Exclusive: Japanese Financial Regulator Steps-up Game on Warning Non-Regulated JFSA Brokers
Friday,23/05/2014|19:22GMTby
Adil Siddiqui
Japan’s regulatory authority for financial services has been stepping-up its game in issuing warnings against firms attempting to market margin derivatives to Japanese residents without the necessary credentials.
Japan’s financial regulator, the Financial Services Authority (JFSA) is actively monitoring marketing activities of financial services firms which solicit or market their products to Japanese investors without holding the necessary authorization. The move comes as the recent tightening of the FX trading landscape in 2010/ 2011 witnessed major amendments to the amount of Leverage users can obtain from providers.
Japan's financial watchdog has communicated with a number of brokerage firms which it believes is unlawfully sourcing and dealing with Japanese resident investors. The regulator has a number of concerns primarily surrounding the safety of Japanese investors.
Japan's retail FX market is the largest and most established on the planet, with a distinct user base. As the market evolved over the last fifteen years, traders adopted new tools and resources to enhance their trading. The use of automated systems such as Expert Advisors (EAs) on the MT4 platform has been one of the recent trends, however with leverage restrictions in place, Japanese investors search for alternate solutions offshore to get the best out of their systems.
In jurisdictions such as the UK or Australia, regulated brokers offer leverage of 500 to 1 and 400 to 1, respectively. A higher amount of leverage reduces the amount of margin investors require to open positions.
The JFSA carries out regular surveillance of the trading environment to ensure firms are not soliciting its residents, if it becomes aware of unregistered operators, including overseas firms, it takes action to prevent any escalated harm to investors.
In a comment to Forex Magnates, a spokesperson for the regulator explained the steps it takes, these include: “Issuing a written warning to the unregistered operator calling on it to immediately cease its unlawful business activities. If required the regulator will make an announcement on the website, stating the fact that the FSA has issued the written warning in order to raise awareness among investors. And in some instances, the regulator will share information with the police on the unregistered operator subject to the written warning.”
Since implementing the new leverage rules, the JFSA has seen a rise in the number of warnings it issues. In 2013 alone the highest number of warnings were issued to over 150 operators, with over a quarter being overseas operators.
The practice of raising awareness and setting out guidelines in the international domain is common; after the Dodd-Frank Act was implemented the US watchdog enforced a practice whereby non-US regulated broker-dealers could not accept US residents. Japan aims to repeat this principle, however to date its enforceability is limited to its own actions.
Japan doesn't stand alone in its fight against unregulated or unauthorized firms; several major regulators across the modern world have warned their residents about unauthorized firms. In the UK, the Financial Conduct Authority recently issued a warning against several unregulated firms acting without a licence.
As stated earlier, regulators have collaborated in the past and in light of the G20 summit which looked at the role of OTC derivatives in the global recession of 2008, co-operation between regulators is expected to rise. The US has been highlighting the FATCA rules relating to tax and a number of regulator and central banks have highlighted that they will be enforcing the rulings.
The JFSA operates in a similar fashion; if necessary the regulator will communicate with other regulators and/or bodies to examine the situation. The spokesperson commented: “With respect to cross-border problems, whether involving unregistered operators or not, the FSA has, when necessary, worked with overseas authorities in such ways as asking each other for and providing each other with information.”
So What Next?
Japanese clientèle is a sound source of revenue for a number of brokers, a recent case, looking at Australia as an example, showed that a number of FX brokers were accepting Japanese residents, this led the regulator to take matters in their own hands and start knocking on doors. As a result, regulators in Australia and Japan are believed to be in communication regarding the matter.
Forex Magnates believes that a change in rules is imminent, whereby ASIC brokers will not be allowed to solicit Japanese residents.
The FSA’s primary goal is to protect its investors, it concluded: “The FSA will continue working to protect investors through such activities.”
Japan’s financial regulator, the Financial Services Authority (JFSA) is actively monitoring marketing activities of financial services firms which solicit or market their products to Japanese investors without holding the necessary authorization. The move comes as the recent tightening of the FX trading landscape in 2010/ 2011 witnessed major amendments to the amount of Leverage users can obtain from providers.
Japan's financial watchdog has communicated with a number of brokerage firms which it believes is unlawfully sourcing and dealing with Japanese resident investors. The regulator has a number of concerns primarily surrounding the safety of Japanese investors.
Japan's retail FX market is the largest and most established on the planet, with a distinct user base. As the market evolved over the last fifteen years, traders adopted new tools and resources to enhance their trading. The use of automated systems such as Expert Advisors (EAs) on the MT4 platform has been one of the recent trends, however with leverage restrictions in place, Japanese investors search for alternate solutions offshore to get the best out of their systems.
In jurisdictions such as the UK or Australia, regulated brokers offer leverage of 500 to 1 and 400 to 1, respectively. A higher amount of leverage reduces the amount of margin investors require to open positions.
The JFSA carries out regular surveillance of the trading environment to ensure firms are not soliciting its residents, if it becomes aware of unregistered operators, including overseas firms, it takes action to prevent any escalated harm to investors.
In a comment to Forex Magnates, a spokesperson for the regulator explained the steps it takes, these include: “Issuing a written warning to the unregistered operator calling on it to immediately cease its unlawful business activities. If required the regulator will make an announcement on the website, stating the fact that the FSA has issued the written warning in order to raise awareness among investors. And in some instances, the regulator will share information with the police on the unregistered operator subject to the written warning.”
Since implementing the new leverage rules, the JFSA has seen a rise in the number of warnings it issues. In 2013 alone the highest number of warnings were issued to over 150 operators, with over a quarter being overseas operators.
The practice of raising awareness and setting out guidelines in the international domain is common; after the Dodd-Frank Act was implemented the US watchdog enforced a practice whereby non-US regulated broker-dealers could not accept US residents. Japan aims to repeat this principle, however to date its enforceability is limited to its own actions.
Japan doesn't stand alone in its fight against unregulated or unauthorized firms; several major regulators across the modern world have warned their residents about unauthorized firms. In the UK, the Financial Conduct Authority recently issued a warning against several unregulated firms acting without a licence.
As stated earlier, regulators have collaborated in the past and in light of the G20 summit which looked at the role of OTC derivatives in the global recession of 2008, co-operation between regulators is expected to rise. The US has been highlighting the FATCA rules relating to tax and a number of regulator and central banks have highlighted that they will be enforcing the rulings.
The JFSA operates in a similar fashion; if necessary the regulator will communicate with other regulators and/or bodies to examine the situation. The spokesperson commented: “With respect to cross-border problems, whether involving unregistered operators or not, the FSA has, when necessary, worked with overseas authorities in such ways as asking each other for and providing each other with information.”
So What Next?
Japanese clientèle is a sound source of revenue for a number of brokers, a recent case, looking at Australia as an example, showed that a number of FX brokers were accepting Japanese residents, this led the regulator to take matters in their own hands and start knocking on doors. As a result, regulators in Australia and Japan are believed to be in communication regarding the matter.
Forex Magnates believes that a change in rules is imminent, whereby ASIC brokers will not be allowed to solicit Japanese residents.
The FSA’s primary goal is to protect its investors, it concluded: “The FSA will continue working to protect investors through such activities.”
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Charlotte reflects on the Summit so far and talks about the culture inside fintech banks today. We look at the pressures that come with scaling, and how firms can hold onto the nimble approach that made them stand out early on.
We also cover the state of payments ahead of her appearance on the payments roundtable: the blockages financial firms face, the areas that still need fixing, and what a realistic solution looks like in 2026.
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In this conversation, we sit down with Drew Niv, CSO at ATFX Connect and one of the most influential figures in modern FX.
We speak about market structure, the institutional view on liquidity, and the sharp rise of prop trading, a sector Drew has been commenting on in recent months. Drew explains why he once dismissed prop trading, why his view changed, and what he now thinks the model means for brokers, clients and risk managers.
We explore subscription-fee dependency, the high reneging rate, and the long-term challenge: how brokers can build a more stable and honest version of the model. Drew also talks about the traffic advantage standalone prop firms have built and why brokers may still win in the long run if they take the right approach.
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A concise look at where compliance, onboarding, and AI-driven processes are heading next.
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Ramanda also shares insights on regulator sandboxes, shifting expectations around accountability, and the current reality of MiCA licensing and passporting in Europe.
A concise look at where compliance, onboarding, and AI-driven processes are heading next.
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We start with Aydin’s view of the Summit and the challenges brokers face as fraud tactics grow more complex. He explains how firms can stay ahead through real-time signals, data patterns, and early-stage detection.
We also talk about AI training and why compliance teams often struggle to keep models accurate, fair, and aligned with regulatory expectations. Aydin breaks down what “good” AI training looks like inside a financial environment, including the importance of clean data, domain expertise, and human oversight.
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Exness expands its presence in Africa: Inside our interview with Paul Margarites in Cape Town
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Finance Magnates met with Paul Margarites, Exness regional commercial director for Sub-Saharan Africa, during a visit to the firm’s office opening in Cape Town. In this talk, led by Andrea Badiola Mateos, Co-CEO at Finance Magnates, Paul shares views on the South African trading space, local user behavior, mobile trends, regulation, team growth, and how Exness plans to grow in more markets across the region. @Exness
Read the article at: https://www.financemagnates.com/thought-leadership/exness-expands-its-presence-in-africa-inside-our-interview-with-paul-margarites/
#exness #financemagnates #exnesstrading #CFDtrading #tradeonline #africanews #capetown
Finance Magnates met with Paul Margarites, Exness regional commercial director for Sub-Saharan Africa, during a visit to the firm’s office opening in Cape Town. In this talk, led by Andrea Badiola Mateos, Co-CEO at Finance Magnates, Paul shares views on the South African trading space, local user behavior, mobile trends, regulation, team growth, and how Exness plans to grow in more markets across the region. @Exness
Read the article at: https://www.financemagnates.com/thought-leadership/exness-expands-its-presence-in-africa-inside-our-interview-with-paul-margarites/
#exness #financemagnates #exnesstrading #CFDtrading #tradeonline #africanews #capetown
