Trading Signals Providers in South Africa Must Be Licensed: FSCA Imposes Debut Fine

South Africa’s Financial Sector Conduct Authority (FSCA) imposed an administrative penalty of over 1 million rand (about US$57,000) on Kabelo Emanuel Mogale for providing forex trading signals without a financial services provider licence and also debarred him for ten years.

It is the first such administrative action in the country against a trading signal provider.

Signal Providers Need a Financial Services Licence

In an announcement today (Wednesday), the South African regulator clarified that “the practice of providing or publishing signals with reference to online trading in financial products falls within the definition of financial services in the FAIS Act, and as such, persons providing such signals require a financial services provider licence.”

It further highlighted that providing such trading signals without a licence is a criminal offence in the country.

The action against Mogale resulted from an investigation following complaints received by the FSCA that he might have been “providing unauthorised financial services through Forex Private Jet Injectors (Private Jet).” The regulator found that Mogale provided forex signals via Telegram to his clients and also recommended their “trades in forex currency pairs.”

“The Penalty Was Inevitable”

The nature of the action is unusual as none of the mature global markets require forex signal providers to be licensed.

However, Jimmy Moyaha, Founder and MD of Lebowa Capital, thinks that “the penalty was inevitable.”

“Signals are advisory in nature,” he added, “as they provide clear price levels and risk management parameters for those taking the signals. Advisory services have always been regulated services.”

Interestingly, the Australian financial market watchdog banned one financial influencer, or ‘finfluencer,’ from offering share purchase recommendations on private online forums, mandating him to obtain a licence. However, the Aussie agency did not define “signal providers” and if all such finfluencers would need a licence.

Signals providers in other jurisdictions also faced actions for unlawful actions, but not particularly for unlicensed activities of providing signals.

The South African regulator, on the other hand, also elaborated that providing trading signals has receded to the practice of recommending trades and prices in financial products to clients. Signal providers usually make money through subscription fees or a percentage of profits and even “benefit through commissions paid by brokers” when clients suffer losses.

“It is not unusual for signal providers to provide fictitious signals and display doubtful evidence of wealth to lure clients into participating,” the regulator highlighted, asking traders not to engage with any unlicensed signal providers.

“The FSCA has communicated, on numerous occasions in the past, that signal providers need to be appropriately licensed and regulated to offer those services,” Moyaha added. “This first fine demonstrates the potential consequences of not having the correct regulation in place as a service provider.”