How to check if a Forex broker is licensed and legit

A legitimate broker will be able to provide a secure trading environment, deposit safety, and operational transparency.

Added to this, licensed brokers are forced to adhere to financial regulatory oversight when it comes to handling customer disputes, ensuring that you are able to pursue due recourse in the event that the broker mishandles your funds or if any other type of dispute should arise.

For traders in the UK, the Financial Conduct Authority (FCA) is the primary financial regulator of the financial markets, and oversees leading brokerage firms like Trade Nation.

In this article, Trade Nation examines how new traders can check the legitimacy of a potential broker by confirming its licence with the Financial Conduct Authority (FCA).

Understanding the role of the Financial Conduct Authority (FCA)

The Financial Conduct Authority (FCA) in the UK is regarded as one of the world's best regulatory agencies for Forex brokers and other financial institutions.

Since 2013, the Financial Conduct Authority (FCA) has been in charge of overseeing the regulation of financial institutions in the UK, along with the Bank of England and the Prudential Regulation Authority (PRA).

When the UK Government decided to break up the financial industry's regulation into separate institutions, it streamlined the entire process and ensured both integrity and openness in the financial markets in Britain.

FCA-regulated brokers can operate in any EU country without establishing extra offices because of the EEA (European Economic Area) agreement and the MiFID derivative. Throughout the EU, country-specific regulatory entities apply MiFID's regulatory framework as a starting point.

The UK is one of the few countries with a well-regarded regulatory structure in place to prevent financial malpractices, broker scams, and other types of fraud affecting both regular and institutional traders.

Registration with the FCA and the assignment of a registration number are both requirements for brokers permitted by the European Economic Area agreement.

As such, the FCA has complete ability to take regulatory or disciplinary action against all EU brokers for non-compliance because of the extensive relationship between the FCA and the other European regulators says Louis Schoeman from popular forex data firm - SA Shares.

As a way to give investors more peace of mind and avoid broker default or insolvency, the FCA has mandated that its regulated member firms hold a minimum amount of operational capital that is directly related to the investments of its traders.

Although the FCA doesn't have a predetermined number of brokers, the FCA will ensure each broker's capital adequacy by conducting regular audits and a thorough review of the company's financial operations.

How to confirm a broker’s FCA regulation

For access to the UK and European markets, all UK-based Forex brokers must obtain an FCA license, and each FCA-regulated company will be given a valid FCA registration number.

Prospective investors can verify the legitimacy of FCA-registered FX brokers by referencing the unique FCA identification code. Take the following steps to confirm a broker’s FCA regulation on the entity’s official website:

1.To find a broker or license number, go to the FCA register website and type the name or license number into the search field.

2.The first thing to look for is if the company is truly licensed by the Financial Conduct Authority (FCA) or whether it is simply passporting its rights from another country to the United Kingdom. If a corporation is licensed in the United Kingdom, it will appear on the list as Authorised.

3.The employment of separate brand names by brokers to promote different goods to different client categories is common practice. Check the module Trading/brand names to ensure that you are aware of all of the brand names under which they are conducting business in order to avoid confusion.