Markets regulator to clamp down online currency brokers

Capital Markets Authority CEO Paul Muthaura, Prof Levi Obonyo and Kenya Association of Manufacturers Vice Chair James Otanga at a recent Annual Media Summit. [Jenipher Wachie, Standard]

The capital markets regulator will clamp down on unlicensed online currency traders, its top official has said.

Capital Market Authority's (CMA) Chief Executive Paul Muthaura said the move will help regulate the forex black market.

He also warned Kenyans against engaging in online foreign exchange trading through platforms of unlicensed entities as they risk losing their investments.

The CMA boss said several individuals and entities have been carrying out the business of an online foreign exchange broker or money manager without the relevant licence by the authority.

“The authority will also take appropriate enforcement action against any persons or entities illegally conducting online foreign exchange trade or collecting client's funds in contravention of the above regulatory provisions,” Muthaura said.

“The public affected or aware of such illegal online foreign exchange transactions are advised to report to the authority or the Capital Markets Fraud Investigation Unit.”

CMA estimates that about 50,000 people, including brokers, dealers and money managers, are in the business and are mainly using offshore platforms that are not overseen by the local regulators.

Tech-savvy Kenyans have increasingly been inclined to take up new products, which may, however, open the local currency to volatility, money laundering or gullible investors become vulnerable to fraudsters.

“CMA requires all online foreign exchange brokers or money managers not licensed by the authority to cease and desist from trading, conducting sensitisations in Kenya and on-boarding Kenyan investors or managing online foreign exchange portfolios,” explained Muthaura.

The regulator has only issued one licence to EGM Securities Ltd (formerly Execution Point Ltd) to operate as a non–dealing online foreign exchange broker.

EGM Securities Ltd is part of a group of companies regulated by the UK’s Financial Conduct Authority, Dubai’s Securities and Commodities Authority and the Jordan Securities Commission,” the company said in a statement.

EGM Securities licence is expected to change traditional stocks and shares in Kenya and provide investors with an appetite for new products.