Who Regulates Brokers ?

EEA Authorised -A financial services firm authorised in another European Economic Area (EEA) state that has a ‘passport’ to offer certain products or services in the UK and other EEA countries. The EEA includes the EU states, plus Iceland, Norway and Liechtenstein. These firms are regulated in their home country and must meet standards which have been agreed across all EEA countries.

The services or products an EEA authorised firm can offer in the UK will be detailed in the ‘Passports’ section of their record on the Financial Services Register.

Authorised -A firm that has been given permission by the FCA to carry out regulated activities. If a financial services firm is based in a foreign country outside the EEA it can still operate in the UK but will need to be authorised by FCA and will appear on the Financial Services Register as ‘Authorised’.

The Financial Services Authority (FSA) was a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom between 2001 and 2013. It has now become two separate regulatory authorities, The Financial Conduct Authority (FCA, www.fca.org.uk) and the Prudential Regulation Authority at (PRA, www.bankofengland.co.uk).

The FCA regulates financial firms providing services to consumers and maintains the integrity of the UK’s financial markets. It focuses on the regulation of conduct by both retail and wholesale financial services firms. The FCA is structured as a company limited by guarantee.

• Ensure & monitor the quality of the bank in which clients funds will be held. The bank must be approved by FCA.
• Keep clients’ funds separate from company funds, clients’ funds can never be treated and used as company assets including the situation when the company becomes insolvent.
• Submit financial reports to the FCA regularly and undergo annual audit.

Even if a broker is insolvent you may still be able to claim compensation through the FSCS.

The compensation limits for forex market: A client receive 100% of the first £30,000 + 90% of the next £20,000, up to £48,000.

The FSCS is an independent body and a fund of last resort for customers of authorised financial services firms. Generally, it covers claims against firms who are insolvent and unable to pay claims against themselves. The FSCS is funded by levies on FCA-authorised firms. Their costs are made up of management expenses and compensation payments. The service is free to individual consumers.

Beware of cloned firms (fraudsters pretending to be from a firm authorised by FCA). If you deal with an unauthorised firm you will not be covered by the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong.

Check FCA Register: http://www.fca.org.uk/firms/systems-reporting/register

The Register has information on forex brokers that are regulated by FCA. Firm status must be ‘Authorised’ or ‘EEA Authorised'(not ‘registered’).

If a forex broker does not appear on the Register but claims it does, contact Consumer Helpline of FCA on 0800 111 6768.

National Futures Association (NFA) is the self-regulatory organization(non-profit) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives (swaps). NFA’s mission is to safeguard market integrity and protect investors.

Commodity Futures Trading Commission (CFTC) is the US government agency that protect market participants and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives – both futures and swaps.

NFA’s activities are overseen by CFTC.

NFA membership is mandatory for all forex brokers(including introducing brokers) in US.

NFA regulated brokers:

• Must follow strict rules set by NFA to ensures the safety of clients’ assets.
• Must have net capital of no less than $15 000 000 to guarantee client’s positions. This minimum raises to $20 000 000 starting from May 19th, 2009.
• Must report their account balances to NFA weekly.
• Must have comprehensive yearly audits.

Background Affiliation Status Information Center (BASIC) http://www.nfa.futures.org/basicnet/

• Non-US brokers or brokers that are not registered in NFA are not allowed to accept US citizens as clients.(They can accept non-US citizens that live in US)
• Maximum leverage of a US forex broker can offer should be 50:1 on major currencies and 20:1 on minors since October 18th, 2010.
• US Forex brokers are not allowed to offer leveraged commodities and precious metal trading (including Gold & Silver) to retail clients.So they can only offer those on a 1:1 non-leveraged basis(requires substantially more margin).(Since July 15th, 2011, enforced by CFTC)

US brokers usually offer a higher leverage to international clients with non-US accounts. They usually have international branches.

EU Commission

Ernst & Young (E&Y)

Financial Markets Association (ACI)

KPMG

United Kingdom:

UK Financial Services Authority (FCA UK)

The Financial Conduct Authority (FCA)

The Prudential Regulation Authority (PRA)

Financial Services Compensation Fund (FSCS)

United States:

Commodities and Futures Trading Commission (CFTC)

Financial Industry Regulatory Authority (FINRA)

National Futures Association (NFA)

New York Stock Exchange (NYSE)

Office of the Comptroller of the Currency (OCC)

US Securities and Exchanges Commission (U.S. SEC)

Chicago Board of Trade (CBOT)

Securities Investor Protection Corporation (SIPC)

Australia:

Australian Securities and Investment Commission (ASIC)

Switzerland:

Association Romande des Intermédiaires Financiers (ARIF)

Swiss Bankers Association (SBA)

Swiss Federal Banking Commission (SFBC)

Swiss Federal Department of Finance (SFDF)

Swiss Federal Finance Administration (SFFA)

Swiss Financial Market Supervisory Authority (FINMA)

Swiss National Bank (SNB)

PolyReg

Geneva Chamber of Commerce (CCIG)

Organisme d’Autorégulation des Gérants de Patrimoine (OAR-G)

Cyprus:

Cyprus Securities and Exchange Commission (CySEC)

France:

Autorite des marches financiers (AMF)

Banque de France

Credit Institutions and Investment Firms Committee (CECEI)

Germany:

Federal Financial Supervisory Authority (BaFin)

Canada:

British Columbia Securities Commission (BCSC)

Canadian Investor Protection Fund (CIPF)

Financial Transactions and Reports Analysis Center of Canada (FINTRAC)

Investment Industry Regulatory Organization of Canada (IIROC)

Ontario Securities Commission (OSC)

Ombudsman of Banking Services and Investments (OBSI)

Japan:

Financial Services Agency of Japan (FSA Japan)

Japan Securities Dealers Association (JSDA)

Japan Investor Protection Fund (JIPF)

Tokyo Commodity Exchange (TOCOM)