The most popular Forex jurisdictions

Where should reliable brokers come from? Which Forex jurisdictions should be avoided?

When choosing your broker, you should pay attention to where the company is registered and which policy the regulatory body follows.  Regulation is required for controlling a broker’s activities, protecting speculators against a broker’s eventual bankruptcy, preventing fraud, etc.

What is a speculator who decides to open an account with a broker most worried about? About reliability, of course. How well his/her money is protected from force-majeure circumstances and reverses of fortune depends on a broker’s reliability. Which features of a broker should be paid attention to when making such an important decision?

This criterion is called “financial regulator”. And a regulator is registered on the territory of a broker’s jurisdiction. Which jurisdictions are popular with the companies which provide access to the market?

Regulators can be subdivided into 3 categories of confidence by the level of their participation in the resolution of disputes. So let's start with 2 regulators from the 1st category.

Cyprus Securities and Exchange Commission

Cyprus is the first most trusted country: over 40 countries have chosen to be based in it.  

In 2001,  Cyprus Securities and Exchange Commission (CySEC) was set up as part of Cyprus legislation.

Форекс-регуляторы, и что стоит о них знать

Its purpose was to control and regulate the activities of the companies connected with investments and securities on the territory of Cyprus. Today, CySec’s function consists in licensing financial companies’ activities and controlling licensed organisations.

CySec operated exclusively in Cyprus up to the year 2004. Nowadays, its sphere of influence spreads far beyond the limits of the island as CySec has got a permission to license EU countries.

CySec is governed by a five-member Board including Chairman and Vice-Chairman appointed by the Council of Ministers following a proposal of the Minister of Finance.

CYSEC HAS WIDE POWERS INCLUDING

- licensing of companies;

- control over brokers, brokerage companies, and other institutions whose activities are connected with stock exchanges;

- monitoring of organisations that manage open-end funds, of brokers and other institutions with listed securities;

- regulation and control over stock exchanges and any operations conducted on Cyprus’s stock exchanges;

- supervision of consultants’ and portfolio managers’ activities, control over the implementation of investment programs.

To exercise its powers, CySEC may demand and collect information from legal persons and individuals, if necessary.

If any violation has been detected, CySEC has a right to inflict a penalty on brokers, consultants, brokerage companies, and any other persons governed by the Law.

British Financial Conduct Authority

British FCA is ranked the second most popular regulator. More than 30 brokers are registered here.

Форекс-регуляторы, и что стоит о них знать

Finansinspektionen from Sweden comes third with over 20 brokers registered.

The St. Vincent and the Grenadines Financial Services Authority (FSA) is at the head of the second category with the so-called “medium level of confidence”. Over 20 companies are registered there.

SVGFSA - the Financial Services Authority of St. Vincent and the Grenadines. This authority controls and regulates the market of financial services and financial non-banking companies according to the St. Vincent & the Grenadines National Economic and Social Development Plan.

SVGFSA and FCA are different authorities.

One shouldn’t confuse SVGFSA with the UK’s Financial Conduct Authority (FCA). These are two different organisations and SVGFSA has nothing to do with FCA. What’s more, it’s impossible to check if a broker is registered with SVGFSA since the Financial Services Authority of St. Vincent and the Grenadines doesn’t publish such lists on its site. SVGFSA doesn’t license brokers. In fact, it can hardly be called a “regulator” since it only registers brokers and issues registration certificates.

SVGFSA issued an official statement regarding international companies registered with SVGFSA and involved in speculation in currency markets and brokerage service provision to prevent them from stating that their activities are regulated by Financial Services Authority since such statements misrepresent  SVGFSA’s authorities with regard to those companies. It’s not a secret that regulatory bodies don’t approve of IBC’s activities as the control over such companies only concerns compliance with their obligations under the International Business Companies Act.

It means, SVGFSA doesn’t control or regulates the activities of brokers and therefore cannot be considered as “financial regulator”.

The third category is characterized by a low confidence level. The leader is the Financial authority of Mauritius with 40 companies registered.

Traders aren’t much familiar with the Financial authority of Mauritius (FSC) which belongs geographically to Eastern Africa. We didn’t find any well-known brokers from there, but a lot of investment companies are based there. Their work is regulated by the Financial Services Commission. (FSC). The companies providing services to the residents of Africa and Asia are located there.

Mauritius is now a popular offshore zone where, for a wonder, an important regulator operates. If we compare FSC with a similar authority, for example, in Belize, which is popular with all brokers, the level of confidence in Mauritius’ regulator will be somewhat higher since the control over financial companies’ activities isn’t established just for appearances’ sake.  

The FSC started work in 2001 because every offshore company that respected itself had to follow a certain money-laundering policy at that time. First, there wasn’t any strict control over the companies’ activities, though the main reason for founding that kind of authority had been the need of licensing and supervision.

The situation changed in 2007. Then, a number of legal acts were added to Mauritius’ legislation to provide a basis for objective control in the sphere of financial services. That supervision corresponded to the world’s high standards and first and foremost protected investors and other clients of financial organizations.

Those steps helped upgrade the reputation of the companies based in Mauritius and contributed to the popularity of the offshore zone itself.

Next, let’s mention International Financial Services Commission of Belize. Over 20 brokers are registered in Belize.

Some young companies go to even greater extremes and work with no licence at the very beginning of their activities. It’s entirely a trader’s choice: is he or she ready for money losses and possible court examinations if a broker turns out to be a fraud?

Japan (FSA Japan) and the USA (NFA) belong to the countries where the toughest control is established.

 

Forex regulators and what you should know about them

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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