Best FCA Regulated Forex Brokers In 2021
FSA UK registry contains Authorised and EEA Authorised brokers.
As FCA UK takes over, it will now be maintaining the registry, however, at this time it simply redirects to the FSA UK website.
Authorised – is an FSA UK regulated broker. A firm that FSA UK has given permission to carry out regulated activities.
EEA Authorised – is a broker that’s been registered with FSA UK, but is regulated in its home country. The EEA Authorised status is given to firms that are authorised in another European Economic Area (EEA) state and been given a “passport” by FSA UK to provide cross border services to UK citizens according to MIFID. These firms are regulated in their home country, and not by FSA UK, although must comply with standards agreed across all EEA countries.
Note from FSA UK site, quote:
“Consumers considering or currently doing business with passported EEA firms (‘EEA Authorised’), may wish to ask for further information from the firm or its UK branch about its complaints and compensation arrangements. This is because the position may differ compared to a UK authorised firm.”
About FSA (UK)
The Financial Services Authority (FSA) is an independent body, a single regulator of all providers of financial services in the United Kingdom. The FSA regulates most financial services markets, exchanges and firms. It sets the standards that must be met and can take action against firms if they fail to meet the required standards.
The Financial Services Authority regulates financial services in the UK since December 2001.
Requirements for FSA regulated brokers
Forex brokers regulated by the FSA are required to meet a number of industry standards and requirements, in particular:
- Ensure the quality of the bank in which clients funds will be held, and, moreover, continue to monitor that quality to be able to fulfil own regulatory obligations. The bank must be approved by FSA.
- Keep client funds separate from company funds, in other words, segregate clients’ deposits, which at no point can be treated.
and used as company assets including the situation when the company becomes insolvent.
- Submit financial reports to the FSA on the regular basis and undergo detail annual audit etc.
What does this mean for a retail Forex trader?
In plain language, this means higher protection of investments for any individual Forex trader.
By being obliged to keep client funds on a segregated account, an FSA regulated broker cannot use clients’ funds to cover their own needs, expenses and risks as well as utilise those funds in case of bankruptcy.
All money received from depositors is treated as “Client money” under FSA client money rules.
These rules form one of the most important parts of the UK financial regulatory system related to consumers – they protect consumers in the event of the failure of an FSA regulated company. If an FSA regulated company fails to meet its financial obligations, a liquidator would not be able to use clients’ money to meet claims of general creditors of the failed company. Clients’ funds can only be used to pay out compensation to clients who held deposits with that company.
Investors protection: the Compensation Scheme
Should the company go out of business and face liquidation, its clients are covered by the Financial Services Compensation Scheme (FSCS) – the UK’s statutory fund of last resort for customers of authorized financial services firms. This means that the FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it.
Concerning the Forex market, the compensation limits are set as follows:
Clients receive 100% the first £30,000 + 90% of the next £20,000, but no more than £48,000 in total. Another point, the FSA regulations do not require to open a separate segregated account for each client. It is enough to have one Client account for all investors, which will be fenced from the Company account. Concerning general clients’ funds’ protection, there is no major difference. Large investors might be able to negotiate a separate segregated account under their name with Forex brokers on an individual basis.
To check if a broker is registered with FCA UK use FCA Register.
Regulating the Forex market ensures fair and ethical business between parties and we would always recommend that you choose a broker that is regulated by the overseeing body in your jurisdiction. It makes trading less one-sided and forces risk management to be put at the forefront of clients minds to help protect them.