Cairo, Egypt, May 18, 2023- Getting acquainted with the regulatory bodies and their function in the FOREX market is an essential first step. These governmental organizations are responsible for overseeing and regulating the FOREX sector. Their primary duties include:
Monitoring and supervising the FOREX market operations.
Ensuring investor and investment safety.
FOREX companies must possess at least one license issued by a relevant regulatory body. Failing to do so should serve as a red flag for investors. Here are five of the most recognized and stringent regulatory authorities in the FOREX market:
The Financial Conduct Authority (FCA), UK.
The Swiss Financial Market Supervisory Authority (FINMA), Switzerland.
The Australian Securities and Investments Commission (ASIC), Australia.
The Financial Markets Authority, New Zealand.
The National Futures Association (NFA), US.
Although almost every country has its regulatory bodies for the FOREX market, these five are considered the most rigorous. For information on other regulatory bodies.
How to Confirm Your Broker’s Authorization
According to Arincen’s Best FOREX brokers article, To ascertain whether a FOREX broker is properly regulated, locate the registration number provided by the regulator on the broker’s website. You can then cross-verify this number on the financial register available on the regulator’s website to ensure that the broker is adequately licensed. For comparison, you can check if several competing brokers in the same country are regulated by the same authority. Most regulator’s websites also provide detailed information about their mandate in the “About Us” section.
FOREX Brokerage – What’s Allowed and What’s Not
One of the initial steps for a new FOREX trader is to understand the rules and regulations a FOREX company must abide by. Key focus should be on the permitted and prohibited activities.
Here are seven things FOREX brokerage firms are not allowed to do:
- Advise clients to buy or sell.
- Provide market or price predictions.
- Manage your financial transactions (deposit/withdrawal).
- Handle your portfolio.
- Offer bonuses to clients without explicit, predefined terms.
- Use bank accounts not registered in their name.
- Offer account management services.
In essence, the role of brokerage firms is strictly limited to connecting buyers and sellers for a pre-agreed commission. Any FOREX brokerage firms violating any of the above rules should be avoided.
Avoiding FOREX Trading Scams
Top-notch regulators actively monitor scam activities and circulate information about illegal brokers operating within their jurisdiction. It’s beneficial to subscribe to the consumer information service offered by your broker’s primary regulator to receive updates about recent scam activities.
Subscribing to this service will also provide information on how to report suspicions about fraudulent activities or scams. This strategy can significantly help protect yourself from common FOREX scams.
Protection of Your Funds in Case of Broker Insolvency
Certain tier-1 brokers, like the FCA and the Cyprus Securities and Exchange Commission (CySEC), have compensation schemes that reimburse investors up to a certain amount if a broker becomes insolvent or engages in wrongdoing. It’s important to note that not all, even tier-1, regulators offer such compensation schemes. Therefore, it’s advised to ask your broker directly about investor protection measures they have in place. Some brokers may have private, third-party insurance and compensation facilities, which can be beneficial if the domestic regulator doesn’t provide compensation.
The bottom line
In conclusion, navigating the FOREX market requires a thorough understanding of regulatory bodies, their role, and the rules and regulations that govern FOREX companies. It’s crucial to ensure your broker is licensed by a respected regulatory authority, and to be aware of the limits of a brokerage’s role in your trading activities. Always stay informed about potential scams and understand the protective measures in place in case of broker insolvency. Armed with this knowledge, you can make informed decisions, protect your investments, and successfully participate in the dynamic world of FOREX trading.
Contact:
Name: Shaimaa Raouf
Phone: +201032021871
Location: Cairo, Egypt
Website: https://en.arincen.com/
