Forex trading is more dependable now than it has ever been thanks to the Financial Services Authority (FSA) of UK. While in the past, many investors wondered whether they could trust Forex brokers with their money, now there is a safeguard that will protect their money once it leaves their hands.
(List of FSA UK regulated forex brokers coming soon…)
All financial service providers in the United Kingdom are regulated by the FSA. Whether they are markets, exchanges or firms, providers are all regulated by the FSA. It should also be noted that the most reliable UK Forex brokers are authorized and regulated by the FSA.
The FSA sets the standards that must be met by all financial services. According to the FSA, each Forex broker firm should comply with the following in order to be authorized by their organization:
*Investigate the quality of the bank where the clients funds will be held and continue to make sure that the bank be able to meet its own regulatory obligations.
*Ensure that the bank where the clients funds will be held be approved by the FSA
*Keep client funds and company funds separate.
*Submit financial reports to the FSA regularly in order to undergo the annual auditing process
It is also important to note that, if a financial firm fails to meet the required standards, then a client can take action against that firm.
These requirements are important for the retail Forex trader because they provide him or her with a higher level of protection. This is particularly important for the retail investor because of a number of reasons.
First, due to the regulation for a segregated account the retail client is ensured that a trading company cannot use their money in order to cover its own needs, expenses and risks in the event that the company does not produce the income that the company had expected itself to produce. Those funds also cannot be used in the event of bankruptcy.
Secondly, when a deposit is made on behalf of a retail Forex trader it is posted under the heading of “client money”. This key element will protect the client in the event of a failure of the company. This simple caption means that a liquidator will not be able to use a retail trader’s money to meet the claims of general creditors should the company fail.
Investors are also protected, thanks to FSA. Under the Financial Services Compensation Scheme (FSCS), coverage is provided for each investor in the even of default of the broker. The FSCS is the United Kingdom’s statutory fund of last resort for customers of FSA authorized financial service firms.
According to the FSCS, the maximum level of compensation for claims against firms that have been declared in default on or after 1 January 2010 is £50,000 per person per firm. This equates to 100% of the first £30,000 and 90% of the next £20,000 up to £48,000 per person per firm.
In order to move forward with the FSCS claim you must submit a claim for review by the FSCS. Please refer to fscs.org.uk for further details.