Wondering Who is the Forex Regulatory Body in the United Arab Emirates? Read our Guide to CBUAE Forex Brokers
In the United Arab Emirates, Forex brokers are required to obtain a license from the UAE Central Bank, whether a foreign or a local company. It is the main regulatory body in the UAE, apart from the Dubai International Financial Center which has its own regulatory body. CBUAE regulated brokers are permitted to market and sell foreign and local shares along with financial instruments for a commission.
A brief explanation of the Central Bank’s duties
The main responsibility of the Central Bank of United Arab Emirates is to formulate and implement banking, credit, and monetary policies. Its ultimate aim is the growth of the national economy in a balanced way. The Central Bank also works to maintain a fixed exchange rate for the dirham against the US dollar and to enable free dirham conversions into other currencies. It is fondly known as the “Bank of Banks”, but it is also the Government’s bank and financial adviser.
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How the Central Bank regulates Forex brokers in the United Arab Emirates
With regards Forex brokers in the United Arab Emirates, according to the Central Bank’s Board of Directors Resolution No. 126/5/95, the Central Bank is responsible for regulating any business intermediating in the sale and purchase of domestic and foreign stocks, commodities, bonds, and currencies. And this includes money market transactions. The Resolution states a financial and monetary intermediary should be a UAE citizen and have a national shareholding of more than 60% of the total paid-up capital, in the case of a company. There is a minimum capital requirement of one, two or three million dirhams, depending on the scope of the intermediary’s activities. The actual license for a CBUAE regulated broker dealing in local and foreign shares is the remit of the Securities and Commodities Authority of the UAE. The Central Bank of the UAE is responsible for granting licenses to brokerage firms dealing in currencies and commodities as well as the intermediaries in currency transactions. The website of the CBUAE has a pdf. list of all firms licensed to act as intermediaries in currency and money market transactions. Although, when we checked it required some updating, as it was dated Sept 2014.
What you can do if you have a complaint about a CBUAE regulated broker
Should you find yourself in dispute with a CBUAE Forex broker the first step you make should be to try and reach a resolution with the company, before filing a complaint with the Central Bank. If you fail to reach a satisfactory conclusion it is possible to file a complaint with the Central Bank. Complaints can be made online, by Fax, or by visiting one of the Central Bank’s branches. These are in Al Ain, Dubai, Sharjah, Ras Al Khaimah or Fujairah. When the complaint is received it will be given a unique reference number which must be quoted in all communications. The Central Bank will notify you when a decision has been reached, either by email or SMS.
A brief history of the Central Bank of the United Arab Emirates
The Central Bank began life in 1973, but then it was known as the United Arab Emirates Currency Board. This beginning followed the creation of the UAE as an independent state. As you might expect, the purpose of the Currency Board was to issue the new currency for the independent state to replace those currently in use. The currencies which needed replacing were the Qatari/Dubai riyal and the Bahraini Dinar. The currency which replaced them was the UAE dirham and it was put into circulation the same day the Board was created. The Currency Board didn’t have full central powers back then, but was left with managing the country’s currency and foreign exchange and gold reserves. It had no regulatory powers and was unable to manage the UAE’s monetary policy. The new Central Bank was created following the passing of the Union Law No. 10 in 1980, and it replaced the Currency Board. The Central Bank of the UAE was given the following powers:
- Issuing and managing the currency
- Ensuring the currency’s stability
- Managing the UAE’s credit policy
- Acting as the Government banker
- Overseeing and developing the UAE banking system
- Providing financial and monetary support to the Government
- Acting as the lender of last resort
- Managing the UAE’s gold and currency reserves
- Representing the UAE in international institutions such as the IMF, the Arab Monetary Fund, and the World Bank
What is the IMF?
IMF stands for International Monetary Fund and it is an international organization with its headquarters in Washington DC. It was originally formed in 1944 at the Bretton Woods Conference but came into formal existence in 1945. At this time there were 29 member countries and its goal was to reconstruct the international payment system. Today, however, it plays a central role in managing balance of payment difficulties and international financial crises. A quota system is used for a country’s contribution, and countries experiencing balance of payment difficulties are able to borrow from the fund.
Why you should choose a CBUAE regulated broker
Choosing a Forex broker in the United Arab Emirates is a very important decision you will have to make before opening an account and making your first trade. And this decision can have a significant impact on your Forex trading success. Pick the wrong one and at the very least you’ll experience an unsatisfactory trading environment. But at the very worse, you could end up losing everything. One way you can protect yourself is to only choose a regulated or licensed broker, preferably regulated by the official body in your own country. A common requirement put in place by regulatory bodies is for client funds to be kept in segregated accounts. This means that should the firm become bankrupt your capital is kept separate and shouldn’t be used to repay the firm’s debts.