What’s a regulated broker? Brokers regulations explained

What is the difference between a regulated broker and an unregulated broker?

This is a very basic but very important concept that you MUST understand and know as an investor. Do not think that this is not important, since it can mean the difference between depositing your money in a very safe company and a very unsafe company.

Firstly, it is very important to understand that not all brokers have the same characteristics. In this case we will divide the brokers into two different types: regulated brokers and unregulated brokers. Remember that we are talking about one of many characteristics that a broker has, but one that is very important.

First of all: what is the role of a financial regulator?

Let’s start by understanding the role of financial regulators: a broker can offer you to trade in different financial markets, for example: Forex, CFDs, Futures, Cryptocurrencies. Many of these markets are unregulated markets, so a regulated broker, even if it offers unregulated products, will be, let’s say, supervised by a financial regulator.

Financial regulators are institutions authorized to supervise the activity of financial markets. Most developed economies have a team or institution whose purpose is to ensure impartiality and transparency (security) in the financial world we are talking about. The role of financial regulators is basically to oversee a large section of businesses that offer financial products (for example, brokers) to a retail client, in this case you, a trader, in order to protect the client and also with the objective not to allow abuses by, in this case, the brokers.

Without going into too much detail, some of the rules that financial regulators may have for companies or institutions that provide financial services can be:

– Transparency

– Report daily activities

– Maintain some liquidity

– Force brokers to send account and transaction records

– In general, prohibit abuse by brokers

Regulator Types

Let’s go with a small example to make it easier to understand, in our case, we do not consider the German regulator as safe as the British Virgin Islands regulator. Yes, as confusing as it may seem, there are also different types of regulators. If you want to meet the best regulators, you can read it in this section.

We created a section that talks about (in our opinion) the best financial regulators out there. >>> BEST REGULATORS

How can I know if a broker is regulated or not?

First of all we want to tell you that you can always write to us to ask us whether or not a broker is regulated, we will gladly reply and take a look at you broker.

(Regulated) brokers are obliged to show their regulation in the so-called footer, the end of the website, you must navigate to the end (below) of the website. There they must show who regulates them (the regulatory body) and the number of their regulation. It is your job as an investor to verify that this is not a false regulation, let us explain: Many unregulated brokers lie about being regulated or posing as a regulated broker. You must take the trouble to verify this regulation.

ALTHOUGH DON’T WORRY: YOU CAN ALSO SEND US A MESSAGE OR LEAVE US A COMMENT AND WE WILL GLADLY TELL YOU IF A BROKER IS OR NOT REGULATED! WE LOVE HELPING TRADERS IN THEIR FIRST STEPS! TELL US THE BROKER WEBSITE YOU WANT TO KNOW MORE!

You can also write a message to the financial regulator in your country, usually, the regulators will provide you with information on whether or not a broker is regulated and authorized to offer financial services.

Finally: what then is the difference between a regulated broker and an unregulated broker?

Without going into much detail, in the case of regulated brokers, there is a body, a financial regulator, that closely follows its activities and whose task is to provide transparency and fair treatment of clients. In addition to this, there is a regulator to which you can file a report or complaint in case you believe that your broker was not honest or did not have good intentions with you.

In the case of unregulated brokers, an unregulated broker, first of all, does not have authorization to provide the financial services it provides, so this is already a big problem, but in addition to this, an unregulated broker means It does not have any body that controls its activities with clients to ensure a safe environment.

This also means that if you believe that your broker did not have good intentions with you, and it is the case of an unregulated broker, although you may file a complaint with the financial regulator of your country, usually the regulator of your country will simply tell you that it was your fault for giving money to a company without authorization to provide financial services in your country, and a company without regulation and that you have been cheated. Do you understand the problem now?

We believe that it is the trader’s job to be well informed before entering high risk financial markets, you must be sure to understand the operation of brokers and the risk of investing before trading money.

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