Complete Guide to DFSA Forex Brokers
Anyone considering taking up Forex trading in Dubai is faced with a pretty unique situation. Dubai is the most populated city in the United Arab Emirates and is the capital of the Emirate of Dubai, one of the seven emirates which make up the country. Contained within Dubai is the Dubai International Financial Centre (DIFC), which is a federal financial free zone which occupies approximately 110 acres. This area of the city has its own legal system and courts, separate from those of the wider UAE. This distinct legal system has jurisdiction over corporate, civil, commercial, employment, securities and trusts law matters. Heading up the regulation of financial services is the Dubai Financial Services Authority. The DFSA operates within the special economic zone only and aims to provide a regulatory environment of international standards. It is charged with the regulation of Forex brokers in the Dubai International Financial Centre. Operations outside of the boundaries of the DIFC are overseen by the UAE’s federal Securities and Commodities Authority. We’ll be bringing you some of the details regarding DFSA regulated brokers, but let’s first look at why the Financial Centre was created.
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Why the DIFC was created
The Dubai International Financial Centre was created in 2004, following the UAE Federal Decree No. 35 of 2004, UAE Federal Law No. 8 of 2004 and Dubai Law No. 12 of 2004. The aim of this financial center is to provide a platform for business and financial institutions to tap into and out of the emerging regional markets. It is intended to create a positive environment for growth, progress and economic development in the UAE and further afield by supplying the necessary legal, business and physical infrastructure in accordance with international standards.
What is the DFSA?
The DFSA (Dubai Financial Services Authority) was created in 2004 as part of the establishment of the DIFC. It is an independent regulator of financial services conducted in or from the International Financial Centre. The financial and ancillary services it regulates includes:
- Asset management
- Credit and banking services
- Collective investment funds
- Commodities futures trading
- Trust and custody services
- Islamic finance
- International equities exchange
- International commodities derivatives exchange
It is also responsible for supervising and enforcing anti-money laundering and counter-terrorist financing. It is also permitted to investigate the affairs of regulated companies, including DFSA Forex brokers, if it is suspected DIFC laws have been broken.
What the DFSA can help you with
As well as regulating Forex brokers in Dubai, the DFSA can also help with:
- Keeping you up to date with the latest Regulatory news
- Finding out whether a firm is regulated
- Gaining an overview of investments in general
- Advice on avoiding scams
- Finding out how to resolve complaints and disputes
Allowing retail Forex brokers to operate in the DIFC is a relatively new opportunity
For more than a decade, it was not possible for retail brokers to set up shop and acquire clients with small amounts of capital. The DFSA only allowed brokers to acquire clients considered to be professional traders. This was because a limit of more than $1 million in liquid assets was required. If a broker wished to attract retail clients it had to get a specific retail endorsement, which very few brokers actually did. The reason for the authority’s change of heart was increased interest in offering FX trading to retail customers both in or from the DIFC. There would, however, be a number of legal limitations and systems and controls requirements. Mainly revolving around the use of UAE Dirhams, which are strictly prohibited in the Financial Centre. Additional controls and measures included:
- A standard risk disclosure statement signed by each retail client
- Minimum relevant experience requirements for compliance and client facing staff
- Five years experience in providing services in retail products under the supervision of a recognized regulator
- Segregation and monitoring of clients
- Margin requirements – a minimum margin of 2% and 5% for major and other currency pairs
What you can do if you have problems with DFSA regulated brokers
Any DFSA regulated broker has to be able to satisfy the Authority there are mechanisms in place to handle customer complaints. Which means your first port of call should always be the DFSA regulated broker. It is your duty to try and resolve the problem directly with the firm in the first instance. It is also likely to be much quicker and more efficient, as well as being in the best interests of the company. It is always best to put your concerns in writing as it is a permanent record of your issue. When you contact the company you must set out all the circumstances of the complaint as clearly and simply as possible. If you are unable to reach a satisfactory resolution with the company directly it is possible to contact the DFSA. However, the DFSA will only look at complaints which are submitted in writing. Each complaint received by the DFSA is carefully assessed in order to decide the most appropriate course of action. It will not, however, seek commercial outcomes for those raising the complaint unless it is in the public interest. The Authority will liaise with DFSA specialists, contact witnesses, consult with other regulators and contact the firm in order to fully investigate the complaint. The process should take no longer than 28 days from receipt of the complaint, but it could take longer depending on the complexity of the problem. Following the investigation, you will be informed whether it is going to taken any further and what action is going to be taken. As you can now appreciate, things are a little different for those wanting to trade Forex in Dubai. We would always suggest you pick a broker that has been DFSA licensed as this is the best way to protect yourself and safeguard your investment.