Saudi Arabia: Warnings of an Increase in Forex Victims

While there has been a huge rise in stock trading in Saudi recently, experts have warned from increasing investments in stocks, due to the high risks involved, which may lead to a total loss of capital in a single day, and alerting the responsible bodies of the importance of educating investors, and protecting them from marketing ploys which, can lead them to the dangerous precipice of investment.

Foreign exchange stocks are considered high risk, since they are primarily used as a precaution against the dangers of monetary exchange, by traders and importers, in order to benefit from the fluctuations of major currencies against the US dollar. They are not normally used for speculating, since they carry a very high risk for non-specialists. Thus, the owners of these companies strive to market such activities as an attractive option to isolated investors of little experience, which can cost them huge losses, with some of them losing their entire investments in the stock exchange.

These official warnings, occurred during a period when there was an increase in the number of foreign companies advertising their services in Saudi, to attract Saudi citizens to enter the Forex trading field, in addition to offering insurance services of up to 500% and attempting to attract them to widen their investment base, to include more currencies. However, when a loss occurs they clear out the customer's investments without consulting him. In doing so, they rely on the foreign currency trading agreement, which gives the company the right to protect its rights during instant close out, which leads investors to become bankrupt.

Official Warning:

An official from the Ministry of Industry and Foreign Trade stated that normally such companies would require a license from the Saudi Monetary Agency in order to participate in the Saudi stock market. However, many unlicensed companies have entered the market via the internet, in order to try and lure as many individuals as possible to a quick profit. Thus, when a loss occurs the individual becomes a scapegoat.

The official added that individuals should ascertain whether such companies are in fact licensed, and request to view the contracts they are entering into, as well as showing them to a legal expert, to understand the full dimensions of the agreement and their legal rights.

High Risks:

The financial consultant Mansour Suleiman stated that investment in foreign currency is considered the highest risk activity in the stock trading field, especially since it offers credit reaching up to 500% rate insurance of capital. In addition, trading in foreign currency stock requires much experience and careful observation, as well as knowledge of foreign currency and in statistics and data which are effective on the market. The dates of posted data are also important since these can confuse unknowing traders.

The majority of such companies try to attract the greatest number of investors, without paying attention to their abilities and knowledge within the field. In fact, some of them deliberately attempt to attract investors with little or no experience, which often leads the latter suffering great losses within the space of a few days.

He also added that some companies paint a rosy picture of the huge possible winnings and transformation from a life of poverty to one of riches overnight which attracts naïve individuals. He called for the launch of awareness campaigns supervised by the Ministry of Finance, and the Ministry of Economy and Planning together with the Saudi Monetary Agency and Chambers of Commerce, in order to increase citizens' and residents' financial awareness and to enlighten them of the more appropriate methods of investment as well as the social and economic disadvantages.