Photo: Google Image
Each country has its own regulation to monitor the forex activities. Get to know the various forex regulations present in different countries.
Forex Regulation in the US
The regulatory bodies in the United States are the CFTC and the NFA. The CFTC determines the rules regulating the commodity brokerage industry, and its stated mission to investors, traders and the public from unethical practices in the commodity and financial futures and options markets. In addition, the CFTC is responsible with creating the regulatory environment that will foster a free market environment that fosters competition. The CFTC has the authority to close any unregulated entity in the retail forex industry.
The NFA is another regulatory body that enforces adherence to certain capital requirements, and maintenance of a sound financial structure by its members. It also requires that member firms actively supervise their employees, agents and affiliates to prevent fraud and unlawful activities.
Since not all forex brokers are members of the NFA, it is important to seek those that offer the added transparency of membership, in order to minimize the risks associated with fraud and similar illegal acts.
Forex Regulation in Australia
The Australian Securities and Investment Commission (ASIC) regulates forex trading in Australia. All legitimate brokers providing retail forex services must be registered with this body which enforces capital requirements. Australian law requires that any foreign exchange broker acquire an Australian Financial Services License or be licensed with the Reserve Bank of Australia.
Forex Regulation in Switzerland
Our advice for beginning traders is to be wary of forex brokers that are only active in Switzerland or are only registered with Swiss Authorities. Many scammers have been exploiting the reputation of Switzerland as a banking centre by registering their fake companies with the Swiss authorities who are very lax about the regulation of the retail forex industry.
The main regulatory body in Switzerland is the Swiss Federal Banking Commission (SFBC). But many scammers choose to register their firms with one of the private regulatory institutions such as Organisme d’autoregulation fonde par le GSCGI, Polyreg and Association Romande des Intermédiaires Financiers, as these bodies only concern themselves with money-laundering issues, and are generally very lax on customer protection.
It is expected that the Swiss Federal Banking Commission will bring all forex brokers under its own supervisory structure by establishing a body similar to the US NFA, but until that plan is in effect, retail customers of forex brokers in Switzerland are basically unprotected against fraud.
Forex Regulation in the United Kingdom
Forex brokers are regulated by the Financial Services Authority (FSA) in the United Kingdom. Apart from its usual supervisory duties, FSA rules require that client deposits be segregated from the funds and accounts of the brokerage firm. In other words, in case of bankruptcy due to fraud, or mismanagement, the customers funds are safe. The advantages of this requirement are self-evident.
Forex Regulation in the EU
In the EU, retail forex brokers are regulated by the authorities of the nations in which they are operating. So far, there is no central regulatory body which supervises the activities of retail brokers on an EU-wide scale. Standards vary from nation to nation, but in general it is a good idea to choose brokers regulated by the institutions of nations like Germany or France, over those located in Greece, Portugal or Hungary, for obvious reasons.
Reprinted from Forexfraud, the copyright all reserved by the original author.