Consumers are reminded to understand fully the risks involved in Loco London gold margin trading before making the investment decision. They must think twice before signing a power of attorney authorizing their agents to trade on their behalf.
Loco London gold is mainly traded among institutional investors such as central banks or gold companies, with short investment time horizon and is highly speculative.
Local companies providing Loco London gold trading services are not regulated by the Hong Kong Monetary Authority nor the Securities and Futures Commission. The Chinese Gold and Silver Exchange Society (CGSE), a self-regulatory body in the trade, only has authority to intervene in disputes involving investment companies of its registered members.
The Consumer Council received 5 complaints on Loco London gold margin trading between 2010 and 2011, with involved amount about HK$350,000.
The June issue of CHOICE highlighted a consumer complaint in which the complainant might have signed a power of attorney authorising his agents to trade (buy or sell) on his behalf without realizing that he had made such authorization.
It all started when the complainant received unsolicited cold calls from an investment company agent marketing investment products of precious metals. He eventually agreed to invest HK$59,800 in London gold. When he intended to collect the principal and expected return a month later, he was shocked to find that only HK$1,763 was left in his trading account. Trading records showed that his account had been traded over 200 times, resulted in a hefty HK$42,627 commission fee, about 70% of the invested sum.
The complainant was upset that he was only told the potential upside gain of Loco London gold trading, not a word of the risks involved was mentioned.
Would-be investors in Loco London gold margin trading are advised to take heed of the following:
- Never blindly trust the information provided in unsolicited cold calls. Make investment decision according to one's investment goals and risk tolerant level.
- Never sign an authorization swiftly without due caution; get legal advice before signing.
- Check if the investment company is a registered member of CGSE on its website.
- Never disclose personal online trading username and password.
- Understand Loco London gold trading thoroughly such as price volatility, risks and commission before signing any investment documents.
- Retain trading documents for record.
The Consumer Council reserves all its right (including copyright) in respect of CHOICE magazine and Online CHOICE ( https://echoice.consumer.org.hk/ ).