Many traders from SA prefer to trade only with FSCA regulated brokers and for a good reason. Today we will talk about what entity is FSCA and what are the benefits of trading with a broker that is licensed by this regulatory authority.
Financial Sector Conduct Authority is the financial regulator in South Africa. The authority was formed in 1990 as a financial service board (FSB). FSB failure led to massive losses in the pension fund sector, with some brokers complaining of favoritism by the board. Consequently, FBS was dissolved in 2018, leading to the formation of FSCA.
Primarily, the authority promotes fair treatment to traders while promoting integrity in financial market operations. This means that it protects forex traders from financial crimes and fraud. Besides enhancing integrity and efficiency in the financial market, the authority protects customers, promotes financial inclusion and stability.
Many South African traders prefer trading only with FSCA regulated brokers. They are assured their deposits are protected by law. However, it is fully legal to trade with unregulated brokers, albeit risky, though some of the best forex brokers in South Africa are regulated by the FSCA anyway.
How FSCA Helps Retail Traders
In general, FSCA can help aspiring traders ascertain whether a broker is regulated or not. The trader has to go through the agency’s record and check whether their broker of choice is regulated. To be accredited by FSCA, a broker must have a physical presence in South Africa.
The FSCA audits the brokers to ensure they do not misuse traders’ money. In fact, the authority requires all brokerage firms to have a physical office in South Africa and submit audits to FSCA regularly.
Benefits of Trading With FSCA-Regulated Brokers
Your Deposit Is Protected
According to the FSCA regulation, brokers must separate clients’ funds from operating funds. The money is deposited in a segregated account. This means that in case of bankruptcy, trader money will still be safe. In other words, the broker is capable of refunding traders’ money if the brokerage firm goes under. Keeping the money in a segregated account prevents misuse and ensures the broker can return clients’ funds with ease.
Another benefit of trading is easy access to your money. If the company goes under, you can visit a broker’s local banks and access your money from the segregated account. However, withdrawals can be an uphill task if the broker is foreign.
Local Laws To Deal With Misconduct
The FSCA Does not issue licenses to brokers with a history of some shady deals. The same case applies to firms that don’t meet regulatory requirements. This means regulated companies have a reputation of treating traders with integrity and according to regulatory guidelines. However, at some point, a trader might experience unfair treatment from a broker.
In case of mistreatment, you can rest assured of security in a legal sense. FSCA regulations are designed to prosecute illegal activities using local laws. This means that local courts can prosecute misconduct and even enforce domestic laws. By trading with FSCA regulated brokers, you can rest assured that you’re protected from rogue and irregularities.
Besides protecting traders’ money from misuse, it ensures the disputes are resolved according to South African laws. FSCA regulated brokers handle traders’ money with proper care safeguarding it from fraudulent activities or malpractice. Additionally, the brokers must apply for ODP.
Traders Benefits from Financial Education
FSCA educates investors about financial news and regulations. It warns the public about fraudulent barkers through an updated media release on their website. Moreover, the authority gives warning about companies and individuals falsely misrepresenting themselves or other organizations. You can also see brokers who have been stripped of their applications in the past through the register.
Essentially, FSCA enhances the financial market integrity and efficiency. It monitors the whole financial market and hence protects all the players, including the retail forex traders. FSCA also ensures that the broker treats all the clients fairly. This provides a channel for traders to resolve their issues if they feel cheated by regulated brokerage firms.
Also, FSCA requires all brokers to deliver straightforward written material that does not confuse or mislead readers. The authority requires the brokerage to acquaint the traders with financial education. Since finance can be hard, it is the obligation of the broker to promote financial literacy and explain risks associated with their products.
In fact, the FSCA requires forex brokers to get an Over-the-Counter derivative provider (ODP) license. According to the license, the brokers must do their due diligence on the new trader. Before new traders can be allowed to trade, they must prove they fully understand the risks and show capital adequacy proof. Failure to get the trading license is a contravention of FSCA regulations and can lead to a brokerage firm’s liquidation, as was the case with JP markets.
When trading with FSCA regulated brokers, traders are assured of education on financial products and government protection. This means their funds are safe and secure. You can easily check if a brokerage firm is regulated on FSCA’s website. By supervising registered brokers, the authority helps to maintain South Africa’s financial stability.