A Quick Look into Forex Regulation in the Kenyan Market

An Overview of the Forex Trading Evironment in Kenya

Currently, the forex scene in Kenya still has a mix of optimism and fear. Just like a baby in its early development stages, it is a guess to predict what kind of person they will be when they grow up. A lot is being done for the Kenyan forex industry to be able to compete. This is first, continentally before going global. And the good thing is that Kenya is the leading financial hub in the region, Eastern Africa. This puts it in a good place to grow fast and become a sustainable industry in the coming years. Yes, the future is luminous but good things take time and only time will tell.

Is Forex Legal in Kenya?

Have you ever wanted to go into a certain venture then for a moment you paused and asked yourself, is this legal? Yes most of us have had those moments. I am pretty sure the reason you are here is that you have asked yourself that question before with Forex. Is it legal for me to practice Forex trading in the country I am residing?

Well that is a good place to start this discussion and to answer the question, yes Forex trading is legal but it is also illegal in some countries (Belgium, countries with Sharia Laws). But the main question to answer here is if it is legal in Kenya? The answer to this is, yes Forex trading is legal in Kenya. This is through the provisions of Section 23(1) of the Capital Markets Act and the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017. CMA is the statutory body that has been given the mandate to handle all forex regulations in Kenya.

CMA License vs. Overseas License

Before the advent of the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017, traders in Kenya already transacted with non-dealing online forex brokers. This is to say that local traders recognized overseas licenses through which these brokers operated in. A good example would be Pepperstone which holds its license in Australia. The only challenge this posed to the local traders was it was not tailored for the Kenyan market. This made it cumbersome in certain aspects, these being proof of residence, and identity among others. But with the introduction of Pepperstone Markets Kenya Ltd which is now regulated by the CMA, it is now in the past.

The introduction of the forex regulation in Kenya to govern non-dealing online forex brokers was a great milestone. This gave rise to EGM Securities (FX Pesa) as the first licensed broker in that regard in 2018, Scope Markets, Pepperstone Markets Kenya Ltd. The CMA License holds an advantage over the overseas license to a Kenyan trader. This is because it gives the local traders confidence in the broker licensed by a local statutory body.

With a CMA license, a non-dealing online forex broker in Kenya can easily tailor their services to meet the Kenyan market. This is in regards to:

·   Setting their terms and conditions of operations with their clients. They have a draft of what is expected of them by the law as a template. This makes it easier for them to come up with their terms revolving around the regulations put in place.

·   Getting local banks and payment platforms to jump onto their platform will be smoother. This is because both parties will be operating under the same law. This means no statutory inconsistencies unlike if they were regulated by different statutory laws. Thus it reduces the many channels that either party has to go through to complete a transaction.

·   Making the local traders believe in the non-dealing online forex brokers. It is a popular belief that what is good for Kenya has to have some Kenyan roots in it. Therefore, local traders are more likely to jump onto the train of a non-dealing online forex broker regulated by their own statutory body than otherwise.

·   Protection of both the non-dealing online forex broker and their clients by the law. In the event of any dispute, a solution can easily be found since there is a law in place that offers guidance when such matters arise.

But before all these came to be, local traders used to team up with friends or family abroad and traded with their assistance. This is because the persons that domiciled in the countries where these brokers were incorporated found it easier to get approved than them that were in Kenya. We can’t wait to see the great exodus of financial investment back to the country with these recent developments.

This is not to say that overseas licensed brokers don’t hold any advantage over the CMA licensed ones. No, there are areas that they do and they come out on top. It will be absurd to think explicitly that CMA licensed brokers are better. This industry in fact has been borrowed from the overseas community. Many of these brokers have been in the industry longer than the forex regulation in Kenya. But as they say East or west home is best.

Disputes and Scammers

Wherever money is involved disputes will arise and scammers will also flood that scene. But here is the good news the Capital Markets Authority has you covered in regards to this. So whether you have a dispute with a locally or overseas licensed broker, or maybe you have been a victim of a scam forex broker the CMA has provisions for this. The CMA advises all persons that have undergone the above-mentioned incidents to report the matter to the Authority or the Capital Markets Fraud Investigation Unit. The Authority will therefore be able to take appropriate legal action against the perpetrators. In the case of a dispute, they’ll look into the matter and offer an amicable solution to it.

Conclusion

In conclusion, the forex industry in Kenya is at its infant stages and everything looks promising as it stands. And with all the forex regulations in Kenya, one thing is for sure, it can only get better as time goes by. Kenya’s positioning puts it on a good trajectory of birthing something formidable in the financial markets soon.