2022 has unfortunately seen record amounts of people scammed out of their hard earned money. The rise in online trading scams has continued to gain traction, with the only positive of this being that there are increasing numbers of would-be investors who are becoming more savvy to the need to use fully regulated brokers when trading their funds online. Whilst many people are now noticing this need and becoming more aware of the signs of a potential scam, there are still a large number of people who are trading without having a full understanding of how the Forex market is actually regulated, and why they need a regulated broker in order to mitigate their risk.
The regulatory status of a forex broker can be quite difficult to discern since, unlike many other industries (particularly in financial sectors), there is no centralised regulatory body that takes on the responsibility of regulating brokers on an international level. Instead, forex brokers are regulated by more localised authorities that are set up to comply with the individual laws of their own jurisdiction. For example, a regulatory body in France, such as Autorité des marchés financiers (AMF), ensures that its members are held to the standards appropriate to French laws. Whilst this seems straightforward in itself, things do get slightly more complicated, as the regulation of each body in Europe also affords it’s member brokers the ability to operate in all countries within Europe. One of the most commonly used regulatory bodies in the UK, for example, is CySEC (Cyprus Securities and Exchange Commission), a regulatory body for Forex brokers that is based in Cyprus.
Each regulatory body has a set of rules and regulations that each member agrees to abide by as part of their regulated status. Whilst these rules may vary from body to body, there are obvious similarities between them, such as strict codes of conduct designed and put in place to protect investors. The members of each body also agree to be periodically audited and reviewed by the governing body as part of their membership, in which the regulatory body has the right to inspect all aspects of the broker’s trading. This includes, but isn’t limited to, their financial conduct, legal compliance and communications with their customers and investors. Where these exacting standards are not seen to be met by a broker, the regulatory body has a set of disciplinary measures that they can take by way of punishment. Each member also signs their agreement to be held to any disciplinary processes and decisions that are deemed necessary by their regulator.
Whilst it’s important to understand how and why Forex brokers are regulated if you’re looking to start trading money online, it’s more important to determine whether or not your broker is regulated at all. Regulated status gives a certain level of protection to the money you’re trading, and helps with providing a process to follow if you suspect any unscrupulous activity on the part of your broker. If you suspect that your broker might be involved in Forex scams, get in touch with their regulator or a professional fraud lawyer who can advise you on next steps.