Brief comparison of UK FCA vs ASIC regulations results in several similarities and differences. You need to know these before choosing your brokers.

UK FCA vs ASIC Which Forex Regulator is More Reliable

FCA forex brokers are famed as some of the best in the industry. But, how do the UK-based FCA compare against ASIC which is equally popular in Asia and Australia? Which forex regulator is more reliable and trusted? Let's learn what it means for forex brokers to have FCA and ASIC licenses.

While both are equally good, the two of them have some differences.

  1. FCA: Govern in the UK and have stringent laws that ensure transparency, security, and fairness in all dealings.
  2. ASIC: Govern in Australia and known to be stringent in its licensing and supervision.

However, when it comes to regulations, there are more than to meet the eyes. What else should trader knows about this?

 

Brief Comparison of UK FCA vs ASIC Regulations

UK Financial Conduct Authority (FCA) is known for its stringent laws and regulations that ensure transparency, security, and fairness in all dealings. Therefore, FCA-licensed forex brokers are generally considered trustworthy. But, what does it mean to be an FCA-licensed forex broker?

  1. The company has fulfilled FCA's minimum capital requirement. A dealer's license that allows the company to run a "market maker" business needs EUR730,000. An intermediary license where the company could facilitate STP execution needs EUR125,000. The cheapest is a restricted broker license in which the company cannot hold client funds, as it only needs EUR50,000.
  2. FCA will monitor the company continuously to ensure the segregation of client funds, monthly report and audit, efficient management including AML and KYC procedures, and proper risk disclosure for clients.
  3. FCA-licensed forex brokers are prohibited from manipulative trade practices, such as entering into positions against their clients. Brokers also should not make unrealistic promises or offering monetary benefits to encourage clients to take risky trading decisions. Any violation would invoke a harsh penalty.
  4. FCA-licensed forex brokers should not offer extreme leverage. Since mid-2019, FCA requires brokers to limit leverage on CFD trading between 30:1 and 2:1.

Australian Securities and Investment Commission (ASIC) is relatively lax compared to UK FCA. However, the leading Antipodean forex regulator is increasingly stringent in its licensing and supervision. Here's what it means to be an ASIC-licensed forex broker currently:

  1. All ASIC-licensed forex brokers are required to hold at least AUD1 million in operating capital.
  2. Like FCA, ASIC will monitor the company continuously to ensure segregation of client funds, periodical report and audit, efficient management including AML and KYC procedures, and proper risk disclosure for clients.
  3. ASIC Forex brokers are not allowed to have any conflict of interest with their customers. This is the reason why Australian Forex brokers usually offer direct market access through ECN or STP facilities.
  4. ASIC allows leverage for forex and CFD trading up to 30:1.

At first glance, the two regulators have equally stringent rules. However, there is one edge that only FCA-licenses have.

FCA also requires every licensed company to join the UK Financial Services Compensation Scheme which would protect consumers in case of bankruptcy or financial failure. FSCS protects client's money up to GBP85,000 for all FCA-authorized companies. The fund protection extends for both UK and non-UK residents. ASIC has no such requirement yet.

 

Which Forex Regulator is More Reliable?

For better judgments regarding which regulator is reliable, traders can use several factors to determine this. Some of them including the jurisdictions and each regulator's disciplinary rules.

 

ASIC

The Australian Securities and Investments Commission or ASIC is the regulatory authority overseeing corporate activities, financial markets, and financial services in Australia.

They regulate Australian corporations, financial markets, financial services organizations, and professionals involved in investments, superannuation, insurance, deposit-taking, and credit. Their role is to ensure compliance with regulations and standards, promoting integrity and consumer protection within these sectors.

ASIC (Australian Securities and Investments Commission) has the authority to take disciplinary action against financial services firms, individuals, and entities that breach the regulations and standards set by the commission. Here are some key points regarding ASIC's disciplinary actions:

  • Regulatory Powers: ASIC can investigate potential breaches of financial regulations and take enforcement action when necessary. This includes conducting surveillance, initiating inquiries, and undertaking legal proceedings.
  • Types of Disciplinary Action: ASIC can impose a range of disciplinary actions depending on the severity of the breach. These actions may include issuing warnings or infringement notices, imposing fines or civil penalties, suspending or canceling licenses, and initiating criminal prosecutions.
  • Public Enforcement Actions: ASIC may publicly disclose its actions against individuals or entities. This helps promote transparency, accountability, and awareness within the financial industry and serves as a deterrent against non-compliance.
  • Administrative and Legal Processes: ASIC follows established administrative and legal processes when undertaking disciplinary action. This includes allowing individuals or entities to respond to allegations, conducting investigations, gathering evidence, and presenting cases before relevant tribunals or courts.
  • Collaboration with Other Authorities: ASIC may collaborate with other domestic and international regulatory bodies to strengthen its enforcement capabilities and share information related to potential misconduct or breaches.

 

FCA

The Financial Conduct Authority (FCA) is the regulatory body overseeing financial services firms in the United Kingdom. The FCA can take disciplinary actions against firms and individuals that breach regulatory requirements. Here are some key points regarding the FCA's disciplinary actions:

  • Regulatory Powers: The FCA has extensive powers to enforce compliance with financial regulations and standards. It can investigate potential breaches, gather evidence, and take enforcement action when necessary.
  • Types of Disciplinary Action: The FCA can impose a range of disciplinary measures based on the severity and nature of the breach. These actions may include issuing warnings, imposing fines or financial penalties, imposing restrictions or suspensions on firms or individuals, and revoking or suspending licenses.
  • Public Enforcement Actions: The FCA often publicizes its enforcement actions to promote transparency and raise awareness within the financial industry. Publicizing actions serves as a deterrent and helps to maintain market integrity.
  • Collaboration and Coordination: The FCA collaborates with other regulatory bodies and law enforcement agencies in the UK and internationally. This collaboration enhances its enforcement capabilities and enables information sharing to address cross-border regulatory breaches.
  • Legal Processes: The FCA follows established legal processes and procedures when undertaking disciplinary actions. This includes allowing individuals or firms to respond to allegations, conducting investigations, gathering evidence, and presenting cases before relevant tribunals or courts.

 

Conclusion

FCA and ASIC are equally reliable as far as regulatory oversight goes. But some differences may influence your choices. For example, high leverage is usually preferred by beginner traders and risk-seekers. This is the reason why lots of Asian traders prefer ASIC-regulated entities. Contrarily, traders looking for better fund safety may seek FCA-licensed forex brokers.

Some popular representatives of ASIC-licensed forex brokers are Pepperstone, IC Markets, and ThinkMarkets. They generally offer ECN and/or STP-based execution. While FCA-licensed forex brokers vary widely, starting from stellar institutional brokers such as Gain Capital up to dubious ones such as FX Giants