Kenya is starting to experience problems with unlicensed forex brokers. On Monday, the country’s financial regulator, the Capital Markets Authority (CMA), issued a statement, warning traders to stay away from unlicensed brokers and telling those brokers to cease their activities in the East African nation.
“The Authority will also take appropriate enforcement action against any persons or entities illegally conducting online foreign exchange trade or collecting client funds in contravention of…regulatory provisions,” said the statement. “Members of the public who have been affected or become aware of such illegal online foreign exchange transactions are advised to report to the Authority or to the Capital Markets Fraud Investigation Unit.”
The CMA – Starting to Build a Regulatory Framework
The announcement comes as Kenya attempts to start building a regulatory regime for the retail trading industry in the country. In July of 2016, the CMA announced a set of rules that brokers would have to adhere to in order to receive licensing in Kenya.
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Aside from caps of 400:1 on leveraged trading, dealing brokers must also have capital holdings of 50 million Kenyan shillings ($490,000) and non-dealing brokers, 30 million shillings ($300,000). Brokers operating in the country with a foreign regulatory license must provide a letter from that regulator, addressed to the CMA, which confirms that it is indeed licensed and that the foreign regulator is not opposed to the company operating in Kenya.
Thus far, only one broker has received a license to operate in Kenya with the local regulator’s approval. EGM Securities – a subsidiary of Equiti Group – got the thumbs up to start providing brokerage services in April of this year.
Despite its efforts at creating a legal framework for brokers to operate in, Kenyans continue to trade with unregulated brokers. In 2016, it was estimated that 50,000 of them were trading with unregulated firms and, given that there is now only one regulated broker to trade with, it seems unlikely that number will have decreased dramatically over the past two years.