Every year, over 30 million people fall with them to investment fraud, and each investor faces an average loss of around $15,000, with accumulated losses running into millions of dollars. What is more surprising is the fact that victims of investment fraud score much higher on the financial literacy measures than non-victims. The average scores for the two are 58% and 41%, respectively.
So, what makes it easier for so many investors to get duped? The basic nature of any investment or trading fraud is to avoid raising suspicion. Legitimate financial brokers and high returns often go undetected for many years. This is why investors are constantly looking out for regulated brokers like Nemo so that security, trust, and their hard-earned money are never compromised.
Regulated brokers offer layers of protection for investors and traders alike and provide them a secure market access. This article will take a look at the importance of trading regulations, popular regulatory bodies around the world, ways to check if a financial broker is regulated and licensed, and factors that investors look for in regulated brokers.
Importance of forex trading regulation
Whether you are trading foreign currencies or stocks, regulation is the cornerstone of security and reliability. Regulatory authorities are set up by financial institutions or governments to supervise forex brokers. The authorities are in place to ensure traders are protected from market manipulation, fraud, and malpractices.
Regulation. A dull word at dinner parties, but a bedrock in the financial world. Without it, the brokerage industry would be less Wall Street and more Wild West. In essence, regulation forces brokers to play by a rulebook — one not written in disappearing ink. The more robust and enforceable the rules, the less likely traders are to find themselves duped by a shady operator in a slick suit and a sales pitch soaked in jargon.
What regulation offers is trust. It cultivates transparency, ensures timely disclosure, and compels brokers to behave as though someone is watching — because someone usually is. The whole point is to let traders make decisions based on reliable, verifiable information, rather than gut instinct and blind faith.
Popular regulatory bodies for trading and investment
In the United Kingdom, the Financial Conduct Authority (FCA) reigns with a reputation for precision, prudence, and a rather British intolerance for nonsense. It is often hailed as the gold standard in consumer protection.
Hop over to the sun-drenched shores of Cyprus, and you’ll find the Cyprus Securities and Exchange Commission (CySEC) keeping a watchful eye on EU brokers. While CySEC may lack the FCA’s stiff upper lip, it enforces regulations that serve as the EU’s baseline for broker behavior.
Down under, the Australian Securities and Investments Commission (ASIC) gets the job done with a no-nonsense tone and a fondness for enforceable standards. Brokers in Australia know the drill: comply, or prepare to have a very uncomfortable conversation.
In the land of lawsuits and leverage, the United States turns to the Commodity Futures Trading Commission (CFTC). If you try to get clever with commodities or forex in the U.S., you’d better know how to spell “subpoena.”
Switzerland, being Switzerland, has its polished watchdog — the Swiss Financial Market Supervisory Authority (FINMA). Imagine regulation wrapped in Swiss precision, wrapped in more regulation.
While these regulatory bodies don’t share a universal handbook or handshake, they do have a common mission: to defend the integrity of the financial markets and protect those who dare to trade in them. Some swing with hammers, others with gavels, but all are gatekeepers against financial chaos.
Benefits of choosing regulated brokers for safe market access
There are advantages to selecting regulated brokers, and more likely, they will engage the standards of the financial industry, which provides greater levels of accountability. When investors find platforms that promise profits guaranteed, or leverage that is higher-than-usual without risk warnings, great care should be taken, because these signs are mostly indicators of a scam or fraud. Consequently, transparency must be accounted for while selecting regulated brokers.
The benefits of selecting regulated brokers include:
- Client fund protection: Regulated brokers will put clients’ funds in an account that is separate from the company’s account. The regulated companies must have this practice in order for them to follow through on clients’ money and have it untouched and available to clients, even during possible financial difficulties.
- Financial compensation scheme: In case a regulated broker ever becomes insolvent, under the Financial Services Compensation Scheme (FSCS), the clients are eligible for compensation of up to £85,000 per eligible claim.
- Transparent practices and pricing structure: Regulated brokers need to keep all information clear and transparent, whether it’s about their fees, risks, or services. Any hidden charges or misleading advertisements are strictly prohibited.
- Access to dispute resolution: Traders who use regulated brokers can escalate a complaint to the regulatory body if the issues remain unresolved by the brokers even after some time.
Ways to check if a broker is regulated and licensed?
To check if a broker is licensed and regulated, the first thing that an investor needs to do is determine the regulatory body overseeing the broker’s operation. Essentially, this depends on the jurisdiction where the financial broker is situated, the investor’s country of residence, and the tradeable products or services offered. Any broker accepting clients from different countries will have different regulatory bodies to allow the onboarding of traders from various regions and countries. Before registering with any broker, find out the legal entities that you will be dealing with as well as the regulatory bodies overseeing that particular broker.
Visit the official website of the broker and navigate to the bottom of the page where all the regulatory and licensing information is available. It includes the regulatory authority’s name along with the brokers’ licensing or registration number. Furthermore, traders can also verify the information with their relevant regulatory body, who have databases available online for investors to search for investment firms and registered brokers.
What do investors look for in regulated brokers?
Professional investors know exactly what to look for in investment brokers. As a new trader or investor, when comparing and choosing a regulated broker, here are some examples of aspects to look for:
- Regulatory compliance – A regulated broker is governed by a recognized regulatory authority to secure the trader.
- Spreads & commissions – When comparing brokers, assess the spreads and commissions, as you should look for a broker that offers competitive pricing.
- Trading platform – Select a viable trading platform that is reliable and user-friendly with order execution systems and charting.
- Leverage & margin requirements – Understand the leverage and margin requirements of any broker that you select and ensure you choose a platform with suitable trading options to meet your investment strategies.
- Educational resources – Choose brokers with educational resources such as crypto trading guides, market analysis, tutorials, and webinars, as this will assist the traders in enhancing their trading skills.
- Customer support – A regulated broker is likely to have a clear form of customer support via live chat, email, or phone, and one that is helpful and responsive.
Conclusion
With regards to online trading and investing, a broker acts as a partner that must be reliable and trustworthy, providing investors with the proper setup and tools to help them achieve profitable investment and trading.
Novices should always seriously evaluate financial brokerage, as it can affect the overall trading experience as well as profitability and risk. There are two things to consider when looking to select a good broker. Finding a regulated broker. This is the most important thing for anyone serious about the financial markets; using a regulated broker like Nemo provides the necessary peace of mind, always knowing that your funds are being well-protected at all times, and the brokers follow strict regulations.
Added to that, check to see if the broker is regulated, along with other aspects like a free, transparent, and quality platform, so you can form a solid base of support for your trading.
