Are Gold Dealers Regulated?
Financial Institutions which trade precious metals on their own account fall under FinCEN regulations and must allow inspections of their premises, scales or weighing devices.
Due to limited regulations, state attorneys general and city departments that oversee businesses are forced to take measures against untrustworthy gold sellers locally; however, their efforts can only go so far.
As the global economy falters and fears of recession increase, investors are increasingly turning to raw bullion such as gold bars and coins as an investment vehicle. Unfortunately, unlike ETFs or mutual funds regulated by the Securities and Exchange Commission, precious metals do not enjoy similar regulatory oversight and pose more of a risk due to being unsupervised marketplaces susceptible to boiler rooms and scammers.
Are You Risking Being Lured By These Schemes? Those hoping to sidestep such schemes should look for a dealer that treats customers fairly and with integrity throughout the transaction process, including avoiding high-pressure sales tactics like promising huge profits or intimating there is limited stock (the “scarcity card”).
Finding a reputable dealer requires finding one who is honest with prices and key terms, avoiding hidden fees that could eat into returns on an investment such as one-time service charges, monthly maintenance fees or restocking charges. Furthermore, dealers should commit themselves to protecting customers’ gold purchases with complete confidentiality.
Notably, most states have laws regulating the retail sale of precious metals. These can be found within state commodities codes or securities codes or, if your precious metal is coin, under merchandising law.
Many buyers of precious metals understand their asset is entirely legal, yet do not want their transaction details reported to Uncle Sam. Therefore, many seek dealers that claim purchases do not need to be reported – though often this claim proves misleading as transactions exceeding $10,000 will trigger cash reporting requirements; personal checks, wire transfers or debits do not count as cash instruments or transactions reported as such.
As many gold coin and precious metal dealers serve as investment advisers, some believe they should be subject to similar regulations as businesses offering investment advice to consumers. But physical gold does not qualify as securities so is outside the purview of federal regulators such as Securities and Exchange Commission; state laws might cover transactions by way of merchandising or advertising laws, telemarketing rules or commodities laws (if applicable).
Since these transactions are so lightly regulated, dealers have considerable freedom in their marketing and promotion tactics. They commonly target older, politically conservative investors who worry what government actions could mean for their retirement savings, advertising in conservative media outlets and paying for celebrity endorsements; promising big profits while playing on scarcity; using other high-pressure sales techniques.
Dealers also have an incentive not to disclose all the information about their customers, which allows them to charge higher markups and pocket any difference between advertised prices and fair melt values for coins and bars. They might claim such coins have collector’s value or secondary uses which make them more desirable investments.
Lack of regulation for certain aspects of this industry leaves consumers vulnerable to scams and fraud, yet many states have laws mandating certain disclosures and verifications, including asking anyone under 21 years old for written authorization from their parent or guardian before selling metals to them; this helps avoid criminal sales of metals to minors, among other disclosures such as price and payment terms; receipt and proof of ownership provided upon request, receipt being provided if needed and customer verification processes; the law also mandates verifications such as address and identity checks on customers before selling any metals to them which helps avoid crime occurring among minors themselves; for instance some states mandate disclosure requirements such as asking any person under 21 years old to produce written authorization from their parents or guardians before selling any metals to them; this helps avoid sales to minors which is illegal – while laws require disclosure and verifications such as verifying both the buyer and identity verification processes used on any potential customers that could arise when selling metals to minors which is illegal under state laws that require disclosure requirements such as asking that person before selling any metals which is required by state law if sold knowingly sold to minors which is against state law requiring dealers. Disclosure includes pricing terms of payment terms as well as providing receipt and proof of ownership from seller on request and then verify their address or identity within 24 hours or it being sold illegally being sold illegally to minors which is prohibited under state laws for selling metals that occur from dealer after sale of purchase as well. Verifying each customer with regard to these transactions being reported back against state laws where sold by dealers before selling metals dealers are verified against state requirements to have proofs when requested, to anyone under age 21 for sale by law allowing sales.
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