A regulatory body in Kenya has told forex traders to take care when investing online – and said they may even be at risk of losing legal protections if they deal with unlicensed providers.
The country’s Capital Markets Authority, or CMA, also said that those who do not have appropriate licenses need to “cease and desist”.
In a press statement, the Authority noted that it had in fact only given one license for a non-dealing online forex broker, which went to a company called EGM Securities Limited, previously known as Execution Point Limited.
“In line with its investor protection mandate, the Capital Markets Authority (CMA) has warned Kenyans against engaging in online foreign exchange trading through platforms of unlicensed entities as they risk losing their investments and may not be protected by the law”, it said.
The statement also focused on other activities which brokers may look to do, and pointed out that none of them are legal in the country without the appropriate permissions.
“CMA also requires all online foreign exchange brokers or money managers not licensed by the Authority to cease and desist from trading, conducting sensitizations in Kenya and onboarding Kenyan investors or managing online foreign exchange portfolios.”
The CMA also used the statement to threaten what it terms “appropriate enforcement action” against those found to be in contravention of the law, although what this action may look like was left unspecified.
The statement appeared to be in direct response to particular incidents.
“The CMA Chief Executive, Mr Paul Muthaura, pointed out the Authority has regulatory oversight over all entities offering online foreign exchange brokerage services in Kenya, which includes supervision of such entities”, the statement continued.
“Mr Muthaura observed several individuals and entities are carrying on or purporting to carry on the business of an online foreign exchange broker or a money manager without the relevant license by the Authority.”
While this particular statement did not go into details of particular incidents, it is widely known that Kenya has suffered a number of forex fraud problems in recent years.
Earlier this year, the CMA publicly estimated that there could be around 100 illegal foreign exchange brokers operating in the country.
In an attempt to combat fraud, it instituted a complicated and rigorous process for those who wanted to sign up for the right to operate as a broker – a move which may well explain why only one broker is currently licensed.
The amount of capital required to set up as a licensed broker was set at 50 million Kenyan shillings (KES). At the time of writing, this is now equivalent to around £385,000 British pounds or $493,000 US dollars.
The CMA in Kenya has been in existence since 1989, and its role is to ensure that the country’s capital markets operate smoothly and safely, which gives it oversight in the forex markets.
It advised anyone who believes they may have fallen victim to an internet-based foreign exchange fraud to speak to the Capital Markets Fraud Investigation Unit.