Forex Broker and Settlement Due-Diligence Checklist
A foreign-exchange transaction can involve currency conversion for travel, business or investment, or a speculative trading product with leverage and rollover. A due-diligence file should distinguish those activities and show the broker, settlement, ownership, fees and Shariah analysis.
This checklist is general information, not investment, exchange-control, tax, legal or Shariah advice. Forex trading can cause substantial losses. Verify the exact provider and product.
1. Define the economic purpose
State whether the transaction pays a foreign expense, converts investment proceeds, hedges a known liability or seeks trading profit. A real currency need and a leveraged speculation require different controls.
2. Identify the legal provider
Record the contracting entity, jurisdiction, FSP or other licence, representative and complaints route. Verify South African authorisation through official registers rather than a broker’s logo.
3. Identify the instrument
State whether the customer receives currency, enters a spot contract, forward, contract for difference, option or another derivative. A platform’s “forex” label does not identify the legal instrument.
4. Trace settlement and possession
Record trade date, settlement date, currency accounts, withdrawal rights and when the customer obtains control. Distinguish deliverable currency from a cash-settled price difference.
5. Review leverage and margin
Show exposure, deposit, leverage, margin calls, liquidation levels and losses beyond the initial deposit where possible. Model an adverse currency move and a market gap.
6. List every cost
Record spread, commission, platform, conversion, withdrawal, inactivity, financing or rollover charges. Calculate costs for the intended holding period, not only one trade.
7. Examine overnight amounWithdrawal test
Before committing material capital, complete a small lawful deposit, trade and withdrawal cycle. Reconcile the broker statement, bank receipt, exchange rate and fees. A successful test does not remove investment risk, but a blocked or unexplained withdrawal is a reason to stop and investigate.ts
Identify swaps, rollover, financing adjustments and “swap-free” replacement fees. Obtain the contract and Shariah rationale for the actual account rather than relying on the account name.
8. Verify client-money protection
Ask where client cash is held, whether it is segregated, who the custodian or bank is and what happens if the broker fails. Record the governing law and compensation arrangements, if any.
9. Review execution
Understand market-maker or agency execution, slippage, requotes, stop-loss limitations and conflicts. A stop order does not guarantee its price in a fast market.
10. Check exchange-control and tax records
Keep authorised-dealer, transfer, source-of-funds, trade, income and gain records. Ask current professionals to apply South African exchange-control and tax rules.
11. Record the Shariah review
Provide the adviser with the actual instrument, possession, leverage, settlement, fees and counterparty structure. Record the method and opinion date. Do not generalise from a ruling on a different product.
12. Set loss and access controls
Limit capital, leverage and authorised users. Use lawful security controls and independent statements. Stop trading when records, withdrawals or product terms cannot be verified.
Official starting points
Practical outcome: the customer should know the exact instrument, provider, settlement, leverage, total cost, custody, regulatory route and Shariah evidence before funding an account.
