FCA Forex Brokers and the UK Regulation

The Financial Conduct Authority (FCA) in the UK is deemed to be one of the most reputable regulatory organizations in the world for regulating Forex brokers and other financial entities. The FCA oversees the process of regulating companies in conjunction with the Bank of England and the Prudential Regulatory Authority, although, the process of regulating financial companies in the UK was carried out by the Financial Services Authority (FSA) before 2013. A resolution by the UK Government saw the regulation of the financial industry being split into different entities, which helped in streamlining the entire process of regulation and ensuring integrity and transparency of the UK’s financial markets.

The FCA is part of the EEA (European Economic Area) agreement and the MiFID derivative, which allows FCA regulated brokers to operate in any part of the European Union without setting up additional offices in any other European country. The MiFID derivative has stipulated a baseline for the regulatory framework, which is enforced through country-specific regulatory organizations throughout the EU. The UK is one of the few critically acclaimed countries in the world that has an excellent regulatory system in place to prevent financial malpractices, broker scams, as well as other instances of frauds that affect both retail as well as institutional traders.

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FCA Regulated Brokers’ Commitment Towards Protection Of Client Funds

FCA is committed to the protection of customer funds by following several regulatory protocols that prevent FCA forex brokers from committing any financial frauds. All FCA regulated Forex brokers should adhere to the strict guidelines enforced by the FCA from time to time. FCA brokers keep their client funds in segregated accounts away from their company accounts, and should not use their traders’ money for any other purposes. To ensure that all UK Forex brokers can maintain their clients’ positions in the market, every FCA regulated broker should have at least £1 million in operating capital, which increases according to the number of traders and the trading capital. Brokers must ensure that all withdrawals are processed instantaneously and that the company can meet all financial obligations without fail.

FCA directs all brokers to submit yearly audit reports and periodic financial statements of their holdings to verify that all the facts provided to the FCA are accurately represented. FCA is very stringent when it comes to the financial reports of its member firms, and actively works with third party audit firms and the member brokers to ensure that the financial data tallies up according to the expectations.

Traders can also be assured of the safety of their trading capital against broker issues such as bankruptcy or insolvency, as FCA regulated FX brokers are required to protect their clients under the FSCS (Financial Services Compensation Scheme). The FSCS is aimed to offer protection for traders against broker-related issues by providing a guarantee of up to £50,000 in compensation. In the case of broker liquidation, traders can receive a 100% of their capital up to £30,000 and a maximum of 90% for the remaining amount for a maximum of £50,000. The FCA is commended for offering such a compensation scheme for its investors, as most of the regulatory authorities from different parts of the globe do not provide such an incentive for their investors.

How Does FCA Tackle Financial Abuse?

Investors are encouraged to exercise their rights while dealing with fraudulent Forex brokers that fail to adhere to the FCA guidelines. If any trader is not satisfied with the level of service, or if investors believe they are being scammed by a broker, the FCA recommends the services of a financial Ombudsman or approaching the court for finding an amicable resolution. The FCA does not personally get involved in any conflict between a company and its client, but the FCA will investigate any instances of fraud or consumer abuse.

If found guilty, the FCA will revoke the licenses and issue hefty fines to the perpetrators, and can even permanently ban the broker from operating in the UK. The FCA has an excellent online database that provides a vast amount of information on regulated brokers, new scams findings, financial malpractices, and other relevant data that can help the investor to learn more about a company before investing. The FCA has been granted immense powers by the UK Government to bring businesses in line with the existing rules and framework, and as an independent agency, the FCA actively seeks out financial scams to deter companies from committing any offense.

The FCA also has strict rules regarding price manipulation, platform tampering, and conflicts of interests with its clients. Although market makers and dealing desk brokers tend to open opposing positions against their clients, the FCA has made it clear that there shouldn’t be any conflict of interest between a broker and the trader. Therefore, most existing Forex brokers regulated by the FCA tend to stick to ethical brokerage practices and are less prone to financial scams such as price manipulation and platform rigging.

How Can I Trust The FCA?

The FCA is a non-profit organization that does not use taxpayer money for its operations. The FCA is funded entirely through membership fees, and it answers to the UK Parliament regarding its regulatory framework. Being a fully autonomous agency, the FCA works for a trader, rather than against him. The FCA follows several procedures to increase the trust and confidence among investors. Every FCA regulated Forex broker receive a unique ID, which can be verified with the official FCA database. It so happens that many brokers claim to be based out of the UK, but to ensure the authenticity of such brokers, the FCA recommends traders to verify the authenticity of FCA regulation personally.

FCA regulatory verification can be done by performing a quick search on the online FCA database to check whether the FCA number matches the description provided by the broker. FCA regulated brokers are also required by the FCA to advertise the UK regulatory information prominently, and traders can always ask their broker about their current regulatory status. The FCA website has an up-to-date portal that provides all facts about a broker and a brief history of its operations, which helps traders to learn about any potential scams and legal lawsuits faced by a broker.

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