Forex trading celebrates in South Africa and other African countries a never-ending growth. Unfortunately for South African’s, there are many scams that traders need to be aware of. According to capetalk.co.za, 35% South African traders individually lost during Covid-19 lockdown over R83 000 to forex scams, accounting in total for millions of ZAR.
This is the risk Forex traders in South Africa take every day. South Africa is the leading country in the African Forex market and lots of foreign and local Forex brokers operate in the country. The only way to avoid being scammed is in accordance with a our in-depth risk guide, trading with FSCA-regulated forex brokers. This article will cover how exactly FSCA can help South Africa in the matter of forex trading.
What Are The Functions Of FSCA?
The Financial Sector Conduct Authority (FSCA) regulates Forex trading as well as trading in other financial markets in South Africa. They are to South Africa what CySec, ASIC, FSA, etc are to other countries and continents.
The Merriam-Webster dictionary defines regulation as “an authoritative rule dealing with details or procedure”. What the FSCA does is to watch all activities going on in the Forex market between Forex brokers, investors, and traders to ensure that they are in accordance with laid down financial rules and procedures.
The financial rules and procedures enforced by the FSCA are applicable to the South African market alone. As a legit Forex broker who wants to operate in South Africa, it is required that you register with the body and obtain a license.
A broker registered with the FSCA has an advantage over unregistered ones. Basically, they appear more trustworthy in the eyes of traders and investors because a scam Forex broker can never register with a regulatory body; it’s a one-way ticket to hell. A registered broker will adhere to the regulation laws and suffer sanctions if it goes against any.
Why Trade with a South African Regulated Broker?
You must have heard many times that Forex trading is very risky. Well, I’m telling you again; Forex trading is risky and if you want to trade in such a risky market, your best shot is with a regulated broker. There are many noticeable differences when you trade with an FSCA regulated Forex broker. You enjoy the following:
1. Transparency
Regulated Forex brokers are constantly supervised by the FSCA, so all of their activities are transparent. This is most beneficial when it comes to audits.
2. Insurance
This is about the most important reason why you should invest with an FSCA regulated broker. In case your Forex broker goes bankrupt, you will lose 100% of your money if it is unregulated because nobody will solicit for you.
On the contrary, if it’s a regulated broker, your investment is insured. You don’t get to suffer 100% of the loss and you will get compensation. The amount depends on the FSCA rules. If you suspect that your Forex broker is making you lose money, for instance, by sudden price movements which did not occur, you can report them to the FSCA which will inspect your case and verify if your broker handled your trades as it should.
3. Verified Identity
If you want to register with an FSCA regulated broker, you’ll be required to provide means of identification and proof of address to verify your account. To some traders, this can be a little inconvenient, but it does help keep the market free from scammers and fraudsters.
Financial markets like the Forex market are highly patronized in money laundering and other illegal activity. With verification, the identity of every trader is known so should there be any case of money laundering, the parties involved will be fished out.
Conclusion
If you want to trade Forex legally and safely in South Africa, you should use an FSCA regulated broker. With a regulated Forex broker, your money is safe to an extent and you get transparency.
However, as mentioned, the Forex industry is risky and there’s no 100% guarantee. An FSCA licensed Forex broker can also go bust and cause investors to lose money. If you want to trade Forex, always follow the rule which is “invest only what you can afford to lose”.
Nevertheless, it’s better to manage risk with a regulated Forex broker than with an unregulated broker. Sometimes, regulated brokers go bankrupt or shut down due to extreme causes; however, some unregulated brokers are straight-up scams set up to take money from you.
