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Q:
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I am an individual forex trader, trading my own money.
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Q 1:
Q 2: |
How does the FAIS Act influence me?
Do I need to register with the FSB or the FIA? |
| FIA1: |
The
FAIS Act does not directly affect an individual investor. You are not required
to register or get a license in terms of FAIS as long as you only trade your
own funds. This changes dramatically if you start soliciting funds from other
persons. |
| FIA2: |
You
don’t need to register with the FSB. The FIA is a self-regulatory organisation
and membership is 100% voluntarily. The FIA offers specific benefits regarding,
best advice information, evaluation of services on offer and education that
may benefit self-directed traders. |
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Q:
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I am trading my own funds and an acquaintance’s. |
Q 1:
Q 2: |
How does the FAIS Act influence me?
Do I need to register with the FSB or the FIA? |
| FIA1: |
The
FAIS Act does not directly affect an individual investor. You are not required
to register or get a license in terms of FAIS as long as you only trade your
own funds. This changes dramatically if you start soliciting funds from other
persons. You are therefore advised to get proper legal advice with regards
to the regulatory position If you are in any way remunerated disproportional
from your proportional shareholding in such arrangement you may by virtue
of that be a de facto investment advisor / manager in spot forex and should
you consider legal advice with regards to your position vis-à-vis
the FAIS Act. |
| FIA2: |
As
far as the FSB is concerned, we have addressed possible ramifications in
Q1 above. The FIA is a self-regulatory organisation and membership is 100%
voluntarily. The FIA offers specific benefits regarding evaluation of services
and education that may benefit self-directed traders and members of “investment
clubs or similar arrangements. |
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| Q: |
My friend trades my funds together with his and some family members’ funds.
How does the FAIS Act influence us? |
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As investors you are not directly influenced by the licensing
requirements of the Act. However it would be in your best interest to ascertain
that your friend is not giving financial advice or render intermediary services
in terms of the Act. You should get legal advice to qualify his status. |
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| Q: |
I have been approached by a company / person offering training in forex trading. |
Q 1:
Q 2: |
Do they have to be licensed in terms of FAIS?
If so and they are not licensed, what should I do? |
| FIA1: |
No. If the company only provides training there is no FSB licencing requirement. However, if the company
also acts as an Introducing Broker, i.e.it refers clients to a specific forex broker and receives remuneration for such referrals, usually based on the trading activities of trainees so referred, this company will have to be registered as a Category 1 FSP. |
| FIA2: |
If an unregistered company do business
in breach of the FAIS Act you should report them to the FIA or the FSB. |
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| Q: |
A company approached me to place investment funds with them in a managed forex account. |
| Q1: |
On
enquiring about their regulatory status they said they are only marketers
and the funds will be placed in America with a FCM and traded by American
traders. Must they be registered? |
| FIA: |
Yes,
the company / individual in South Africa must be registered as a FSP Forex
Category 1. Presumably they act as “introducing brokers” and they may also
share in “profits” payable by the “American traders”. You should diligently enquire about “what is in it for them”.
Following the money trail will clear up all uncertainties. You should also
provide the FIA with their details in order for the FIA to give the correct
and applicable advice regarding registration to them. |
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| Q: |
A
company approached me to place investment funds with them in a managed forex
account. On further investigation it seems as if the funds must be transferred
in my own name to an island tax haven? Should I do it? |
| FIA: |
If the company that approached you is a South African company, you must ask the following questions:
- Please provide your FSB license number. You can then check this on the FSB website or with the FIA.
- You must then also check with the FSB if they have approved the foreign company. The South African representatives must have applied to the FSB to promote this specific company's business in South Africa. It is part of the South African company's licence conditions that they may only do business with foreign companies / forex brokers / forex market makers / forex money managers which were pre-apporved by the FSB.
If
one or both of the above is outstanding hold onto your funds with all you
have and report it to the FIA. Always enquire about properly regulated service providers.
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| Q: |
I
have developed a “forex trading
robot”/ "automated trader" in conjunction with an IT company
in Kazakhstan. Our back testing track record shows 300% returns per year.
In live simulations we also made 300% annualised (tested over 8 weeks). I
want to offer the service to the public. How does FAIS affect me? |
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You are a discretionary financial services provider. You must register as a FSP Category 2. The foreign forex services
providers you tie up with must also be approved by the FSB.
WARNING
Beware
of exorbitant returns claimed based on “automated traders”. Exorbitant returns
are usually the result of exorbitant gearing and not sustainable for longer-term
investment periods under any circumstances. |
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| Q: |
When must everyone offering forex services be registered and licensed in terms of FAIS? |
| FIA: |
By 30 September 2004. Any company starting out after this date must be licenced before commencing business activities. |
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| Q: |
How long does registration and licensing take? |
| FIA: |
Although no definite timeframe can be set, it is best to assume that the application process will take about three to four months at a minimum. |
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| Q: |
Can I apply for a forex license through the FIA rather than directly with the FSB? |
| FIA: |
No. Since the majority of registrations were successfully made the FSB handles all new registrations itself. |
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| Q: |
Which service providers in the spot forex industry must register in terms of FAIS as FSP Category 2? |
| FIA: |
- Those trading managed forex accounts on behalf of investors.
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| Q: |
Which service providers in the spot forex industry must register in terms of FAIS as FSP Category 1? |
| FIA: |
- Financial
advisors soliciting forex investments as part of their financial advice practice.
- Introducing brokers of self-directed traders.
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| Q: |
We only offer training in forex trading? Do we have to register? |
| FIA: |
No. If your company only provides training there is no FSB licencing requirement. However, your company
also acts as an Introducing Broker, i.e.it refers clients to a specific forex broker and receives remuneration for such referrals, usually based on the trading activities of trainees so referred, you will have to be registered as a Category 1 FSP. |
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| Q: |
My company have several branch offices. Are they my representatives or do they have to register separately? |
| FIA: |
This
can differ from case to case. Generally speaking a branch manager, training
manager and support manager will qualify as key persons in each branch depending
on the level of discretion they have in executing their duties. Where they
are bona fide representatives as defined by the Act their experience and
qualification standards must be similar to those of key individuals of the
“head office”. The representatives can bind the company and the company must
take full responsibility for their actions. The FSP can lose its license
because of the conduct of representatives. |
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| Q: |
I have done a three-day forex training course in 2001. Is this a recognized qualification? |
| FIA: |
No. |
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| Q: |
I
have traded 2 years demo account and 6 months a live account with my own
money. Do I have enough experience as an key individual for a forex FSP? |
| FIA: |
For a forex FSP Category 2 – No. For forex FSP Category 1 – Probably. |
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| Q: |
How must I gain the necessary experience? |
| FIA: |
Just
as in any other sub-industry of the financial services industry. By working
for a registered forex Category 1 or Category 2 service provider for the
appropriate time as a representative. Upon acquiring the proper experience
and qualifications and based on all other criteria to become a FSP in terms
of the FAIS Act you can then apply and become a FSP. |
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| Q: |
Are there any forex specific qualifications that will enhance my application? |
| FIA: |
The FIA believes doing the Registered Persons
Examination for Forex will enhance your application. See www.saifm.co.za. |
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| OTHER QUESTIONS: |
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| Q: |
Is
it legal to place funds in South African Rands with a forex trader? I heard
most people say you need a tax clearance certificate to make an offshore
investment? |
| FIA: |
In
terms of the Foreign Exchange Regulations, as administered by the Reserve
Bank you are not allowed to trade foreign financial instruments with margin
in rands. |
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| Q: |
I
have placed R100 000 with a forex trader. I paid the money into a South African
Bank Account. After a few months I suddenly stopped receiving statements
showing good returns and instead received all sorts of vague excuses. I now
received a letter stating the funds were lost due to market conditions. What
can I do? |
| FIA: |
You
should insist on proof that your funds were indeed lost. Follow the money
paper trail. If this cannot be proven beyond any doubt you may claim fraud
or even find your money, however it may be in the disguise of an expensive
car or holiday home. Contact the FSB and / or the FAIS Ombud. See www.faisombud.co.za. |
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| Q: |
What are tax implications of a self-directed forex trading account? |
| FIA: |
In
this regard it is best to consult with a professional accountant. The FIA’s
advice is that one may consider it as a speculative trading business, all
proceeds are income and expenses incurred may be deducted. |
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| Q: |
What are tax implications of a managed forex trading account? |
| FIA: |
The
important question is if this is an investment and falls under capital gains
tax or is it income and falls under income tax or a combination? Consult
a professional person. |
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