Understanding forex regulation in South Africa|Influencer Forex Analysis•Langa Ntuli

At least in the last five years, South Africa has witnessed an astounding increase in the number of forex traders and those interested in learning to trade forex. Gradually, as a result, more international brokers are seeing the potential for acquiring the FSCA license and offer their services to South Africans. This interest is partly due to some of the restrictions other nations (like those in Europe) enforced on brokers with concerns of leverage.

Fortunately, at the moment, very few restrictions with the products they can offer exist here. Due to the lack of trust that most South African-born brokers have, most clients have been heavily looking towards genuinely FSCA-approved brokers, whether originally from here or abroad. Its useful to understand what the benefits of the FSCA and other basic regulations are.

Primary benefits of regulated brokers

The FSCA (Financial Sector Conduct Authority) is South Africas primary regulatory body for financial firms, including forex brokers. There are two primary advantages that the FSCA provides for forex traders:

(a) Ensuring we are dealing with reputable brokers.

(b) Preventing money laundering.

(a)

A broker with an FSCA license has proven to their customers they‘ve adhered to all the necessary financial laws, ensuring the unlikelihood of malpractice or scams taking place with client funds. With this license, they cement a trustworthy reputation where clients feel secure their deposited money is in safe hands. Furthermore, clients are reassured there won’t be any issues with withdrawals as well, provided theyve met the requirements stipulated in prior agreements.

Luckily, clients can check the curret regulatory status of an FSCA-regulated broker here using their FSP number:

https://www.fsca.co.za/Fais/Search_FSP.htm

The FSCA also publishes regular media releases that warn the public of any recent fraudulent behavior of companies or individuals that may have lost their licenses or claimed to be licensed by them.

Though not directly related, another thing worth noting is the popularity of so-called money managers or traders who promise set returns through an investment programme. Most of these operations turn out to be scams. Any person trading other peoples funds must also be licensed by the FSCA.

(b)

The second benefit is to prevent money laundering. Over the last few years, financial organizations globally have religiously followed the KYC (Know Your Customer) guidelines. South Africas KYC aligns with The Financial Intelligence Centre Act 38 of 2001. In simple terms, a regulated broker has to follow KYC, whereby the client provides personal identification documents to ensure only they have full control of their trading account.

Laws around forex taxation

The forex markets are interbank markets based in foreign destinations. However, taxation laws still apply according to the South African Revenue Service (SARS). Even though trading with a local broker technically means your funds remain domestically, any profits above a certain threshold are liable to taxation as these come through as bank wire transfers. SARS class profits from forex under income tax, which traders should declare on an annual basis. Traders can get more detailed information in this regard by contacting SARS directly.

Conclusion

This article provides all the basics around regulation in South Africa and how the laws exist to safeguard the interest of clients and also ensuring companies always act in good faith.

【About the author】

Mr. Ntuli is a retail trader and writer in forex. He has been

engaged in the forex markets for many years. He also has knowledge about

many other financial markets, namely stocks, indices, and

cryptocurrencies. For the past year, he has then transitioned to writing

content on various forex-related topics for different clients ranging

from broker reviews, trading strategies, indicators to educational

information about the markets.

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