In terms of sleeping well at night knowing that your money is secure, there is simply no comparison between choosing a regulated broker and unregulated broker. Putting things into simple terms, unregulated brokers have nothing in their way of deciding to keep your money and telling you that placed a bad trade (or in many cases, advising you to make trades or making the bad trades themselves). Whether they scam you right away or down the line after they’ve earned your trust one thing is for sure, a financial institution that is being trusted with people’s money needs to be held accountable.
Luckily there are government run regulators (watchdogs) that scrutinize the financial institutions in their regions and their rules and regulations are enforceable by law. This helps investors rest easy knowing that if any foul play is observed, they have where to turn to make things right. Unfortunately in recent years a trend has started where countries who don’t have the cleanest records in the corruption department have formed regulatory bodies. These regulatory bodies are obviously as big of scams as the governments are who back them. This article will review which regulators you can trust, and which you can’t.
There are many countries world wide that have trustworthy watchdogs overseeing the financial service industry in their region. However for the sake of our audience we’re going to focus on the most commonly used regulators in the Forex and CFD trading industry. This is not to say that others are not trustworthy, and feel free to contact us if you’d like our opinion on a regulator that’s not listed here.
The Financial Conduct Authority (FCA)
The United Kingdoms watchdog has a reputation of taking a hard line approach to financial misconduct and practices extremely high standards in terms of who they allow to be granted and maintain an FCA license. In recent years the FCA has made a point of cracking down on anyone targeting UK citizens through trading scams or misconduct. They are a respected authority and are held in high esteem by regulators of other countries. The FCA at times will make recommendations to regulatory bodies from other countries to investigate brokers that are not UK based if they have reason to believe that there is something needing investigating.
For the above reasons, we can conclude that in the world of Forex and CFD’s, if a company has been granted permission to offer services under the FCA, this company can be trusted as a legitimate financial institution or service provider.
It’s important to make sure if a company is claiming to be regulated by the FCA that their regulatory license checks out on the FCA website.
The Australian Securities and Investments Commission (ASIC)
Much like the FCA in the UK, the Australian Securities and Investments Commission is a hard working government organization that does not tolerate any sort of misconduct in the financial arena. As Forex, binary options and crypto scams have plagued Australians over the recent years, ASIC has taken things a step up and is constantly on the prowl. If your broker is listed as an authorized financial services provider on the ASIC website, you can trust that they are who they say they are.
In short, ASIC regulation is one of the best.
The Cyprus Securities and Exchange Commission (CySEC)
Now is where things get tricky. We have not included CySEC in this list because they are the best, in our opinion they are by no means comparable to the FCA or ASIC. However they are one of the commonly found regulatory licenses found with CFD brokers and Forex companies. Technically speaking, a license from CySEC authorizes a company to offer financial services throughout the EU. For this reason alone it is a very popular license to have.
How safe are CySEC regulated brokers?
In our experience, not so safe. While having a CySEC license doesn’t necessarily raise any red flags, it also doesn’t ensure you that the broker is fully accountable. If a broker has a CySEC license along with another license from one of the trusted regulators this helps give credence to the trustworthiness of the broker. To be clear, CySEC is a government watchdog and they do scrutinize companies when enough pressure is placed on them. They also administer heavy fines and will suspend a brokers license if they do not correct their ways. However we’d prefer brokers who don’t need their ways corrected for fear of the smallest infraction costing them their business.
In conclusion, if a broker is license by CySEC and by the FCA or ASIC, they can be trusted. If a broker is only regulated by CySEC, more research is needed in-order to know what the broker is about.
There are many and we will list a few of the commonly used ones here. The rule of thumb is, if the regulatory body is located on a remote island or a small country that is well known for it’s corruption, that would be an unreliable regulator. These organizations have a pay to play policy and offer offshore brokers whatever they want in exchange for a fee. You can best assume that there is no level of accountability with a regulator like that.
The International Financial Services Commission (IFSC)
Located in Belize, a hotbed of financial corruption on a government level the IFSC is the first “regulator” to look out for. If you check out the IFSC’s website they’ll tell you that they are “a statutory authority established in Belize to regulate and supervise the international financial services sector”. However if you look into any of the companies that they regulate, you will find them to be fully blown scams. The offshore brokers that carry the IFSC license often don’t even try to hide their agenda by making outrageous offers on their websites with some stating guaranteed returns of 15% per day.
Is the IFSC trustworthy?
If a company carries an IFSC license, this in it of itself is enough for them to be suspected as a scam broker.
The Cayman Islands Monetary Authority
You may have heard of individuals storing their money in offshore accounts such as the Cayman Islands for all sorts of interesting reasons, but for our purposes we need to know if the Cayman Islands government is trustworthy to ensure proper conduct within the financial service industry. The good news is that we’ve done the work for you and the answer is a resounding no.
Are CIMA regulated brokers trustworthy?
CIMA regulated brokers are not trustworthy whatsoever and have zero level of accountability. This means that they can steal your money and no-one will do anything about it.
There are dozens more regulators that should and shouldn’t be trusted. Feel free to contact us for specific cases.
Looking for a broker who’s regulated by the FCA and ASIC? Check out our Fortrade Review to see if they’re right for you.