Mboweni warns about illegal forex trading by individuals
There is a greater need to protect individuals from becoming the victims of fraud when doing online forex trading, which is illegal in SA, says finance minister Tito Mboweni.
This is especially the case in the light of modern technological developments.
Forex trading by individuals is not allowed in SA and SA residents are not permitted to speculate against the rand.
The minister said in a reply to a parliamentary question by DA MP Dennis Ryder that although individuals were not permitted to trade in forex, some did and placed their funds at risk.
“They may become victims of fraud as they deal with unregulated offshore brokers, who may not honour settlements. Often, victims do not disclose such dealings for fear of embarrassment and prosecution. The regulators often issue media announcements to caution the public,” Mboweni said.
Online platforms advertising forex trading were not allowed. They were therefore not registered in SA with any of the financial sector regulators and were operating illegally, similar to online gambling platforms. Such platforms were not likely to have a presence or a bank account in SA, Mboweni said.
“This is a challenge for regulators as they are beyond SA jurisdiction, making enforcement difficult.”
That most of the online forex operators were based outside SA meant co-ordinated action with the relevant authorities in those countries was required. Mboweni said the regulators were considering how best to act in such instances.
The minister said that domestic credit and debit cards were not allowed to be used to fund online forex trading activity. The Reserve Bank had acted against individuals who used their SA credit cards to trade in this way.
“Action has been taken by the Financial Sector Conduct Authority and Reserve Bank against a broker who acted as an over-the-counter derivatives provider without being licensed to do so, and [was found] to have breached the Financial Advisory and Intermediary Services Act.
“The Reserve Bank also blocked their bank as they also entered into contracts for different arrangements via a nonresident platform operator without obtaining the prior approval from the Bank to hedge their exposure abroad. This matter is still in progress.”
Mboweni pointed out that the illegal online forex trading platforms should not be confused with authorised brokers who used trading platforms to manage and execute market positions. The brokers did not trade in actual foreign currency, but offered products with exposure to underlying referenced assets, which might include foreign currency.
OFTEN, VICTIMS DO NOT DISCLOSE SUCH DEALINGS FOR FEAR OF EMBARRASSMENT AND PROSECUTION