Currency trader invites suspicion
Currency trading is a fast and furious world. The slightest movement in the value of one currency relative to another can spell big profits, or big losses, for investors.
Quite rightly, then, any individual or organisation offering advice on currency investments in the UK must be licensed by the Financial Services Authority. And it hardly needs saying that to provide a decent service to clients, advisers must be absolutely up to date and on the ball.
What, then, must we make of currency traders Atwood & James Limited? The firm contacted a Moneywise reader in Dorset offering a free investment guide and boasting that, when the euro peaked against the dollar recently, “those who had invested with us in the euro five months earlier earned a return of £10,489 for every £600 they invested”.
The reader was urged to return a reply card to an address in Wandsworth in London, but instead he asked Moneywise to investigate because it sounded “too good to be true”. He was right there.
Not at home at Companies House
Enquiries at Companies House revealed that there is no such company as Atwood & James Limited. Assuming it does exist, it must be foreign, but if it is trading as a limited company in the UK without registering with Companies House, it is acting illegally.
So is it trading in the UK? A trip to Wandsworth found no trace of the company. Its address belongs to a marketing firm. When reply cards arrive for Atwood & James, they are scanned into a computer that can be accessed remotely from anywhere in the world.
The company decorates its literature and its website at atwoodjames.com with pictures of the Statue of Liberty. Is this a clue to the firm’s real whereabouts? The monument is just a short ferry ride from Wall Street, so is the currency trader operating from the heart of New York’s financial district.
Well, no. They do have a New York address, but in the state, not the city, and in the north of the state at that, close to the Canadian border and hundreds of miles from any financial centre.
Is the firm licensed there as a currency investment adviser? Again the answer is no. But surprisingly, it seems there is nothing wrong with this.
A licence to trade?
The Commodity Futures Trading Commission, the US watchdog that oversees currency trading, says that anyone simply acting as a middleman does not need to register as long as the customer ends up dealing with a company that is acting legally.
This seems to be the key to Atwood & James. It is not licensed in London, but it is not really based in London anyway. It is not licensed in New York, but it is not breaking any laws there if it passes customers on to someone else.
In this case the someone else appears to be a completely separate company, also called Atwood & James, but based in Rio de Janeiro. If you gave them a call, this is where the phone would ring.
The question is, would you want to call them? And the answer here is much clearer than the the firm’s location: no, you wouldn’t.
On the company’s website, at the time of writing the pound was quoted against the dollar at $1.83, a figure that is about 18 months out of date – the recent exchange rate has been several cents above $2. The excuse offered by Atwood & James is that some small currency firms have been stealing their recommendations, so they have stopped updating their website. As excuses go, this rings as hollow as using pictures of Big Ben and the Statue of Liberty to decorate your advertisements when your business has no connection with either of them.
A type of derivative often lumped together with options, but slightly different. The original derivative was a future used by farmers to set the price of their produce in advance before they sowed the seeds so that after the harvest, crops would be sold at the pre-agreed price no matter what the movements of the market. So a future is a contract to buy or sell a fixed quantity of a particular commodity, currency or security (share, bond) for delivery at a fixed date in the future for a fixed price. At the end of a futures contract, the holder is obliged to pay or receive the difference between the price set in the contract and the market price on the expiry date, which can generate massive profits or vast losses.