How to Verify a Broker’s Regulation Status

When selecting a forex broker, you are always recommended to select one that is regulated, but you may be wondering how you can verify that your chosen broker is registered where they say they are. Each of the major financial regulators has a register that you can search for the details of your broker. However, whilst all forex platforms do have to publicly state the details they’re registered under, it can sometimes be tricky to find these key pieces of information. 

In this article, we will both direct you towards the registers for you to check if your broker is regulated by the FCA, CySEC, or NFA/CFTC in the USA, and where to find the crucial information that the brokers will have registered under, so you can be 100% certain that the broker you’re looking at is the one registered under that brand name or domain. 

Why should I choose a regulated broker?

Choosing a regulated broker is an important step towards minimising the risk in forex trading. A broker who is registered with a top-tier financial authority must legally provide certain protections to traders, as well as submit frequent accountancy records. 

The reason why we talk about top-tier regulators is that these offer the highest possible protections, which can begin to reduce the risk of trading in forex markets. The biggest factor of top-tier regulation is that these brokers must have segregated accounts, where all client monies are kept completely separate from the business’s operational funds - they cannot use your money to keep their own business afloat. This also means that if the business were to declare bankruptcy, you would still be able to withdraw your money from the platform, as it is kept in a separate account from the business. 

Another major regulatory factor offered by the best financial authorities is negative balance protection, meaning that all traders will never owe the platform any money if their trades wipe out their account balance. You only go back to zero, which means you can start over without being entangled in owing money to the platform for failed trades. Ultimately, this makes up part of the ethical factors that regulators such as the FCA, NFA/CFTC, and CySEC require for brokers to be registered with them. Other ethical factors include that all trade executions must be fair, with no manipulation of prices on the platform, as well as limiting the leverage that a trader can use in making a trade to ensure that there is not too much untoward risk being taken in any transaction.

All brokers registered with a top-tier regulator must have their trading conditions audited regularly, whilst their accounts must be submitted every quarter to ensure that the business is financially stable enough to operate. These regulators also offer protection directly to traders, as they can provide arbitration and dispute resolution facilities for those who make a complaint about their forex broker.

How can I verify that my broker is regulated?

Now that you understand the importance of choosing a regulated broker for your forex trades, it’s time we showed you exactly how to verify that the broker you want to use is regulated in your financial markets. Each major regulator keeps a publicly available list or searchable database of every registered broker. This means that as long as you have the right information about the broker, you can verify if they are registered with the authorities they say they are. 

Firstly, let’s find those key details that brokers publish for you to identify who they are with a broker. These are usually published in the footer of the broker’s website, and if they are registered with multiple authorities, the footer will be quite a long text area. You will need to note the license number and the business’s operational name specifically relating to the authority you want to check it against. It can also be useful to note the URL of the broker’s forex platform too, as this is needed in some cases. 

For US-based brokers, you can use the FINRA BrokerChecker tool and select the firm option, inputting either the license number or the firm’s name. The results will show you whether or not your broker is authorised or not. The process is the same for UK-based brokers, where you search the license number or the name of the firm on the FCA Register. The results here are slightly more detailed, as you can actually see exactly what protections are offered to you as a customer of that broker, and if the broker is no longer registered, the results will even tell you the exact date that the broker lapsed their registration under the authority.

As most EU-based forex platforms choose to register with CySEC, their Entity Registration list is your first port of call to verify if the platform is regulated or not. Here, you only need to scroll down the list, looking for either the name of your broker or their registered domain. You should always be a little wary of platforms that operate under offshore licenses, as these agencies offer weak oversight compared to those protections we highlighted earlier that are specified by top-tier regulators.

Selecting a regulated broker has never been easier

Nowadays, there are so many platforms available that it can be a little tricky to know where to start. One way to begin to create a shortlist of potential brokers for you to register with is to browse a list of EU regulated trading platforms where you can have confidence that the brokers listed have been vetted and the list is kept up to date.

It is important that in forex trading, you minimize risk as much as possible. The best way that you can begin to do that is to start by selecting a broker that is regulated by a top-tier agency. As they offer you many protections, both over your funds and your trades, you can start implementing your chosen trading strategy with confidence that you are the only person in charge of your forex destiny, and that a sub-par platform is not going to be the cause of your failures.