Armenia’s central bank warns against leveraged transactions

24.12.2018 19:00
Armenia’s central bank warns against leveraged transactions

YEREVAN, December 24 /ARKA/. Armenia’s Central Bank has warned today about high risks of leveraged transactions (leverage is an investment strategy of using borrowed money — specifically, the use of various financial instruments or borrowed capital — to increase the potential return of an investment) at the local FOREX market, reminding also of a tight regulation of this area.

According to the Central Bank, the number of applications for obtaining permission to enter the FOREX market have increased in recent years, despite the fact that leveraged transactions are considered deals with high risk.

"Typically, proposals for leveraged transactions are misleading potential investors, as they promise high return in a short period of time, which is not true. Moreover, investors may lose much more than they invested. This market is not free of fraud. Investors are often unaware where their funds are kept and there have been cases when an investor could not return his money,” the regulator said.

In view of the above-mentioned risks, the Central Bank set strict requirements for persons providing leveraged investment services in the forex market. In particular, such services are to be provided only to professional clients, that is, to those who have relevant experience and knowledge to understand all the accompanying risks, and are able to make investment decisions on their own.

The Central Bank recalled that the law prohibits provision of leveraged investment services to non-professional clients, wishing to trade at FOREX markets. The regulator reminded that it had introduced risk control mechanisms to protect the interests of professional clients. -0-

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