Actually it is not illegal for Americans to use an offshore broker. Dodd Frank purports to regulate foreign brokers offering their services to U.S. clients. However, the foreign brokers can argue that U.S. regulators have no jurisdiction over them, or just ignore the U.S. regulators if the brokers have no presence in the U.S.
This means the broker cannot be a member of an exchange in the US, directly or via subsidiaries. This narrows it down to: 1) Brokers who offer access to European and Asian markets only 2) Forex brokers Also if the broker doesn't have a bank account in a US bank, transferring money to the broker will cost extra to US customers. Regarding "ignoring" US regulations completely, remember an executive of an online casino who got arrested as soon as his plane landed in the US?
Call it as you may or seeing it from any point of view, it sounds like totalitarism and cutting individuals' freedom. Some colleague brokers are accepting us customers though, they just understand CFTC has no jurisdiction over them. We advice a bearer-share corp as security layer, for both parties. More expensive and tedious to wire funds, yes. But more secure a way to access unrestricted trading conditions, specially if you think of the tight conditions imposed by the US goverment.
Foreign banks, many of which offer forex platforms to U.S. investors, will be prohibited counter-parties because of language in Dodd-Frank Section 742. However, this provision does not become effective until July 16, 2011. While Congress did not leave room for bank regulators to make rules that would allow foreign banks to intermediate forex transactions for U.S. retail investors after July 2011, these foreign banks are still outside of the CFTCâs jurisdiction and thus unaffected by the CFTCâs final regulations on OTC retail forex. Therefore, a U.S. retail trader could continue to trade forex through a foreign bank, with no leverage or hedging restrictions, until July 16, 2011 without running afoul of any of the new rules that have received so much attention. But, If it becomes the law in US and forced by CFTC, overseas brokers may have to follow the rules and not solicit if they are trust worthy brokers. I wouldn't feel comfortable opening an account overseas. But, it's just me. Others may have different view of things. Also, it is est date for ruling is on/around July, 2011. But, who knows if it will happen. It may take another few years... Never know for sure. Now ask yourself this question...Do you trust that your overseas broker will not notify you on 07/16/11 that they are no longer able to do business with you or to transfer money back and forth and that your account is closed? Where is your money? Can you get it back from them? Shady Dealers (dealers that ignore international laws and conventions) that continue to do business with you can close at anytime...do you feel comfortable? As far as it being illegal for me directly, I do not trust Obama (I do not want to be made an example of as an accredited investor)... ES
here is an email I received just now... from one of the dealers thought to be a "safe haven" for retail residents of the USA. Dear Valued Client, You might be aware of the recent changes in U.S. regulations regarding off-exchange retail foreign exchange. The new regulatory rules-implemented by the Commodity Futures Trading Commission (CFTC), the U.S. government agency responsible for the regulation of retail foreign exchange-apply to retail forex transactions that are offered or entered into by entities registered with CFTC under the Commodity Exchange Act (CEA). Tadawul FX Ltd. is regulated by Cyprus Securities and Exchange Commission (CySec) and complies with all applicable European Union laws and regulations, including those under the European Markets In Financial Instruments Directive (MiFID). Although, Tadawul FX does not have any offices or operations in the US and is not subject directly to the licensing laws of U.S. regulators, further to our compliance checks it appears that the CFTC does not allow retail forex transactions to be provided to U.S. clients by entities not registered with the CFTC. Due to the regulatory restrictions in the U.S., it is with great regret we inform you that Tadawul FX will no longer be able to accept any transactions from U.S. residents from 8th July 2011. Procedure for USA resident clients By 8th of July 2011 (22:00 CET) all open positions and all pending orders must be closed. Any positions left open will be automatically closed at the last available price, and all pending orders will be cancelled. All funds in the trading account must be withdrawn to the original source. To collect all remaining balances from your trading accounts, you are kindly requested to send a withdrawal form, which will be processed once it is received. If you have recently sent funds to your trading account, the funds will be sent back to your original source, as soon as these are received. As of Wednesday 6th July 2011, no deposits will be processed from U.S. residents. The status of the trading account will be changed to "Read Only," allowing you to access your account with your existing login details, just to view history and generate reports as you require. We sincerely apologize for any inconvenience this may cause you, but unfortunately changes in U.S. regulations are beyond our control. Nonetheless, we will continue to reevaluate the U.S. laws and would be happy to accept U.S. residents in the future, should the laws and regulations change. We have thoroughly enjoyed working with you and would like to thank you for your business. Please feel free to seek independent legal advice to further determine how the regulations affect you or your company.
Folks.. I have one word of advice... Get your money out of your overseas Forex accounts, if you are a retail trader/resident of the USA without some sort of legal entity overseas. Don't be in denial...deal with it. If you try to find an overseas dealer that will take your money and let you trade...ask yourself...is he reputable? Do the Foreign banks want to do business with him? Can he hedge his book with futures?.. or is he merely relying on the bucket? Remember...The USA is the best of the worst...and when they wave their power through the CFTC...one way or another they will get their way...when this worldwide depression takes its toll and the countries start to fall and the dominoe effect runs its course the USA will remain standing and the one-world economy will be launched (it is biblical). Thats all...That's it... ES
What kool aid are you drinking? Deal with what - the fact that at any moment the CFTC can outlaw Forex trading in the U.S. altogether. They have that authority and were lobbied hard last year not to do so. Just because they didn't, does not mean they won't. In just the last six months the margin requirements on my Forex accounts has been increased. I am now barred from trading silver and gold, and I can no longer trade through an overseas broker. The trend is real and it's not looking good for Forex traders in the U.S. I say get the hell out. Sure there are unreputable brokers around the world but I'm sure there are many that are. But neither the reputable nor unreputable stole my money or have denied me the right to to trade. But the U.S. government/CFTC just did.
I had gotten the impression that this was to go into effect in October 2011. After my initial depression when I heard of the Dodd-Frank Act, I seriously considered giving up US citizenship, since this would affect my livelihood. But Dukascopy announced on July 1 that this is happening this month. Supposedly FXDD and Alpari will be offering Dukascopy technology and feeds, but that doesn't address the leverage issue which was only one of the reasons I left FXDD. If they allow me to use an API (JForex) that can run on a stable operating system that doesn't crash daily, and get ECN spreads, this may not be as bad as I thought. But if you want to know who to vote out of office, here you go: http://clerk.house.gov/evs/2009/roll968.xml#Y http://www.senate.gov/legislative/L...fm?congress=111&session=2&vote=00162#position Oh, and this goes to show you that Dukascopy is still more reputable than many US brokers; complying to this US regulation. How about a policy of allowing mismanaged firms to fail and traders who don't learn proper use of leverage to wipe out? Now we want to raise the debt ceiling?! I also like how the law is written for "eligible entities" if they have some real cash $10M or so. Then they can trade where ever they want http://www.law.cornell.edu/uscode/7/usc_sec_07_00000001---a000-.html What would it take to get some of these regulations back to not feeling like I'm in a communist country? I can't trade where I want, and scammer firms don't go under due to bad reputations?
OK, now that is a relief. But we need now is a plan other than "just deal with it" that will allow us to maintain are lively hood and for many of us are income and protect us from future regulation. My idea was this... 1.) Find a reputable broker that accepts an entity such as a corporation. 2.) As a U.S. citizen set up a foreign corporation in another country. 3.) Open an account with broker identified in step 1 with corporation established in step 2. 4.) Trade without any fear of future or present regulation. I know that this sounds far fetched, but I'm just spitballing here, throwing some ideas out there. Maybe it can work, maybe not. Can anybody shed some light? Dukascopy accepts institutional clients. Can that be a foreign corporation? As for setting up an offshore entity this was the first link in a google search. http://www.overseasincorporationservices.com/index-8.html