The Capital Markets (Online Foreign Exchange Trading) Regulations
These Regulations may be cited as the Capital Markets (Online Foreign Exchange Trading) Regulations.
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- Jurisdiction
- Kenya
- Instrument
- Notice
- Citation
- Legal Notice 226 of 2017
- Version
- Undated source snapshot
- Language
- en
Source attribution: Source: Kenya Law
Statute overview
About this statute
These Regulations may be cited as the Capital Markets (Online Foreign Exchange Trading) Regulations. This section provides definitions of terms used in the Regulations, including 'binary options', 'client', 'client account', 'client funds', 'cornering activity', 'leverage', 'money manager', various types of online foreign exchange brokers, and related terms. Section 10. Suspension of a licence Section failed to comply with any conditions subject to which the licence was granted under these Regulations; Revocation of a licence where the reasons for the suspension of a licence under regulation l0 have continued during the period of suspension Automatic revocation of a licence if declared insolvent by a court of law.
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Provisions of The Capital Markets (Online Foreign Exchange Trading) Regulations
Showing 32 of 32
Part I
PRELIMINARY
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PRELIMINARY - 1. Citation
AI-assisted research summary: These Regulations may be cited as the Capital Markets (Online Foreign Exchange Trading) Regulations.
Section 1. Citation Section These Regulations may be cited as the Capital Markets (Online Foreign Exchange Trading) Regulations. - 2
PRELIMINARY - 2. Interpretation
AI-assisted research summary: This section provides definitions of terms used in the Regulations, including 'binary options', 'client', 'client account', 'client funds', 'cornering activity', 'leverage', 'money manager', various types of online foreign exchange brokers, and related terms.
Section 2. Interpretation Section In these Regulations, unless the context otherwise requires— "binary options" means an option which involves making a bet on the price movement of an underlying asset in the near future for a fixed amount; "client" means a person who is registered with an online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") and has executed an agreement with the online forex broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") for dealing through such online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") in foreign exchange transactions; "client account" means a bank account established and maintained by an online foreign exchange broker for the purposes of regulation 23 ; "client funds" means money of any currency which a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") deposits in a client account ("a bank account established and maintained by an online foreign exchange broker for the purposes of regulation;") or which the online foreign exchange broker owes to a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") and includes any other property deposited with an online foreign exchange broker in the course of its business for which that broker is liable to account to its client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") and any money or other property accruing therefrom; "cornering activity" in relation to foreign exchange means use of currency held in significant amounts to be able to manipulate its price; "leverage" means the ratio of the market price of an agreed multiple of contracts to the agreed margin where margin is the deposit or payment made to create, vary or maintain a position of the contracts; "money manager" means an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management; "dealing online foreign exchange broker" means an entity licensed by the Authority to engage in the business of online foreign exchange trading ("the internet-based trading of foreign exchange and includes trading in contracts for difference based on a foreign underlying asset;") as principal and market maker; "online foreign exchange trading" means the internet-based trading of foreign exchange and includes trading in contracts for difference based on a foreign underlying asset; "online foreign exchange trading platform" means an internet-based trading system through which foreign exchange trading is conducted; and "non-dealing online foreign exchange broker" means an entity licensed by the Authority that acts as a link between the foreign exchange market and a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") in return for a commission or mark-up in spreads and does not engage in market making activities.
Part II
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS
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LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 10. Suspension of a licence
AI-assisted research summary: Section 10. Suspension of a licence Section failed to comply with any conditions subject to which the licence was granted under these Regulations;
Section 10. Suspension of a licence Section failed to comply with any conditions subject to which the licence was granted under these Regulations; - 11
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 11. Revocation of a licence
AI-assisted research summary: Revocation of a licence where the reasons for the suspension of a licence under regulation l0 have continued during the period of suspension
Section 11. Revocation of a licence Section the reasons for the suspension of a licence under regulation l0 have continued during the period of suspension; - 12
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 12. Automatic revocation of a licence
AI-assisted research summary: Automatic revocation of a licence if declared insolvent by a court of law.
Section 12. Automatic revocation of a licence Section is declared insolvent by a court of law; - 13
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 13. Appeal against suspension or revocation of licence
AI-assisted research summary: An entity licensed as an online foreign exchange broker or money manager that is aggrieved by a suspension or revocation of its licence may appeal to the Capital Markets Tribunal within fifteen days of being notified.
Section 13. Appeal against suspension or revocation of licence Section A dealing or non-dealing online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") aggrieved by the decision of the Authoriry to suspend or revoke its licence may, within fifteen days of being notified of the suspension or revocation by the Authoriry, appeal to the Capital Markets Tribunal. - 14
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 14. Online foreign exchange broker ormoney managerto clear liabilities
AI-assisted research summary: An online foreign exchange broker or money manager must clear all its outstanding obligations up to the date of licence revocation or suspension, even if the licence is suspended or revoked under regulations 10, 11 or 12.
Section 14. Online foreign exchange broker ormoney managerto clear liabilities Section Despite a suspension or revocation of a licence under regulations 10 , 11 or 12 , a dealing or non-dealing online foreign exchange broker or money manager shall be responsible for clearing all its outstanding obligations up to the date of the revocation or suspension of the licence. - 15
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 15. Continuing obligations
AI-assisted research summary: Licensed online foreign exchange brokers and money managers must submit to the Authority, on a monthly basis or at intervals the Authority specifies, a summary of traded volumes per currency in the prescribed form; the Authority may also require other documents.
Section 15. Continuing obligations Section 15(1)(a) the details of any customer complaints and resolution status; Section 15(1)(b) evidence of daily reconciliations; Section 15(1)(c) for the money-manager, reports on the total funds under management; Section 15(1)(d) a full set of monthly management accounts; and Section 15(1)(e) risk-based capital adequacy returns. Section 15(2) In addition to the documents required under paragraph (1) , the Authority may require an online foreign exchange broker or a money manager to provide such other documents as the Authority may consider necessary. Section 15(3) An online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall, on a monthly basis or at such other intervals as the Authority may specify, submit to the Authority a summary of traded volumes per currency, in the prescribed form. - 3
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 3. Obligation to seek a licence
AI-assisted research summary: Persons must not act as dealing or non-dealing online foreign exchange brokers or money managers unless they have been granted the relevant licence by the Authority.
Section 3. Obligation to seek a licence Section 3(1) A person shall not carry on or purport to carry on business as a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") , non-dealing online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") unless that person has been granted the relevant licence by the Authority. Section 3(2) A person who carries on or purports to carry on business as a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") , non-dealing online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") without the relevant licence commits an offence. - 4
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 4. Application for a licence
AI-assisted research summary: Persons intending to operate as dealing or non-dealing online foreign exchange brokers or as money managers must apply to the Authority for a licence in the Form set out in the First Schedule, and must provide the documents and items listed in Section 4(2)(a)–(k).
Section 4. Application for a licence Section 4(1) A person who intends to operate as a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") , non-dealing online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") , shall apply to the Authority for a licence in the Form as set out in the First Schedule. Section 4(2)(a) the documents, information and declarations specified in regulation 5 ; Section 4(2)(b) in the case of an application for a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") or a non-dealing online foreign exchange broker licence, a letter from a recognized online foreign exchange trading platform ("an internet-based trading system through which foreign exchange trading is conducted; and") stating that the applicant meets all the relevant requirements of that platform and that the platform will admit the applicant if licensed by the Authority; Section 4(2)(c) in the case of a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") , an agreement with an online foreign exchange broker who is licensed by the Authority; Section 4(2)(d) client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") on-boarding policies; Section 4(2)(e) business plans; Section 4(2)(f) individual risk assessments; Section 4(2)(g) Anti-Money Laundering and know your client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") checks; Section 4(2)(h) product sensitization framework including client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") appropriateness assessment; Section 4(2)(i) internal dispute resolution mechanisms to be adopted to resolve customer complaints and disputes; Section 4(2)(j) all relevant service level agreements with other online foreign exchange market service providers, where applicable; and Section 4(2)(k) the fees as set out in the Second Schedule. - 5
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 5. Eligibility for a licence
AI-assisted research summary: Section 5 lists eligibility criteria for a licence, including company incorporation in Kenya, fit and proper status, at least five years' relevant experience for certain persons, membership of a professional body, necessary infrastructure and staff, specific experience and certification for persons in charge of trading, fit and proper directors/key personnel, and capital/financial thresholds (50,000,000; 30,000,000; 10,000,000; 5,000,000 shillings and an 8% of total liabilities rule).
Section 5. Eligibility for a licence Section 5(1)(a) is a company incorporated in Kenya and limited by shares; Section 5(1)(b) is a fit and proper person in accordance with section 24A of the Act; Section 5(1)(b)(i) is a fit and proper person in accordance with section 24A of the Act; Section 5(1)(b)(ii) has experience of not less than five years in the business of buying, selling, managing, or dealing in foreign exchange, foreign exchange futures or futures contracts; and Section 5(1)(b)(iii) is a member of a professional body; Section 5(1)(c) has the necessary infrastructure including office space, equipment and staff to effectively discharge its activities; Section 5(1)(d) in the case of a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") , has a person in charge of trading with at least three years' experience in foreign exchange trading, demonstrated ability to perform and in possession of certification from the Association Cambiste Internationale-Financial Markets Association or its equivalent; Section 5(1)(e) has, as its directors, substantial shareholders and key personnel, persons who are fit and proper in accordance with section 24A of the Act; Section 5(1)(f) fifty million shillings, in the case of a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") ; Section 5(1)(f)(i) fifty million shillings, in the case of a dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") ; Section 5(1)(f)(ii) thirty million shillings, in the case of a non-dealing foreign exchange broker; or Section 5(1)(f)(iii) ten million shillings, in the case of a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; and Section 5(1)(g) thirty million shillings or eight per cent of total liabilities whichever is higher in the case of a dealing or a non-dealing foreign exchange broker; or Section 5(1)(g)(i) thirty million shillings or eight per cent of total liabilities whichever is higher in the case of a dealing or a non-dealing foreign exchange broker; or Section 5(1)(g)(ii) five million shillings or eight per cent of total liabilities whichever is higher; in the case of a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; Section 5(2) In addition to the eligibility criteria set out in paragraph (1) , an applicant shall not be eligible for a licence if the applicant has not complied with the Capital Markets (Corporate Governance) (Market Intermediaries) Regulations (sub. leg). - 6
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 6. Furnishing of information, clarifications,etc.
AI-assisted research summary: An applicant must provide additional information or clarifications about previous dealings in foreign exchange, securities, commodities, and related matters when required.
Section 6. Furnishing of information, clarifications,etc. Section require an applicant to furnish such additional information or clarifications regarding any previous dealings in foreign exchange, securities, commodities and any other matter connected thereto; or - 7
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 7. Grant of licence
AI-assisted research summary: The Authority must grant and notify licences when applicants meet eligibility and regulatory requirements; it must give applicants a hearing before refusing, must inform refused applicants in writing within 14 days stating grounds, and an aggrieved applicant may appeal to the Capital Markets Tribunal within 15 days of receipt.
Section 7. Grant of licence Section 7(1) The Authority shall grant a licence to an applicant if the Authority is satisfied that the applicant meets the eligibility criteria and the requirements set out in regulations 4 and 5 and inform the applicant in writing of the grant. Section 7(2) Where the eligibility criteria are not met, the Authority shall not refuse to grant a licence without giving the applicant an opportunity of being heard. Section 7(3) Where, after hearing the applicant, the Authority determines that a licence should not be granted, the Authority shall communicate, in writing, the decision to the applicant within fourteen days of the decision, stating the grounds for refusal. Section 7(4) An applicant aggrieved by the decision of the Authority under paragraph (3) may appeal to the Capital Markets Tribunal within fifteen days of receipt of the decision of the Authority. - 8
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 8. Validity of licence
AI-assisted research summary: A licence granted under regulation 7(1) is valid unless it is suspended or revoked.
Section 8. Validity of licence Section A licence granted under regulation 7(1) shall be valid unless suspended or revoked. - 9
LICENSING OF ONLINE FOREIGN EXCHANGE BROKERS AND MONEY MANAGERS - 9. Annual licence fee
AI-assisted research summary: Licensed online foreign exchange brokers or money managers must pay the applicable annual licence fee listed in the Second Schedule.
Section 9. Annual licence fee Section A dealing or non-dealing online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall pay the relevant annual licence fee set out in the Second Schedule.
Part III
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS
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THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 16. Standards of conduct
AI-assisted research summary: Online foreign exchange brokers and money managers must observe standards of conduct (integrity, skill, market conduct), maintain client protections (segregated funds, bank custody where applicable), comply with AML/terrorism laws, maintain governance and complaints procedures, ensure staff suitability, cooperate with the Authority, and notify the Authority immediately and in any case within twenty four hours of any non-compliance.
Section 16. Standards of conduct Section 16(1)(a) open clients' accounts; Section 16(1)(b) provide a trading platform; Section 16(1)(c) provide access to market information that the clients may utilize in formulating their strategies; Section 16(1)(d) monitor traders' positions; or Section 16(1)(e) provide end-of-day reports. Section 16(2) A dealing online foreign exchange broker ("an entity licensed by the Authority to engage in the business of online foreign exchange trading as principal and market maker;") may trade as principal and market maker. Section 16(3)(a) choose and manage investments prudently for his or her clients; Section 16(3)(b) develop an appropriate investment strategy; Section 16(3)(c) take positions in the market to meet the investment goals of the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") ; Section 16(3)(d) undertake financial analysis; and Section 16(3)(e) monitor foreign exchange portfolio investments on behalf of the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") . Section 16(4)(a) currency pairs involving the Kenya shilling ; and Section 16(4)(b) binary options ("an option which involves making a bet on the price movement of an underlying asset in the near future for a fixed amount;") . Section 16(5)(a) observe a high standards of integrity and fair dealing: Section 16(5)(b) act with due skill, care and diligence; Section 16(5)(c) observe high standards of market conduct; Section 16(5)(d) seek from clients information about their circumstances and investment objectives which might be reasonably expected to be relevant in enabling the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") to fulfill their responsibilities to the clients; Section 16(5)(e) take reasonable steps to give every client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") any information needed to enable the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") to make a balanced and informed investment decision, in a comprehensible form; Section 16(5)(f) avoid any conflict of interest with clients and, where such a conflict unavoidably arises, ensure fair treatment of the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") by complete disclosure or by declining to act while always ensuring the interests of the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") are never unfairly placed above those of the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") ; Section 16(5)(g) maintain adequate financial resources to meet the foreign exchange business commitments and withstand the risks to which the business is subject; Section 16(5)(h) in the case of an online foreign exchange broker ensure that all clients' funds are held in a bank licensed under the Banking Act ( Cap. 488 ); Section 16(5)(i) in the case of an online foreign exchange broker, keep clients' funds segregated from its own funds and ensure that at no point shall the clients' funds be used for margining, hedging or as company assets, including where the company becomes insolvent; Section 16(5)(j) apply stringent governance and risk-management procedures throughout the business including adoption of risk-management procedures to deal with stop losses, no negative accounts, double lock limited risk accounts, margin call and close out procedures; Section 16(5)(k) comply with the Proceeds of Crime and Anti Money Laundering Act, (No. 9 of 2009) and Prevention of Terrorism Act, (No. 30 of 2012) ; Section 16(5)(l) organize and control internal affairs in a responsible manner and clearly separate its front office and back office functions; Section 16(5)(m) have efficient procedures and arrangements for addressing complaints by clients; Section 16(5)(n) have adequate arrangements to ensure that all staff employed by the online forex broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") are suitable, adequately trained and properly supervised, and subjected to well-defined compliance procedures; Section 16(5)(o) adopt and enforce written procedures with regards to communications with the public; Section 16(5)(p) deal with the Authority in an open and co-operative manner and keep the Authority informed of anything concerning the online forex broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") that might reasonably be expected to be disclosed to the Authority; and Section 16(5)(q) comply with the requirements of these Regulations and shall inform the Authority immediately and in any case not later than twenty four hours in case of non-compliance. - 17
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 17. Professional indemnity
AI-assisted research summary: Online foreign exchange brokers must determine and obtain adequate professional indemnity insurance for their key personnel.
Section 17. Professional indemnity Section An online foreign exchange broker shall determine and obtain adequate professional indemnity insurance for its key personnel. - 18
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 18. Agreement between online forex broker andmoney manager
AI-assisted research summary: A licensed money manager must enter into a written agreement with an online foreign exchange broker that clearly sets out the scope of activities the money manager may undertake.
Section 18. Agreement between online forex broker andmoney manager Section 18(1) A money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall enter into an agreement, in writing, with an online foreign exchange broker that shall clearly set out the scope of activities that the money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") may undertake. Section 18(2)(a) clear duties, responsibilities and performance of the money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; Section 18(2)(b) an undertaking by the money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") to disclose conflict or potential of interest to the online forex broker as soon as practical after becoming aware of the conflict; Section 18(2)(c) the responsibility of the online forex broker to monitor the money managers conduct and to ensure compliance with the terms and conditions of the agreement; Section 18(2)(d) compliance with laws; Section 18(2)(d)(i) compliance with laws; Section 18(2)(d)(ii) conduct of marketing activities; and Section 18(2)(d)(iii) termination procedures; Section 18(2)(e) the terms of remuneration of the money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; and Section 18(2)(f) the notices between the online forex broker and the money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; and dispute resolution mechanisms. - 19
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 19. Leverage ratio
AI-assisted research summary: Online foreign exchange brokers may provide leverage to clients up to four hundred times the client's deposit; the Authority may revise that leverage ratio by circular to address currency volatility or protect investors.
Section 19. Leverage ratio Section 19(1) An online foreign exchange broker may provide leverage ("the ratio of the market price of an agreed multiple of contracts to the agreed margin where margin is the deposit or payment made to create, vary or maintain a position of the contracts;") , not exceeding four hundred times that of the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") 's deposit, for foreign exchange trading in a currency pair between any currency pair or underlying assets to its client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") . Section 19(2) The Authority may, by circular, revise the leverage ("the ratio of the market price of an agreed multiple of contracts to the agreed margin where margin is the deposit or payment made to create, vary or maintain a position of the contracts;") ratio provided in paragraph (1) from time to time as may be necessary to stabilize volatility in global and local currencies or for investor protection. - 20
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 20. Systems audit
AI-assisted research summary: An online foreign exchange broker or money manager must establish risk-management mechanisms, systems and procedures to ensure the trading platform provider is credible and platform risks are addressed in a timely manner.
Section 20. Systems audit Section An online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall establish risk-management mechanisms, systems and procedures to ensure that the online foreign exchange trading platform ("an internet-based trading system through which foreign exchange trading is conducted; and") provider is credible and that any risks associated with the platform are addressed in a timely manner. - 21
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 21. Maintenance of books of accounts, recordsetc.
AI-assisted research summary: Online foreign exchange brokers or money managers must prepare and maintain books of accounts and related documents that accurately reflect the business, and those records must be preserved for a minimum of seven years.
Section 21. Maintenance of books of accounts, recordsetc. Section 21(1) An online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall prepare and maintain books of accounts and other documents which shall disclose a true, accurate and up to date position of the business in electronic or manual form. Section 21(2)(a) journals or other comparable records; Section 21(2)(b) cash books and any other books of original entry that form the basis of entries into any ledger, including books that contain daily records of all orders for purchase or sale of foreign exchange, all purchases and sales of foreign exchange and all other debits and credits; Section 21(2)(c) ledgers or other comparable records reflecting asset, liability, reserve, capital, income and expense accounts; Section 21(2)(d) ledgers or other comparable records reflecting foreign exchange bought or sold, of which the delivery is delayed; Section 21(2)(e) records of all balances of all ledger accounts in the form of trial balances to be prepared at least once at the end of the six months of every year of account; and Section 21(2)(f) records of transactions with the banks including clients' deposits and withdrawals from the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") group account maintained with a licensed bank. Section 21(3) The books of accounts and other documents prepared and maintained under these Regulations shall be preserved for a minimum period of seven years. - 22
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 22. Risk disclosure statements
AI-assisted research summary: Furnish the client with a separate written risk disclosure statement.
Section 22. Risk disclosure statements Section furnished the client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") with a separate written risk disclosure statement; - 23
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 23. Segregation of clients' funds
AI-assisted research summary: Online foreign exchange brokers must keep client funds separate from their own, open segregated client accounts at a bank licensed under the Banking Act, ensure client deposits/withdrawals go only through those client accounts, perform daily reconciliations of accounts, and must not accept or pay cash to clients for transactions under these Regulations.
Section 23. Segregation of clients' funds Section 23(1)(a) maintain strict segregation between its own funds and every individual client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") 's funds without any co-mingling between own funds and clients' funds; Section 23(1)(b) open a segregated clients' account with a bank licensed under the Banking Act; and Section 23(1)(c) ensure that all deposits and withdrawals by the clients are only made through the individual client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") 's accounts established under paragraph (b) . Section 23(2) An online foreign exchange broker shall undertake daily reconciliations between the clients' account maintained at the designated bank and individual clients' account ledgers maintained by the broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") . Section 23(3) An online foreign exchange broker shall not accept cash from, or pay cash to, a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") for any transaction under these Regulations. - 24
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 24. Handling of clients funds bymoney manager
AI-assisted research summary: A money manager must not receive a client's money.
Section 24. Handling of clients funds bymoney manager Section shall not receive client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") 's money; and - 25
THE CONDUCT OF ONLINE FOREIGN EXCHANGE BUSINESS - 25. Business conduct regulations
AI-assisted research summary: Online foreign exchange brokers and money managers must observe high standards, comply with required practices, submit periodic reports, and prepare an annual compliance report.
Section 25. Business conduct regulations Section 25(1) An online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") and the associates of online foreign exchange brokers or money managers shall observe high standards of commercial honour and uphold just and equitable principles of trade in the conduct of its foreign exchange business. Section 25(2) An online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall, in the conduct of foreign exchange business comply with the respective practices and standards relating to the conduct of the foreign exchange business for which it is licensed specified in these Regulations. Section 25(3)(a) advertisement by or on behalf of an online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; Section 25(3)(b) the disclosure to a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") of the financial risks in respect of trading forex recommended by the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") to a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") ; Section 25(3)(c) the avoidance of any conflict of interest between the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") and a client ("a person who is registered with an online foreign exchange broker or money manager and has executed an agreement with the online forex broker or money manager for dealing through such online foreign exchange broker or money manager in foreign exchange transactions;") ; Section 25(3)(d) recommendations made by an online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; Section 25(3)(e) submission of annual audited accounts; and Section 25(3)(f) any other matter relating to the practices and standards of conduct required of an online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") in conducting foreign exchange business for which it is licensed. Section 25(4) An online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall submit to the Authority reports and accounts on monthly, quarterly, semi-annual basis and on such other intervals as the Authority may request. Section 25(5) An online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall prepare and submit to the Authority an annual report demonstrating how compliance with these Regulations was achieved in the year that the report relates to.
Part V
INSPECTION
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INSPECTION - 28. The right of the Authority to inspect
AI-assisted research summary: The Authority has the right to inspect to establish that the books of accounts and other books are being maintained in the manner required.
Section 28. The right of the Authority to inspect Section establish that the books of accounts and other books are being maintained in the manner required; - 29
INSPECTION - 29. Procedure for inspection
AI-assisted research summary: The Authority must give online foreign exchange brokers or money managers reasonable notice before inspections, but may order inspections without notice if satisfied it's in investors' or public interest; inspecting officers have power to inspect as directed by the Authority.
Section 29. Procedure for inspection Section 29(1) The Authority shall, before undertaking an inspection under regulation 32 , give the online foreign exchange broker or money manager a reasonable notice of the Authority's intention to do so. Section 29(2) Notwithstanding paragraph (1) , the Authority may direct, in writing, that an inspection of an online foreign exchange broker or a money manager be carried out without notice to the online foreign exchange broker or money manager if the Authority is satisfied that it is in the interest of the investors or in the public interest that such notice should not be given. Section 29(3) The inspecting officers or any other person authorized by the Authority shall have the power to inspect the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") in the manner directed by the Authority. - 30
INSPECTION - 30. Obligations of online forex broker ormoney managerunder inspection
AI-assisted research summary: Inspecting officers may require production of documents and information and are entitled to examine or record statements; directors, officers or employees must assist and brokers/money managers must allow access, extend facilities and provide copies.
Section 30. Obligations of online forex broker ormoney managerunder inspection Section 30(1) An inspecting officer may require a shareholder, director, an officer or an employee of an online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") which is being inspected to produce, such books, accounts and other documents in his or her custody or control and furnish the inspecting officer with the statements and information relating to foreign exchange transactions within such time as the inspecting officer may require. Section 30(2)(a) allow the inspecting officer reasonable access to the premises occupied by the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") by any other person acting on behalf of the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; Section 30(2)(b) extend reasonable facilities to the inspecting officer to examine any books, records, documents and computer data in the possession of the online foreign exchange broker money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") or any other person; and Section 30(2)(c) provide copies of documents or other materials which, in the opinion of the inspecting officer, are relevant. Section 30(3) An inspecting officer shall, in the course of inspection, be entitled to examine or record statements of any shareholder, director, partner, proprietor or employee of an online forex broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") under inspection. Section 30(4) A director, an officer or an employee of the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") under investigation shall give to the inspecting officer all assistance in connection with the inspection which the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") may reasonably be expected to give. - 31
INSPECTION - 31. Action on inspection report
AI-assisted research summary: The Authority may take the appropriate action provided for under the Act after considering an inspection report.
Section 31. Action on inspection report Section The Authority may, after considering an inspection report, take the appropriate action provided for under the Act. - 32
INSPECTION - 32. Appointment of an auditor
AI-assisted research summary: The Authority may appoint a qualified auditor and direct that investigation costs be borne by the broker or money manager; persons connected to the licensee must produce documents, give assistance and allow access; an auditor may examine staff and request bank statements.
Section 32. Appointment of an auditor Section 32(1) The Authority may, in the interest of investors, appoint a qualified auditor to audit the books of accounts or investigate any affairs of an online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") . Section 32(2) The Authority may direct that the costs associated with the investigation of the affairs of an online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") under paragraph (1) shall be borne by the online foreign exchange broker or money manager. Section 32(3) A shareholder, director, officer or employee of the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") which is being audited or investigated shall produce, to the auditor, such books, accounts and other documents in his or her custody or control and furnish the auditor with such statements and information relating to foreign exchange transactions within the time as the auditor may require. Section 32(4)(a) allow the auditor reasonable access to the premises occupied by the online foreign exchange broker, money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") or by any other person acting on behalf of the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") ; Section 32(4)(b) extend reasonable facilities to the auditor for the examination of any books, records, documents and computer data in the possession of the online foreign exchange broker, money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") or any other person; and Section 32(4)(c) provide copies of documents or other materials which are, in the opinion of the auditor, relevant. Section 32(5) An auditor shall, in the course of an audit or investigation, be entitled to examine or record statements of any member, director, partner, proprietor or employee of an online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") under audit or investigation. Section 32(6) A director, an officer or an employee of the online foreign exchange broker or a money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") under audit or investigation shall give the auditor all assistance which the licensee may reasonably be expected to give in connection with the audit or investigation. Section 32(7) The auditor shall have a right to request for bank statements from the bank at which the online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") maintains its office account and in the case of an online foreign exchange broker, the client account ("a bank account established and maintained by an online foreign exchange broker for the purposes of regulation;") .
Part VI
OFFENCES AND PENALTY
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OFFENCES AND PENALTY - 33. Prohibited conduct
AI-assisted research summary: Online foreign exchange brokers or money managers must not engage in any foreign exchange transaction that is prohibited by any written law.
Section 33. Prohibited conduct Section 33(1) An online foreign exchange broker or money manager ("an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management;") shall not engage in any foreign exchange transaction that is prohibited by any written law. Section 33(2)(a) cheat, defraud or deceive, or attempt to cheat, defraud or deceive any person; Section 33(2)(b) willfully make or cause to be made a false report, or willfully enter or cause to be entered a false record in or in connection with any foreign exchange transaction; Section 33(2)(c) disseminate, or cause to be disseminated, false or misleading information, or acknowledge inaccurate report, that affects or tends to affect the price of any foreign currency; Section 33(2)(d) engage in manipulative acts or practices regarding the price of any foreign currency or foreign exchange transaction; Section 33(2)(e) willfully submit materially false or misleading information to the Authority or its agents with respect to foreign currency transactions; or Section 33(2)(f) embezzle, steal or knowingly convert any money, securities or other property received or accruing to any person or in connection with foreign exchange transactions. Section 33(3) A person who engages in any conduct that is prohibited under paragraphs (1) or (2) commits an offence. - 34
OFFENCES AND PENALTY - 34. Penalty
AI-assisted research summary: A person convicted of an offence under these Regulations shall be liable to the penalties specified in sections 25A and 34A of the Act and may face additional actions for damages for losses caused by the offence.
Section 34. Penalty Section A person who is convicted of an offence under these Regulations shall be liable to such penalty as specified under sections 25A and 34A of the Act and any additional action for damages in respect of the loss occasioned by the commission of the offence.
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The Capital Markets (Online Foreign Exchange Trading) Regulations
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