Traders in the UK Should be Looking for the Best FCA Forex Brokers
The FCA (Financial Conduct Authority) is responsible for the regulation of financial services in the UK. It was formerly known as the FSA (Financial Service Authority) but changed its name in 2013. Along with its reincarnation came a new regulatory body known as the Prudential Regulatory Authority, which is wholly owned by the Bank of England. It has responsibility for the prudential regulation and supervision of banks, building societies, credit unions, major investment firms, and insurers. It is also responsible for the setting of standards and supervision of financial institutions on an individual firm level.
What is the FCA?
The FCA is the UK’s regulatory body that has responsibility for regulating financial firms which provide services to consumers, with the aim of maintaining the integrity of financial markets in the UK. Its main focus is regulating the conduct of retail and wholesale financial services companies. It is a structured company that is limited by guarantee.
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The FCA is responsible for overseeing the operations of more than 50,000 firms. It is mandated to step in when FCA regulated brokers treat their customers unfairly or behave in ways that are a risk to the integrity of the market. It not only regulates but also investigates complaints and enforces laws in regard to broker infractions. There are two parts of its regulation that are designed to increase consumer protection. These are:
- An FCA Forex broker has to place any funds belonging to clients in an account which is separate from the company accounts used to finance its day to day operations. This is known as account segregation.
- The FCA operates the Financial Services Compensation Scheme. This scheme was set up to provide a full refund of trading capital up to £30,000 along with 90% protection for account capital up to £20,000 should an FCA regulated broker be declared bankrupt.
The FCA has also been responsible for issuing certain guidelines to ensure brokers comply with the best industry practices.
The FCA guidelines for regulated Forex brokers
Forex brokers regulated by the FCA are expected to shop around for the best possible deal when acting as the counterparty on behalf of its clients. If a broker is found not following this rule there could be a substantial fine. As in the case of FXCM who were fined for withholding profits accruable from favorable slippage, while passing along the full cost of unfavorable slippage to clients. The FCA has recently upped its game with regards sequestration of clients funds. FCA Forex brokers are required to provide periodic reports that contain certain data such as capitalization and value of segregated client funds. If a regulated broker fails to provide such information, is found guilty of withholding it or there is a lack of transparency, hefty penalties will be imposed.
All of these measures and several more, help to protect Forex broker clients in case anything goes wrong with the broker. Choosing to pick an FCA regulated broker will therefore be far less risky.
Is it easy to find out whether a Forex broker is regulated by the FCA?
Much like many other regulatory bodies, the FCA maintains a register that is accessible to the general public. It is called the Financial Services register and can be found on the Authority’s own website. The register contains a record of all firms, individuals and other entities that are or have been regulated by the FCA. The firms that are registered are able to conduct regulated activities or provide regulated products, which is the category that Forex brokers fall into.
It’s relatively easy to find out the status of an FCA regulated Forex broker. But you may encounter some terms you are unfamiliar with. So let’s give a brief explanation, to help you find out the kind of broker you are dealing with and whether you are protected if things go wrong.
Appointed representative – This refers to a firm that may be acting on behalf of an authorized firm that has to account for its activities
Appointed representative former – This refers to a firm that is no longer authorized to carry out the type of business regulated by the FCA
Authorized – This type of firm is authorized by the FCA to carry out regulated activities in the Forex and other markets
Authorized applied to cancel – This firm has applied to cancel its previously issued authorization
Authorized in liquidation – This firm is in liquidation and intends to stop doing business in the future or it may already have stopped
Authorized suspended – This firm will still be authorized by the FCA but has had its license suspended for a certain period of time
No longer authorized – This firm is no longer authorized to carry out certain types of FCA regulated business
There is also another term you might find in the registry. A cloned firm is when fraudsters try to use the details of an authorized firm to try to convince people they are the genuine article. The FCA are kind enough to help you protect yourself by sharing some basic tips. We’d advise all of you to spend a few minutes reading their advice.
The benefits the FCA provides for the consumer
Whether you’re looking for an FCA Forex broker or any other kind of financial service the FCA is there to oversee the functioning of the company and how it interacts with you, the consumer. Its main aim is to protect you against all types of fraud and financial crime. It serves to guarantee that market integrity is kept intact. One of the ways it does this is by auditing all registered organizations, and not just the financial side but a company’s conduct as well.
The FCA also serves to promote healthy competition because it allows companies to attract clients in the interest of fair and honest services. Basically, the FCA is a financial watchdog that aims for consumers to be able to benefit from the healthy competition that is brought about by an open and transparent market.