Why Did the Capital Market Authority Grant Licenses to Forex Companies Despite Investment Risks?

Exclusive to SadaNews: In light of the rising risks associated with the foreign exchange (Forex) trading market, and the expanding scope of misleading advertisements invading the digital space targeting citizens with temptations of quick wealth, the Palestinian Capital Market Authority has taken a bold and calculated step by licensing companies to engage in this high-risk activity.

The General Manager of the Securities Department at the Palestinian Capital Market Authority, Murad Jadba, confirmed in a conversation with SadaNews that the authority has granted licenses to three companies in recent years to engage in foreign exchange (Forex) trading operations, as part of its efforts to regulate the local financial market. He also indicated that the authority is currently working on licensing a fourth company, which is expected to start its activities in 2026.

Jadba explained that the authority's decision to issue the licenses came after years of caution, driven by several key factors, most notably combating the black market, protecting investors’ funds, and fighting financial fraud.

He added that Palestine is not immune to the global electronic space, pointing out that the digital invasion via social media platforms, especially during the COVID-19 pandemic crisis, served as a spark that prompted the authority to take stringent measures to confront this invasion that targets citizens through funded advertisements that mislead them into believing they can achieve quick wealth.

Jadba emphasized that the authority fully understands that investing in the Forex market involves high risks, and for this reason, it requires that any promotional advertisements by licensed companies clearly include a warning about the nature of these risks.

In a related context, Jadba confirmed that the authority imposes strict oversight on licensed financial brokerage companies that operate in foreign exchange trading within unregulated markets, aimed at protecting investors and ensuring the integrity of transactions and market stability.

The authority relies on a well-structured legislative and regulatory framework in its oversight, in addition to using advanced electronic systems to monitor and verify compliance by companies with laws and regulations issued by adopting a central depository system for all operations related to the activity, taking into account lessons learned from the crises that some countries have faced in regulating this type of activity.

The authority called on the public of investors to exercise caution and verify that any entity has obtained the necessary license before dealing with it, through reviewing the licensed entities section on the authority's official website.

Regarding the conditions for granting licenses, Jadba clarified that the authority does not issue licenses to conduct Forex activities except for companies that meet a set of criteria, including:

- Membership in the Palestine Stock Exchange: The company must be an official member of the exchange.

- Capital Requirements: An additional registered and paid capital of at least three million US dollars is required, to ensure financial solvency and the ability to meet obligations.

- Detailed Business Plans: Companies must provide a clear organizational structure, internal control procedures, and an accurate description of the nature of the foreign exchanges they will be dealing with.

- Electronic Infrastructure: Reliable global trading platforms must be provided and licensed by the relevant authorities.

The authority recently issued a notice calling on individuals and entities conducting or promoting activities related to dealing with unregulated foreign exchanges (Forex) without obtaining the necessary licenses to cease these practices immediately, based on the applicable laws and regulations in Palestine.

The authority affirmed that any unlicensed practice is considered a clear violation of the law and exposes those responsible to legal accountability, stressing the need for all unlicensed entities to stop providing any investment or promotional services related to Forex, under the threat of liability.

Jadba also alerted journalists and the public about the importance of distinguishing between licensed companies that are monitored by the authority and operate according to the regulations and laws, and unlicensed companies that the authority is working to combat legally, which have been linked to many fraud cases. He confirmed the existence of close cooperation between the authority and security agencies to pursue violators, as raids were conducted on several unlicensed entities operating under fake names or titles like "training academies."

Moreover, financial expert Mohamed Salama stated in his conversation with SadaNews that the global Forex market, which includes banks, brokers, and traders, generates daily profits of around 50 billion dollars from its investments in the foreign exchange market.

Salama expressed his support for the steps taken by the Palestinian Capital Market Authority to license companies to engage in this activity, despite its dangers, as it is an open market for everyone and cannot be stopped. He stated that licensing achieves three main objectives: subjecting companies to the oversight of a formal authority, allowing regulatory bodies to recover the rights of victims of fraud, and contributing to the public treasury through taxes and creating jobs.

The Forex market is considered the largest global financial market, with a daily trading volume of approximately 8 trillion dollars, and it includes around 15 million traders worldwide.

Earlier, the Palestinian Capital Market Authority confirmed to SadaNews that it had received numerous complaints from traders who were victims of fraud due to their dealings with unlicensed companies and individuals.

In this context, Jadba mentioned that the authority is handling these complaints in coordination with security agencies, but investigations take a long time due to their complex nature.

In a report titled "The Forex Market... Market Whales Devour Small Fish", SadaNews shed light on the risks of investing in this market, emphasizing the importance of trading through companies licensed by official entities, due to their subjection to the oversight of the Capital Market Authority, which sets conditions and rules to protect all parties. The report also indicated that the authority handles citizens' complaints quickly and efficiently, aiming to establish justice for both investors and licensed companies.