Why trading with a licensed broker in Kenya matters

Photo credit: Shutterstock | Nation Media Group

Kenya has been experiencing a steady level of economic growth in recent times. In 2023 and 2022, the country’s economy grew by 5.6 percent and 4.9 percent respectively, according to official data.

It should therefore not come as a surprise that the country has witnessed an influx of new traders into its financial markets.

While there are plenty of opportunities to appreciate, a touch of pragmatism is equally important, such as working with a legit broker.

Let's take a look at some of the reasons why regulations have become paramount concerns as well as what types of risks can be averted in the forex trading market.

What are the risks attributed to unregulated brokerages?

To be clear, not all CFD and Forex brokers have been created equally. This is particularly the case when referring to start-up firms that are not properly registered with the Capital Markets Authority (the governing regulatory body within Kenya). The problem here is that clients are not provided with adequate levels of protection, and this can result in surprisingly grave consequences.

Identity theft and fraud

Let us imagine that you have recently registered for a Forex trading account with a relatively unknown brokerage firm. While this company may indeed promise great things, a lack of regulation is a serious oversight.

Two primary dangers in such a situation are associated with the theft of personal information such as email addresses and credit card details. These can then be used to exploit customers; resulting in potentially dire financial losses. With a lack of regulation, it will be nearly impossible to recover these funds. Furthermore, any unknown third party that possesses sensitive personal information represents a long-term threat. A regulated broker, on the other hand, would need to maintain a security standard to avoid these issues.

Other types of digital manipulation

As if the concerns outlined above were not serious enough, other risks may present themselves. Kenyan brokers that lack a trading license can become victims of fraud. For example, it is not uncommon for a website to become infected with spyware and malware. The problem here is that an in-house IT team might not even be aware of the embedded software. As a result, they can unwittingly expose clients to the very same threats mentioned in the previous section. Again, working with a legit broker in Kenya is the only way you can be protected against these problems that might arise.

The undeniable advantages of trading license

Kenyan authorities take the notion of unlicensed brokerages quite seriously. After all, they are hoping to attract an entirely new tranche of investors. The majority of these are accustomed to dealing with highly supervised marketplaces and nothing less than full transparency will suffice. This is when the true power of governmental regulations comes into play.

Strict ethical guidelines

There may be instances when a potential dispute arises between an investor and a brokerage. For instance, perhaps the fees and commissions associated with a specific position were not made clear. Unlicensed firms will provide few means for compensation, as they are not bound by the ethical standards outlined by the Kenyan CMA. Simply stated, many disputes will remain unresolved and clients have few legal courses of action to take.

On the contrary, a well-known multi-asset CFD brokerage such as Exness, which possesses a valid Kenyan trading license, is required to adhere to ethical trading standards so that any disputes can be resolved in a timely fashion. Not only is this a legal requirement, but it also makes good business sense – a big reason to use a regulated broker for your forex trading operations.

Additional safety features

Online security is yet another very real issue in these modern times. Brokerages recognised by the Kenyan financial authorities will therefore be obligated to put several cutting-edge features in place. For instance, personal details will never be shared with third parties for marketing purposes. The presence of SSL (Secure Sockets Layer) encryption also scrambles all information transmitted between two parties; virtually eliminating the chances that these details become compromised.

Given the importance of the personal information investors must provide in order to operate in the forex trading market, these safety measures offered by any legit broker in Kenya are essential for ensuring a safe environment.

A regulated broker may additionally employ a type of identity check known as a KYC verification. Traders will need to confirm their identity by supplying specific documents (such as a passport or a national identity card) before a transaction is approved. This adds yet another layer of digital protection in terms of unauthorised transfers. It also helps to thwart the growing threat of money laundering. This is likewise one of the safeguards the team at Exness has put in place.

Leveraging the opportunities to be found within an emerging marketplace

Please note that this article was not intended to deter anyone from becoming involved with the Kenyan financial markets. It instead serves to highlight the reasons why partnering with a regulated broker is essential in this day and age. With a bit of foresight and by appreciating the associated benefits, getting in on the "ground floor" or lucrative investment opportunities has never been more of a reality.