The gaps in investor protection must be closed

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gold bar

Investor protection can be easily levered out with precious metals.

(Photo: Science Photo Library / vario im)

Frankfurt It’s an absurd situation: anyone who raises funds from investors and promises interest without a banking license quickly gets into trouble with the financial regulator Bafin. However, those who sell gold and who promise to store the precious metal for a fixed return usually have nothing to fear from the regulatory authorities. Because investor protection does not apply to real assets.

The Pim case has shown where the legal loophole leads: the gold trader was supposed to be able to sell gold that never existed.

So far, however, the investor scandal has had no consequences. Numerous gold traders continue exactly where the pim left off. A second Pim case just seems a matter of time. For this reason, legislators must quickly improve investor protection for precious metal investments.

One possibility would be to oblige gold traders to show gold that they have bought and stored as a special fund.

Ruinous delay tactics

The reputable providers do that anyway, so nothing would change for them. And the black sheep could no longer use customers’ gold as productive capital and cheerfully move it back and forth. Dubious business models would be deprived of the basis.

Pim was only able to collect money for years, even though the dealer’s financial situation was already threatening because the company refrained from disclosing balance sheets.

The lag tactics are also used by some gold traders who copy the Pim business model. The refusal to publish balance sheets promptly should therefore no longer be punished like a petty offense. Significant fines could already help enforce existing law.

The best solution would be to treat precious metal investments for what they are de facto: regulatory investments. The intermediaries would have to meet the same high requirements as bank advisors. But until then it is still a long way.

More: Pim Gold’s heirs – the questionable promise of returns in gold trading.

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