Forex Trading in South Africa and FSB Forex Brokers
For those of you considering a venture into the world of Forex trading, South Africa is a country with a lot of promise. While this form of investment may still be in its infancy you really shouldn’t be too worried, as the financial sector in South Africa is one of the most liberal on the African continent, and there is a lot of potential here for Forex traders. Those of you just starting out are faced with an important decision: which of the Forex brokers in South Africa to register with.
Forex brokers in South Africa and regulation
All over the world, there are a number of financial market regulators, which usually operate in a particular country. In South Africa, the regulation of Forex brokers falls on the shoulders of the Financial Services Board of South Africa (FSB). This regulatory agency oversees and regulates all financial intermediaries in the country. It is a very powerful authority, and is able to impose fines and penalties, with no limitations, on FSB-regulated brokers and other regulated entities who do not conform to the requirements. The Board is an independent body which was created after it was found there was a need for an independent regulatory and supervisory body by the Van der Horst Committee. Further Acts have been passed since the FSB was created which have further expanded its remit.
The Financial Services Board is a member of a number of national and international organisations including the International Organisation of Securities Commissions (IOSCO) and other African regulatory bodies. Those that are worthy of particular mention include those in the Southern African Development Community region.
What level of protection can you expect from an FSB-regulated Forex broker?
Those of you living in or trading from South Africa will be aware that the country and its currency have become more stable in recent years. Unfortunately, it seems that the South African Government is dragging its heels with regard to controls, particularly those that restrict a consumer’s ability to invest with offshore firms.
That doesn’t mean there is no protection, though. On the contrary, as there is already a well-developed infrastructure and a reasonable level of oversight. That doesn’t, however, mean you’re home and dry, and we would still recommend that you perform your own due diligence. The sheer size of the Forex trading marketplace means that there are bound to be fraudsters and scammers who manage to slip through the regulatory net. The safety and security of your funds must be your priority, and it is important that you undertake your own research.
One of the things you should always be checking is the credibility of your South African Forex broker’s licence and authority; but this actually applies to all brokers, wherever they might be located. Most regulatory bodies make information on licensing and regulation freely available to members of the public. It is just a question of finding the regulator’s website and looking through a list or performing a search. As well as finding out whether a licence is valid you can also find out whether there have been any customer complaints.
FSB Forex brokers and customer complaints
A service was created in 2002 specifically for resolving complaints or disputes made by clients of financial services providers. Very aptly, it was called the Office of the Ombud for Financial Services Providers. It offers an informal, quick, inexpensive and fair way for consumers to resolve disputes. It is a free service and is readily accessible for all South African consumers, but there are certain restrictions. Firstly, the infraction must have occurred after the 30th September 2004. Secondly, it must not exceed R800,000.
As a consumer, you will be able to receive impartial assistance, provided without fear, prejudice or favour. The following types of complaints can be addressed to the FAIS Ombud:
- If there has been a contravention or a failure to comply with the requirements of the FAIS Act by a financial services provider
- If the complainant is likely to suffer, or has already suffered, financial damage or prejudice
- If the complainant has been treated unfairly
- If a provider has been negligent or wilfully offered a financial service causing damage or prejudice, or likely to result in the same.
Before you take the official line with your complaint you should always try and resolve the problem with the financial services provider directly. According to FSB regulations the provider has 6 weeks to resolve the matter. If you find yourself unable to reach a mutually agreeable resolution you can take the matter to the FAIS Ombud, as long as you raise the complaint within 6 months.
When the FAIS Ombud receives your complaint it is obliged to investigate the allegation. All parties involved in the complaint have the right to legal representation, and the Ombud is empowered to follow and implement any procedures it considers to be necessary. Before the issue is taken to this level, though, the Ombud will try and help with mediation or by recommending a resolution. The Ombud has the final word and can ultimately decide to dismiss or uphold the complaint, and award compensation if it feels this is necessary.
It’s important you choose an FSB-regulated Forex broker.
One of the most important factors to consider when choosing your Forex broker is that of regulation. Choosing a regulated broker will mean it has enough capital to cover trading losses, that your funds will be protected in segregated accounts, and that a fair and transparent trading environment will be provided. It is very quick and easy to check a broker’s regulation, simply by visiting the regulator’s website. You may also be able to uncover whether the broker has had any problems or been found to be breaking the rules. With Forex trading being such a risky form of investment, it would be wise not to add to those risks by choosing an unregulated broker.
The Forex industry is regulated on a local scale, with countries imposing their own regulations. However, we should point out that not all regulators offer the same level of protection. It has also become a common occurrence for brokers to claim they are regulated when they are not. You should always perform your own due diligence and check any claims a broker makes with regard to regulation.