Forex trading has become a very popular form of investment for many different people. Whether you live in the USA, Germany, Poland, Estonia, or indeed any other country it seems to have taken the world by storm. However, there is one aspect of online trading that many people seem to forget about, and that is regulation. While there may be no single regulatory body, individual countries usually have their own set of rules with regard to financial services providers. Estonia is no different, and regulation is left to the Estonian Financial Supervision Authority, otherwise known as the EFSA.
A brief introduction to the EFSA and Forex brokers in Estonia
Founded in 2001, the Estonian Financial Supervision Authority is the agency responsible for the supervision of the financial services industry in Estonia. Often called the EFSA, it is an autonomous agency which oversees banking, insurance, and securities markets in Estonia. It also acts as a watchdog for Forex brokers in Estonia. As with many other regulatory bodies, its aim is to act as a stabilising force for the country’s financial sector, but it also serves to protect consumers, clients, and investors.
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This may seem like a rather general description of its duties, so how about we look at its responsibilities in more detail? The roles of the EFSA is to do the following:
- Lower any risks in the financial system as much as possible
- Protect investors assets and their interests
- Stabilize the financial sector in Estonia and its monetary system
- Improve the transparency of the financial sector and enable it to remain competitive
- Increase efficiency of the financial sector.
The reason for the creation of the EFSA was a need for institutional reform of the financial sector that came about in the 1990s. It was ordered by the Bank of Estonia and the government because it was felt there was an increased need for integration and arbitration. Initially a committee was created and legislation was drafted, following which the agency was formed. Following on from an initial rejection, the reform was passed in the Financial Supervision Authority Act of 2001.
The EFSA takes consumer education very seriously
As well as being responsible for EFSA Forex brokers and overseeing the supervision of financial services providers such as banks and insurance intermediaries, the EFSA has chosen to include the education of consumers as part of its remit. To help with this endeavour it has created a website for consumers: www.minuraha.ee . Contained in the site is well-organised and unbiased information to help consumers organise their finances and make financial decisions. You will be able to find the latest news relating to financial services and the financial market, products, comparison tables and calculators.
EFSA regulated brokers follow a set of procedures with regard to customer complaints
The rules financial services providers have to follow are laid out in the regulations imposed by the EFSA. This same applies for most other regulated bodies, and the entities that are regulated by them.
Your first step if you have a complaint relating to a financial services provider is to contact the provider directly, and give them the opportunity to offer an amicable solution. It is always going to be a good idea to make your complaint in writing as this will act as a permanent record, and may come in useful in the future. It is more than possible you will be able to resolve your complaint with this course of action. However, if it is not possible, your next step will be to contact the EFSA.
The Financial Supervision Authority of Estonia will be able to offer you independent advice. It is not, however, able to take part in civil disputes or act as an extrajudicial body. This is because it is simply not competent in legal assessments. The EFSA is only able to offer advice and give you details of the agency or organisation you will need to get in touch with to assist in settling your dispute.
You do have another option, which is to take the matter to court. To do this you will have to work your way through the three-tier judicial system, starting with the county and administrative courts.
In Estonia, EFSA regulated Forex brokers also comply with MiFID
In Europe, there is a currently a Directive in force which was developed to merge EU financial markets and make cross-border investment a viable option. The Markets in Financial Instruments Directive was passed in 2007, and is currently undergoing a process of revision. This Directive regulates how financial services providers operate on an EU-wide scale. It covers all companies that provide services relating to financial instruments and where they might be traded.
The goal of the Directive is to make the rules that govern financial services firms and their operations more harmonised. This would, in turn, lead to improved transparency and customer protection, and make cross-border business much easier.
Individual regulatory bodies overseeing EU financial markets are obliged to meet the minimum standards of MiFID. Some regulatory bodies have chosen to go above and beyond the basic requirements, but even the MiFID rules and regulations are a positive step towards consumer protection.
It’s easy to check whether a Forex broker is regulated by the EFSA
There is a section of the EFSA website that lists all financial services providers regulated by the EFSA, including regulated EFSA brokers. It is therefore very quick and easy to check whether a Forex broker you are considering is regulated, and hence a much safer option. When you’ve found the name of the firm in the list you can also check a number of other relevant details such as capital stock, licence specifics, contact information, and the company register number.
You are going to be in a much better position if you choose a Forex broker regulated in Estonia by the EFSA. Of course, it is your decision, but consider what will happen if you choose an unregulated broker. Far less protection is possibly the major concern.
