In a bid to bolster safeguards for currency traders and clients, the Capital Markets Authority (CMA) has initiated a significant move. The capital markets regulator has formed a dedicated working group, bringing together licensed Forex brokerage firms and various stakeholders to establish standards aimed at fortifying consumer protection.
One of the pivotal objectives of this effort is to ensure that licensed forex brokers enhance their disclosure practices and introduce a comprehensive investor education program. By doing so, CMA seeks to address the risks and potential losses associated with investments in Contract for Differences (CFDs) products.
CFDs are essentially contractual agreements between buyers and sellers, stipulating that buyers must compensate sellers for the difference between the current asset value and its value at the time of the contract. This asset portfolio includes currencies, making it a crucial area of concern for regulators.
The move by CMA to bolster protection for Forex traders occurs against the backdrop of sustained interest in forex trading within the investing public. CMA CEO Wycliffe Shamiah highlighted the rationale behind this initiative, stating, “In an effort to foster and deepen growth in the online forex trading industry, CMA has facilitated the setting up of a Technical Working Group comprising of the licensed online foreign trading brokers as well as other stakeholders, including peer regulators, to assess the state of the market and propose recommendations to mitigate the challenges faced by investors, traders, and licensed players.”
The current framework for online Forex trading is governed by the 2017 Capital Markets (Online Forex Trading) Regulations. These regulations mandate brokers and money managers to collect comprehensive information from clients regarding their financial circumstances and investment objectives. Additionally, brokers are required to provide clients with all necessary information to enable them to make well-informed investment decisions in a clear and understandable format.
Furthermore, brokers must diligently avoid conflicts of interest with their clients and ensure equitable treatment of clients by making full disclosures in cases where conflicts are unavoidable.
CMA has, to date, licensed nine non-dealing online foreign exchange brokers, including FX Pesa, Scope Markets, Pepperstone, Exinity Capital East Africa, HF Markets, Windsor Markets, Exness, Ingot Africa, and Admirals Kenya. Additionally, Mansa X and Trade Sense Limited have been licensed as money managers.
This proactive step taken by CMA underscores the commitment of regulatory authorities to safeguard the interests of currency traders and ensure the integrity of the Forex trading industry in the region.
Photo Source: Google
By: Delino Gayweh
Serrari Financial Analyst
24th September, 2023
