In the world of Forex and commodity trading, the majority of investors prefer to trade with regulated Forex brokers as opposed to non-regulated Forex brokers. Ensuring that the Forex broker you are trading with is a regulated Forex broker is one of the main criteria that investors look for before choosing a broker. In order to verify if a Forex broker is a regulated Forex broker, you will need to first of all find out which country the Forex broker is registered in. The local regulatory authority for investment firms will usually be the regulator of any regulated Forex brokers; the details of which are usually available within the website of many of the investment form regulators. Regulated Forex brokers will be accountable to their local supervisory authority for their actions as they are given usually a strict set of guidelines which they must follow.
Subsequent to their acquirement of a license from their local investment firm regulator, Regulated Forex brokers are continuously (usually on a yearly basis) monitored and audited to ensure the regulated Forex Broker’s compliance with the set of rules laid out by the regulatory authority. Such rules may vary between different regulatory authorities, however most will impose the need for a regulated Forex broker to maintain a minimum level of assets (usually in accordance to the investment service (s) provided by the broker) and ensure as much as is possible a smooth and un-interrupted flow of its service to its clients.
Deviation from the rules and guidelines set out by the regulators may result in the regulated Forex brokers having to incur a financial fine and in serious scenarios may have their license provoked. The accountability of the regulated Forex brokers to their supervisory authority ensures that the client’s are protected financially and will receive a certain level of service. Subsequent to the number of rules and conditions that a regulated Forex broker needs to follow and adhere by, the majority of regulated Forex brokers tend to advertise the fact that they are regulated within their own website.
Rules that regulated Forex brokers must meet/follow:
As a client of a regulated Forex Broker, an investor can rest assured that the following measures are taking place by its broker, subsequent to its regulation:
Any funds deposited within a regulated Forex broker will be held within segregated bank accounts from the company’s funds – this money cannot be used for the regulated Forex broker’s financial activities and as such provides comfort to investors that should their regulated Forex broker run into financial difficulties, that their funds are safe. The regulated Forex broker will carry out its operations with complete transparency for each client’s financial account, including the collection of required financial documents from clients. A frequent set of financial reports are submitted by the regulated Forex broker to its supervisory authority for scrutiny.
Regulatory Authorities
The three main regulators that account for most regulated Forex Brokers are the Cyprus Securities and Exchange Commission (CySEC) of Cyprus, the Financial Services Authority (FSA) of the UK and the National Futures Association (NFA) of the USA.
- Other common regulatory authorities that supervise regulated Forex Brokers include:
- ASIC (Australia)
- OSC (Canada)
- DFSA (Denmark
- BAFIN (Germany)
- FSA (Japan)
- GSCGI, Polyreg, OAR-G, ARIF CFB, SFDF (Switzerland)
- SEC, CFTC (USA)
The above list of supervisory authorities for regulated Forex brokers will impose a minimum set of legal requirements that the regulated Forex Brokers will need to maintain, some of which may vary in accordance with each regulatory body. There is a minimum requirement to maintain a certain level of financial assets in accordance with the investment services provided by the regulated Forex brokers and insure the continuous flow of service to its clients and the compliance of a various number of strict procedures and standards.