ILLEGAL foreign exchange dealers will face possible seven-year jail terms and fines of up to $10 million under new regulations. A government Bill would, if passed, ban leveraged foreign-exchange trading except by licensed dealers and institutions authorised under the Banking Ordinance. Lesser infringements of the legislation will carry fines of $100,000 to $1 million, with prison sentences of between six months and two years. Where disputes arise the licence-holder, if the client requires, shall agree to a settlement via arbitration. Under the Bill, adequate information would have to be given to regulators monitoring the activities of foreign-exchange firms. Regulators would have the power to demand an audit and appoint an auditor to carry it out. Each licensed operation would have to make regular returns to the Securities and Futures Commission. The authorities would also be empowered to wind up foreign-exchange dealing firms and to withdraw or suspend licences. Under the Bill, client money must be kept in, and trading on their behalf conducted via, segregated client trustee accounts. The Bill also covers the appointment of individuals authorised to investigate the activities of foreign-exchange dealers and prohibits the obstruction of such inquiries. Sales activities such as cold-calling would be banned. Law-breakers risk fines of up to $200,000 and up to two years' imprisonment. The drafting of legislation covering the industry comes after a number of high-profile raids on and investigations into foreign exchange firms after investors lost money.