The cloners are still at it. FX firms who are being emulated by impostors have no recourse

What would happen if a famous chef opened a restaurant under his own widely renowned brand, using his well-earned reputation as the mainstay of the entire ethos of the culinary and dining experience, only to find that shortly afterwards, a chancer with none of the credentials of said chef opened an inferior restaurant, selling bogus, inferior quality versions of similar dishes at similar prices, whilst creating an air of quality-by-association by making the restaurant look similar to the original, and giving it a similar name?

Within a very short time, the genuine chef restaurant would take the impostor to court for infringement of the copyright of his brand and for emulating his trademark.

Suppose, as another example, that an established brand such as Ford Motor Company launched a new Mustang, a trademark since the baby-boomer days of Lee Iacocca’s leadership which in 1965 began the entire pony car trend in North America, and after just a short time, the years of research and development resources expended by Ford to ensure that today’s Mustang maintains its status as an idealistic symbol of the muscle car genre, yet keeps pace with modernity and technological change were dashed by a fake version, using a similar name to which it has no intellectual property rights, its inferior engineers and designers trying to pass it off as the real thing.

Such an occurrence would immediately catch the attention of Ford Motor Company’s intellectual property and trademark divisions, resulting in internal corporate lawyers suing the impostor for infringement of the copyright of his brand and for emulating his trademark.

In every single case, in every other industry in the world – particularly those mentioned here which either produce a physical product or have a physical venue – any emulation by chancers wishing to ride on the back of genuine success in order to dupe members of the public would result in legal action and an immediate stop would be put to it.

This is a difficulty which FX firms face – pretty much zero recourse over any such behavior.

The worst part about this problem is that when financial services firms are emulated by impostors, usually there are bad intentions involved, yet unlike many other businesses where the consequences are not usually as grave – being ripped off by a fake firm posing as a real FX company or asset management firm is potentially far more expensive and can cause far more long term damage to a larger number of people than for example being sold a counterfeit shirt at a market or mistaking a similarly named restaurant for the real chef-owned establishment, yet it is the online financial services business that is unable to protect itself against the cloners in the way that offline businesses are.

Various regulators – the Financial Conduct Authority (FCA) in Britain and ASIC in Australia particularly  – often publish warnings on their websites when they come across a clone of a genuine firm, however these are impotent and have absolutely zero value because they do not put a stop to the practice of cloning, and customers would have to actively search for that warning before choosing a firm of which to become a customer – something which practically nobody actually does.

The latest victim of this type of fraud is Dukascopy Bank in Switzerland, a boutique brokerage which has a Swiss banking license and provides its own proprietary technology to global white label partners, as well as operates its own very high quality television channel.

Dukascopy, being a Swiss bank, would have plenty of legal clout when it comes to ensuring its commercial standing is maintained, however last week, the firm has become aware of a firm which uses a similar name and is based in Hong Kong.

The Hong Kong Securities and Futures Commission (SFC) issued a very small warning and placed the similarly named Dukes Copy Ltd on its alert list as an unlicensed entity – which is about as effective as attempting to light a charcoal fired barbecue in Atlantis.

The SFC’s warning says practically nothing apart from that there is a company called Dukes Copy Ltd which is not licensed in Hong Kong and that it is not associated with Sun Hung Kai Forex Limited, an SFC licensed corporation, and its parent company Sun Hung Kai Financial Limited. It uses a bank account in Hong Kong in the name of Duke Exchange Fund for settlement and its Hong Kong address belongs to a secretarial company.

So what? How does this help anyone?

Fortunately, Dukascopy Bank in Switzerland noticed this and actually conducted some further investigation into the Dukes Copy Ltd impostor, and deduced that it is actually an FX-related investment offer which is likely to be a scam. “We are currently taking legal actions to protect Dukascopy brand name and reputation” stated Dukascopy Bank.

At last, a firm doing resorting to legal action, however generally it is very difficult to get to the actual owners of these particular scams and therefore many attempts by regulators or legal entities are fruitless.

There needs to be a change in the way copyright is protected and intellectual property rights for internet based businesses – especially those in the financial services sector – can be upheld with regulators having the power to block the internet protocol (IP) addresses of firms wrongfully emulating the genuine article.

Regulatory technology is so high these days in the major jurisdictions that there is no reason why instead of just issuing useless warnings, regulators and governments could have the hosting providers take websites of impostors down and block their IP addresses, as well as have their payment channels disconnected.

Now that is how to make a positive difference to the investing public and to the good firms whose name has been earned by genuine means.