Exclusive: Japanese Financial Regulator Steps-up Game on Warning Non-Regulated JFSA Brokers
by
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.”
Interactive Brokers Expands Offerings with Daily Options on French Stocks
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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#fmas #fmas24 #fmevents #networking #finance #africa
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
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20-22 MAY 2024
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Looking to expand your network in #Africa?
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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