Broker Regulation

I am going to tell you about the Broker Regulation in this post.

As you see my broker reviews, my primary criterion for a broker is its regulation. Because it can be risky to trade with an unregulated broker. If you don’t want to defraud by a scammer read this broker regulation post and learn why the regulation is so necessary.

In this blog, I strongly recommend regulated and reliable brokers for the security of investor’ funds. The regulators have authority to sanction firms that do not comply with the terms and conditions.

In this way, the watchdogs ensure to increase the reliability of brokers. Of course, these words are for reputable regulators. Unfortunately, not all regulators provide this.

There are a lot of regulators around the world. Some of them regulate every little thing but some regulate almost nothing.

You can see the rigidity of the broker regulation is more or less related to the level of development of the country.

Some watchdogs have an intentional policy of lax regulation or low taxation to attract the brokerage industry, while others have an intentional policy of strict regulation and/or high taxation to keep the brokerage industry away.

I analyzed some of the most essential global regulators to supply you with facts about how your broker is reliable.

Let’s start!

cysec fca regulation broker

Australian Securities and Investments Commission (ASIC)

ASIC is Australia’s integrated corporate, markets, financial services and consumer credit regulator.

The Australian Securities and Investments Commission (ASIC) is an independent Commonwealth Government body who regulate Australian companies, financial markets, financial services organizations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit.

What Does ASIC do?

According to the ASIC website; as the markets regulator, ASIC assess how effectively authorized financial markets are complying with their legal obligations to operate fair, orderly and transparent markets. The regulator also advise the Minister about authorizing new markets.

ASIC is set up under and administer the Australian Securities and Investments Commission Act 2001 (ASIC Act), and the regulator carries out most of its work under the Corporations Act 2001 (Corporations Act).

There are some requirements that the ASIC Act requires:

  • maintain, facilitate and improve the performance of the financial system and entities in it
  • promote confident and informed participation by investors and consumers in the financial system
  • administer the law effectively and with minimal procedural requirements
  • receive, process and store, efficiently and quickly, information that is given to ASIC
  • make information about companies and other bodies available to the public as soon as practicable

ASIC has powers to protect consumers against misleading or deceptive and unconscionable conduct affecting all financial products and services, including credit.

Some of them:

  • registering companies and managed investment schemes
  • grant Australian financial services licenses and Australian credit licenses
  • register auditors and liquidators
  • grant relief from various provisions of the legislation which ASIC administer

Reputation

Although there are some allegations about ASIC of has a political agenda, ASIC has a strong reputation.

Cyprus Securities and Exchange Commission (CySEC)

The Cyprus Securities and Exchanges Commission is the financial regulatory authority in Cyprus.

As the first authority to regulate the Binary Option as an investment service, it has become a hub for many forex agents. Because it has a large workforce with low corporate tax rates, the ideal location of the island and rich financial background and experience.

CySEC regulates Cyprus Investment Firms (CIFs), Cyprus branches of Investment Firms (Ifs) of other EU member-states, Undertakings for Collective Investment in Transferable Securities (UCITS), Administrative Services Companies – Trustee and Fiduciary Service Providers, Alternative Investment Fund Managers (AIFMs).

Responsibilities of the CySEC

According to the CySEC website, there are various responsibilities of the regulator. To summarize some of them:

  • To examine applications and grant operating licenses to entities under its supervision, as well as to suspend and revoke the said licenses.
  • To supervise and regulate the agencies under its supervision in order to ensure their compliance with the laws governing their operation.
  • To carry out all necessary investigations in view of the exercise of its duties under the law as well as on behalf of other foreign competent Authorities.
  • To require the cessation of practices which are contrary to the securities market laws.

Powers of the CySEC

  • Granting and suspending financial services operating licenses
  • Supervising and regulating stock markets and agencies under its supervision
  • Imposing disciplinary sanctions provided by law Issuing regulatory directives
  • Applying to appropriate courts to enforce laws
  • Cooperating and sharing information with other Cyprus agencies

Reputation

Although it has been criticized in the past because of low oversight, the regulator has rectified its deficiencies and became a reputable regulator.

Financial Conduct Authority (FCA)

The Financial Conduct Authority is the conduct regulator for financial services firms and financial markets in the UK and the prudential regulator of those firms.

The FCA aims to protect consumers, enhance market integrity and promote competition.

The FCA was established on 1 April 2013, taking over responsibility for the conduct and relevant prudential regulation from the Financial Services Authority.

FCA regulates banks, building societies and credit unions claims management companies, consumer credit firms, electronic money and payment institutions, financial advisers, fintech and innovative businesses, general insurers and insurance intermediaries and more.

Applicants have to meet a range of requirements for registration before the FCA allow them to operate in the market.

The FCA review their business plans, risks, budgets, resources, systems, controls and whether key staff has the necessary qualifications, experience and ability to carry out their roles effectively.

They must meet these requirements before the FCA will authorize or register them.

Reputation

FCA has a reputation as a tough regulator for small traders and has strict punishments against financial firms that abuse consumers.

The UK’s FCA is undoubtedly one of the most respected regulators.

Financial Industry Regulatory Authority (FINRA)

FINRA is not part of the government. They are a not-for-profit organization authorized by Congress to protect America’s investors by making sure the brokers operate fairly and honestly.

FINRA is a regulator that protects the investors and ensures market integrity through effective and efficient regulation of brokers.

FINRA does this by:

  • writing and enforcing rules governing the activities of all registered broker-dealer firms and registered brokers in the U.S.;
  • examining firms for compliance with those rules;
  • fostering market transparency; and
  • educating investors.

Reputation

FINRA has a reputation to find market abusers by using its technological tools. Furthermore, some argue that the regulator has left the big firms unsupervised and is pursuing minor violators.

There are also other regulators around the world you can see them in the table below.

CountryRegulatory institution
CanadaInvestment Industry Regulatory Organization of Canada (IIROC)
DenmarkFinancial Supervision Authority (DFSA)
Dubai (UAE)Dubai Financial Services Authority (DFSA)
Hong Kong
Securities & Futures Commission (SFC)
Japan Financial Services Agency (FSA)
New ZealandFinancial Markets Authority (FMA)
RussiaThe Central Bank of the Russian Federation (CBR)
South Africa
Financial Services Board (FSB)
SwitzerlandFinancial Market Supervisory Authority (FINMA)
UkraineNational Securities and Stock Market Commission (NSSMC)
United StatesCommodity Futures Trading Commission (CFTC)
National Futures Association (NFA)
BelizeInternational Financial Services Commission (IFSC)

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