At Finance Magnates Africa Summit 2025, a pointed discussion between industry legal and compliance leaders underscored a growing consensus: regulatory shortcuts may offer early gains, but they increasingly carry reputational and financial consequences.

During a panel discussion titled "Lost & Funds: Traders’ Trust Amid Regulation and Fraud," moderator Jimmy Moyaha spoke with Eva Crouwel, the Head of Financial Crime at Hidden Road Partners, and Shawn Barnett, the Director at Norton Rose Fulbright South Africa.

The panelists, drawing from their respective roles, mentioned that South Africa’s derivatives sector is fast outgrowing its informal past, and those still relying on outdated models may soon find themselves under regulatory fire.

From Informal to Institutional

“For a large part of the traditional financial institutions in that space trust comes through regulation, and trust comes, through being able to evidence that you have and uphold golden standards when it comes to your onboarding, when it comes to the safety of your product, and the safety of your platform, Crouwel said.

“I always jokingly say that's what we sell, we don't sell cross margining, although we also do that, we don't sell credit, although we also do that, we sell trust.”

Barnett said the industry is entering a phase of regulatory self-awareness. While non-bank institutions like CFD and FX brokers once operated under looser frameworks or referral models, many are now opting for formal ODP (Over-the-counter Derivative Product) licensing, particularly to enable local rand deposits and demonstrate credibility to clients.

“In the last 18 months, people have been moving more towards the ODP licenses. I'm currently working on a couple where they've decided that it makes financial sense for them to be able to go to clients and say, "Listen, we're locally regulated, we can take your deposits locally, and then from there, they can of course hedge with liquidity providers all over the world.”

Compliance or Consequences

That pivot, however, has come too late for some firms. Barnett revealed his team is currently involved in multiple investigations into brokerages operating without proper licenses—cases that have seen client funds frozen by the South African Reserve Bank due to exchange control violations.

“We've had brokerages that took cash deposits in a referring broking model, in other words where they had no ODP license in South Africa but were merely referring clients offshore and those cash deposits were blocked in South Africa because the Reserve Bank said and quite correctly that when an individual is investing with an offshore institution it has to take its money offshore, can't keep it in South Africa.”

Red Flags for Retail

For retail traders, the conversation took a cautionary turn. Moyaha pressed the panelists on how ordinary investors can identify trustworthy brokers in an increasingly crowded—and occasionally predatory—market.

Barnett urged clients to look past glossy marketing and ask hard questions about licensing, advisory authority, and operational transparency.

“If you believe at any point this brokerage has given you advice, you should ask yourself did they ever ask me questions around whether this is an appropriate investment for me, did they do an assessment of how I should be looking at these instruments, did they do any record of the advice they give me. And I promise you in almost 90% of those cases that does not happen.”

More from FMAS:25: “By the End of 2010, Every Second Person in Cape Town Was Trading,” FMAS:25 Leaders Roundtable

Crouwel echoed the sentiment, adding that aggressive onboarding, easy deposits, and inflated returns are often warning signs. “A fast buck is an expensive buck,” she said.

“Due diligence is a process where you establish trust and where you establish reputation, and only if you're satisfied with that should you be trusting people with your money.”

The Regulatory Road Ahead

The panel concluded with a forward-looking view on regulatory evolution, particularly as South Africa prepares for the introduction of the Conduct of Financial Institutions (COFI) Bill.

Barnett warned that many client agreements in the market today remain “materially non-compliant,” giving brokers excessive discretion over client assets. “These agreements wouldn’t survive a test for treating clients fairly,” he said.

“Once COFI comes in, we’ll see much stricter conduct standards—similar to what’s already been implemented in insurance. Once COFI becomes law, and it will essentially replace numerous other financial market legislation, the conduct standards we'll see under that will be very “treat your customers fairly focused.”

Crouwel welcomed the development, but stressed that investors must also evolve. The message was clear: in South Africa’s evolving derivatives and crypto landscape, regulation is no longer a future concern; it’s now the cost of doing business.

Source: Finance Magnates