How is the trading market regulated by the FSCA in South Africa?

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Forex trading has deservedly become one of the most popular forms of investment worldwide. A lot of people, including the ones in developing countries, are moving to trading on different brokers’ websites. Especially the coronavirus pandemic had a major impact on these new trends because stuck at home, people started acquiring new skills. 

When we talk about Forex trading, Africa has been at the forefront. In particular South Africa has managed to establish itself as one of the most prominent countries, when it comes to Forex and all activities associated with it. We should also have a look at the trading market and how it is regulated in the country. This article will follow the regulations in South Africa and how the situation looks like. 

What is the FSCA?

The Financial Services Authority is the main regulator in South Africa. Before moving to the laws and regulations section, first we should do a brief overview of the regulator itself and how it emerged in the financial market of South Africa.

FSCA has been operating since 1990 and is headquartered in Pretoria, South Africa. The structure was created to provide supervision over the activities of organizations operating in the financial sector and providing related services on the South African continent. 

The functions of the regulator were gradually expanded. Based on the Law on Financial Consulting and Intermediary Services (FCIS), the regulator was able to supervise the activities of banks, insurance companies, brokers, market-makers, brokers, dealers, large traders and investors, ETF funds, as well as issuers of stocks, bonds, bills, derivatives and other financial instruments that have been listed on the issue of their securities on a large international stock exchange headquartered in Johannesburg JSE with a capitalization of 950.2 billion US dollars as of April 1, 2019, etc. Currently, FSCA is responsible for regulating South African FX brokers investment, pension and mutual funds, as well as insurance and various financial companies.

Regulator’s Area of Responsibility

The powers of the regulator do not include oversight of fraudulent financial institutions. The Reserve Bank of South Africa deals with similar issues. The list of FSCA powers mainly includes registering and licensing of financial companies. First of all the first entities that come to our mind are Forex brokers. At the same time the organization should monitor the work of licensed entities and how they carry out all the regulations. In addition the FSCA prevents unfair activities that are aimed at deceiving customers.

 

The role of the FSCA has expanded and also includes the introduction of penalties for detected violations. In such a way the regulator tries to improve the efficiency of financial markets. Furthermore the regulator has a strong anti-money laundering policy alongside protecting clients and providing necessary information and education in the following area.

The main goal of the regulator is to ensure the stability and fairness of the financial market, inform and protect consumers, and bring to justice organizations that threaten the financial well-being of clients. This has become especially important during the coronavirus pandemic.

 

Structures that do not have an office in Africa are eligible to obtain a regulatory license. The Office cooperates with foreign brokers, provided that they are honest and do not use fraudulent tricks. Organizations deprived of their licenses lose the right to operate on African territory. However, they can still engage in the provision of services in any of the offshore zones if they receive a certificate from a local regulatory organization. In this way, FSCA confronts corporate fraud exclusively within its region. However, FSCA is the only regulatory body on the African continent. The degree of confidence of financial market participants in it is assessed as average.

What is known about the work of the regulator?

The FSCA has a dedicated Appeals Board that reviews customer complaints. Its participants are persons who do not work in the Department and are not active participants in the financial services market;

The department has the right to impose fines without restrictions on the amount, to make decisions on the payment of compensation. The decisions are equal to the decisions of the local Supreme Court and are subject to mandatory execution;

The regulator has membership in the International Securities Organization and SADC (Southern African Development Community). The work in each sector is overseen by a separate committee that is part of the FSCA.

 

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