CMA raises concern over unlicensed online Forex traders

The Capital Markets Authority is raising concern over the rising number of unlicensed online Forex traders in the country.

CMA says the traders who operate in the black markets are swindling Kenyans billions of shillings.

The authority says it has embarked on a crackdown together with other government agencies to nab the illegal dealers.

Three years ago, thousands of Kenyans lost billions of shillings through an online Forex trading portal platform, VIP portal in the most famous case of Forex trading fraud.

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VIP Portal promised a five percent commission per month for every new member an investor recruited.

However despite this, more unsuspecting people continue to lose money through these schemes. It is estimated that there are more than a hundred unlicensed online Forex traders in the country operating in digital space.

The Capital Markets Authority says it has launched a major crackdown with law enforcers targeting the illegal traders most of who operate in Nairobi.

Online Forex trading operates like equity markets short sellers. It involves placing a bet on a particular currency and trading it through the internet, with the basic aim of buying low and selling high.

CMA chief Paul Muthaura says since they launched new regulations on Online Foreign Exchange Trading last year they have received more than ten applications from both local and offshore traders for licensing.

The new regulations now require the traders to register with the CMA as part of efforts to exert a measure of regulatory control over the online Forex business. To be registered, the Forex dealers must raise Ksh50 million in minimum capital, a requirement aimed at protecting consumers.

Foreign dealers wishing to trade in Kenya will also be required to maintain an equivalent of Ksh40 million of their capital reserves in financial instruments in Kenya.

On Tuesday, EGM Securities became the first registered Online Forex Broker in Kenya. This is the first license to be issued under the new regulations, which brought the oversight of online foreign exchange brokerage services under CMA, which includes supervision of licensed entities.

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