
only by the terms of your account agreement with the banking institution.
(3) You may be able to offset or liquidate any trading
positions only through your banking institution because the transactions
are not made on an exchange, and your banking institution may set
its own prices. Your ability to close your transactions or offset
positions is limited to what your banking institution will offer to
you, as there is no other market for these transactions. Your banking
institution may offer any prices it wishes. Your banking institution
may establish its prices by offering spreads from third party prices,
but it is under no obligation to do so or to continue to do so. Your
banking institution may offer different prices to different customers
at any point in time on its own terms. The terms of your account agreement
alone govern the obligations your banking institution has to you to
offer prices and offer offset or liquidating transactions in your
account and make any payments to you. The prices offered by your banking
institution may or may not reflect prices available elsewhere at any
exchange, interbank, or other market for foreign currency.
(4) Paid solicitors may have undisclosed
conflicts. The banking institution may compensate introducing brokers
for introducing your account in ways that are not disclosed to you.
Such paid solicitors are not required to have, and may not have, any
special expertise in trading, and may have conflicts of interest based
on the method by which they are compensated. You should thoroughly
investigate the manner in which all such solicitors are compensated
and be very cautious in granting any person or entity authority to
trade on your behalf. You should always consider obtaining dated written
confirmation of any information you are relying on from your banking
institution in making any trading or account decisions.
(5) Retail forex transactions are
not insured by the Federal Deposit Insurance Corporation.
(6) Retail forex transactions are
not a deposit in, or guaranteed by, a banking institution.
(7) Retail forex transactions are
subject to investment risks, including possible loss of all amounts
invested.
Finally, you should thoroughly investigate any statements
by any banking institution that minimize the importance of, or contradict,
any of the terms of this risk disclosure. Such statements may indicate
sales fraud.
This brief statement cannot, of course, disclose all the
risks and other aspects of trading off-exchange foreign currency with
a banking institution. I hereby acknowledge that I have received and
understood this risk disclosure statement.
Date
Signature of Customer (e) (1) Disclosure of profitable accounts ratio. Immediately following
the language set forth in paragraph (d) of this section, the statement
required by paragraph (a) of this section shall include, for each
of the most recent four calendar quarters during which the banking
institution maintained retail forex customer accounts:
(i) The
total number of retail forex customer accounts maintained by the banking
institution over which the banking institution does not exercise investment
discretion;
(ii)
The percentage of such accounts that were profitable for retail forex
customer accounts during the quarter; and
(iii) The percentage of such accounts
that were not profitable for retail forex customer accounts during
the quarter.
(2) Statement of profitable trades.
(i) The banking institution’s statement
of profitable trades shall include the following legend: Past performance
is not necessarily indicative of future results.
(ii) Each banking institution shall
provide, upon request, to any retail forex customer or prospective
retail forex customer the total number of retail forex accounts maintained
by the banking institution for which the banking institution does
not exercise investment discretion, the percentage of such accounts
that were profitable, and the percentage of such accounts that were
not profitable for each calendar quarter during the most recent five-year
period during which the banking institution maintained such accounts.
(f) Disclosure of fees and other charges. Immediately following
the language required by paragraph (e) of this section, the statement
required by paragraph (a) of this section shall include:
(1) The amount of any fee, charge, spread,
or commission that the banking institution may impose on the retail
forex customer in connection with a retail forex account or retail
forex transaction;
(2) An explanation of how the banking institution will determine
the amount of such fees, charges, spreads, or commissions; and
(3) The circumstances
under which the banking institution may impose such fees, charges,
spreads, or commissions.
(g) Set-off. Immediately following the language
required by paragraph (f) of this section, the statement required
by paragraph (a) of this section shall include:
(1) A statement as to whether the banking
institution will or will not retain the right to set off obligations
of the retail forex customer arising from the customer’s retail forex
transactions, including margin calls and losses, against the customer’s
other assets held by the banking institution;
(2) If the banking institution states that
it reserves its right to set off obligations of the retail forex customer
arising from the customer’s retail forex transactions against the
customer’s other assets, the banking institution must receive from
the retail forex customer a written acknowledgement signed and dated
by the customer that the customer received and understood the written
disclosure required by paragraph (g)(1) of this section.
(h) Future
disclosure requirements. If, with regard to a retail forex customer,
the banking institution changes any fee, charge, or commission required
to be disclosed under paragraph (f) of this section, then the banking
institution shall mail or deliver to the retail forex customer a notice
of the changes at least 15 days prior to the effective date of the
change.
(i) Form of disclosure
requirements. The disclosures required by this section shall
be clear and conspicuous and designed to call attention to the nature
and significance of the information provided.
(j) Other disclosure requirements unaffected. This section does not relieve a banking institution from any other
disclosure obligation it may have under applicable law.
