FCA, ASIC, CySEC: which regulator is strictest

Every broker advertises a licence. Not every licence carries the same protection, and for clients
outside the major jurisdictions often none of them applies at all. Here is the full picture.

1. The three most-cited regulators

FCA — United Kingdom

One of the strictest regulators anywhere.

• High capital requirements.
• Mandatory segregation of client money.
• A compensation scheme with a per-client limit.
• A low cap on retail leverage.
• Negative balance protection is compulsory.

ASIC — Australia

Strict and well regarded.

• Firm capital and audit requirements.
• Mandatory segregation of client money.
• A cap on retail leverage.
• No compensation scheme equivalent to the FCA’s.

CySEC — Cyprus

Operating inside the European framework.

• Applies the common EU rules on derivatives.
• An investor compensation fund with a limit.
• Lower capital requirements than the FCA, which is why many brokers register here.

2. The offshore tier

Jurisdictions such as the Seychelles, Vanuatu, Belize, Mauritius and Saint Vincent license with far
lighter requirements:

• Low minimum capital.
• Little or no requirement to segregate client money.
• No compensation scheme.
• Very high leverage permitted.
• Limited capacity to supervise or resolve disputes.

None of that automatically makes a broker bad — plenty of large, reputable firms run
offshore entities. But it does mean your legal
protection is markedly weaker, and you are relying on the broker’s commercial reputation
rather than on a protective mechanism.

3. The point that matters most

A brokerage group usually runs several entities:

• A UK entity serving UK clients.
• An Australian entity serving Australian clients.
• An offshore entity serving international clients.

Clients from most of Asia fall into the third group. Which means the licence
displayed prominently on the home page may not apply to your account at all.

This is not concealed — it is in the client agreement — but very few people read that far.

4. How to check in ten minutes

1. Open the broker’s client agreement. Find the entity name and place of registration near the
   front.
2. Note the licence number given.
3. Go to the relevant regulator’s website and use its
   public register.
4. Compare: does the entity name match, is the licence current, and what services does it cover?

Step 4 is the important one. There are cases where the licence number is genuine but belongs to a
different entity, or where the permitted scope does not include the service being offered to you.

5. Three questions you should be able to answer

• Which legal entity signed the agreement with me?
• Which regulator supervises that entity?
• Is my money segregated from the firm’s own working capital?

If you cannot answer all three, you do not yet know what risk you are carrying.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.