The FCA is one of the most prestigious regulatory bodies that exists independently from the United Kingdom Government. FCA helps regulate more than 56,000 financial services companies. Their responsibilities include overseeing financial markets in the UK, promoting fair competition in financial services for the benefit of consumers, as well as investigating to ensure regulatory compliance and treat customers fairly.
Advantages and Disadvantages of Trading at FCA Regulated Brokers
Among many forex broker regulators in the world, regulators who are able and proven to protect traders' funds when a broker bankruptcy occurs is very rare. Competent customer protection is a testament to the quality of the FCA. There is an FSCS (Financial Services Compensation Scheme) that can provide funds of up to 85,000 pounds of the deposit amount per customer per broker.
Other advantages of trading with FCA-regulated brokers are: Having clear regulations, reputation, and infrastructure. As explained above, the UK is one of the countries with the most advanced financial activities in the world. The FCA is overseen directly by the Bank of England and works with the UK Financial Ombudsman to resolve disputes. Not only that, but the use of modern technology also supports the performance of this British regulator.
Although the FCA regulatory requirements are quite strict, there are still many forex brokers who can comply. In 2020, more than 90 forex brokers were carrying FCA regulations. With various forex brokers listed, traders can choose the trading conditions that best suit their needs.
Apart from the benefits above, FCA-regulated brokers also have disadvantages. One of the most visible is the use of leverage. With a maximum leverage of 30: 1, FCA-regulated brokers look less tempting than offshore brokers that provide leverage of up to hundreds. Also, it should be noted that spot forex contracts are not included in activities that are protected by FCA regulations.
FAQ
What does FCA regulated mean?
Being regulated by FCA (Financial Conduct Authority) means operating under the standards of the United Kingdom's financial regulator. FCA-regulated brokers are known to have clear regulations, reputation, and infrastructure. This does not come as a surprise as the UK is one of the countries with the most advanced financial activities in the world. The FCA is overseen directly by the Bank of England and works with the UK Financial Ombudsman to resolve disputes.
What are the FCA rules?
The protection of customer funds is FCA's main focus, leading them to enforce certain protocols that prevent its brokers from committing any financial frauds. All FCA regulated Forex brokers should adhere to the following rules:
Keeping the client funds in segregated accounts away from their company accounts, and should not use traders' money for any other purposes.
Maintaining at least £1 million in operating capital, which increases according to the number of traders and the trading capital.
Ensuring that all withdrawals are processed instantaneously and that the company can meet all financial obligations without fail.
Submitting yearly audit reports and periodic financial statements to verify that all the facts provided to the FCA are accurately represented.
Protecting the clients under the FSCS (Financial Services Compensation Scheme) that is aimed to offer protection for traders against broker-related issues by providing a guarantee of up to £50,000 in compensation.
What is the main purpose of FCA?
The FCA oversees the process of regulating financial companies in conjunction with the Bank of England and the Prudential Regulatory Authority. The split of financial industry regulation into different entities helps to streamline the entire process of regulation and ensuring integrity and transparency of the UK's financial markets.
What are the powers of FCA?
Although FCA does not personally get involved in any conflict between a broker and its clients, the regulatory agency will investigate any instances of fraud or consumer abuse. The FCA will revoke a company's licenses and issue hefty fines to if it is found guilty, to the extent of permanently ban the broker from operating in the UK.
To help them conducting their tasks, the FCA has an excellent online database that provides a vast amount of information on regulated brokers, new scams, financial malpractices, and other relevant data. It has been made clear that the agency has been granted immense powers by the UK Government to keep financial businesses in line with the rules and framework.
If you are interested to open an account in one of the brokers in the list above, make sure to try the forex demo account before proceeding to register in the live account.
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