Forex trading legal if done via authorised dealers ‘ ’

It was legal for SA individuals to engage in forex trading as long as this was done through authorised dealers using forex derivatives that were issued by licensed entities, the Financial Sector Conduct Authority (FSCA) said on Thursday.

But it was illegal in terms of Reserve Bank exchange control regulations for SA residents to speculate against the rand whether in or out SA or to purchase forex directly without the assistance of an authorised dealer, the authority said.

The clarification came after a reply by finance minister Tito

Mboweni to a parliamentary question by DA MP Dennis Ryder. Mboweni s statement that it was illegal for individuals to trade in forex and speculate in the rand caused confusion among forex traders who have been trading for decades through authorised dealers approved by the Reserve Bank or using derivative products approved by the FSCA.

Mboweni warned against the dangers of using unregulated offshore brokers who often did not honour their financial commitments. It was illegal for these offshore online platforms to market themselves in SA unless registered with the FSCA.

Treasury deputy directorgeneral Ismail Momoniat said that there were many such get

rich quick operations.

Mboweni said illegal online forex trading platforms should not be confused with authorised brokers using trading platforms to manage and execute market positions. FSCA divisional enforcement executive Brandon

Topham agreed that the problem was with foreign online forex trading platforms often based in Malta, Cyprus and elsewhere which were frequently fraudulent and not properly regulated. He said people putting money on these platforms should not see it an investment but rather as an unregulated gamble.

Topham said forex trading by individuals was allowed in SA as long as it was done through authorised dealers or financial service providers normally banks registered and allowed to offer online trading platforms.

Such individual traders could, however, use only their own money. To trade in other people s money they needed special licences. It was unlawful in terms of exchange control rules to use a domestic credit or debit card to invest on offshore trading platforms.

But it was legal for individuals to use amounts that they were allowed annually to take offshore to buy foreign investments through authorised dealers as long as this did not result in speculating against the rand.

Long-standing forex trader Johan van As said that he had been trading in forex legally since 2001.

Forex trading for individuals is a 100% legal activity in SA, and is regulated by the FSCA,” he said. However Van As stressed that this had to be done through regulated companies. Intellidex chair Stuart Theobald said that there were two ways individuals could trade in forex. One was through derivatives and the other was directly through currencies, in which case money had to be taken offshore within allowable limits and deposited in a foreign bank account. From there I can do with it “what I want, including to short the rand or some other currency. Loads of South Africans do this. There is no legal barrier to this at all,” Theobald said.

He said that onshore one could trade derivatives in the rand, but not in the underlying currencies.

FOREX TRADING FOR INDIVIDUALS IS A 100% LEGAL ACTIVITY IN SA, AND IS REGULATED BY THE FSCA