Checking a broker's licence: five steps, ten minutes

In this article7

1. 1. What a licence is, and is not
2. 2. The tiers of regulator
3. 3. The ten-minute check
4. 4. Signals to stop
5. 5. Past the licence: compare costs
6. 6. A criterion usually left out
7. Sources

“Is this broker trustworthy” is the most-asked question in every trading community, and the answer is usually based on a feeling or on what somebody said. There is in fact a process — about ten minutes — that gives an objective answer.

1. What a licence is, and is not

A licence does not guarantee you a profit and does not guarantee the broker will not fail. It guarantees three more specific things:

• Client money must be segregated from the firm’s own — if the broker gets into trouble, your money is in principle outside the estate.
• There is a body to complain to when a dispute cannot be settled with the broker.
• The broker reports and is inspected, so it cannot quietly disappear.

2. The tiers of regulator

Not all licences are equal. By strictness:

• The strictest — FCA (UK), ASIC (Australia), CySEC (Cyprus). High capital requirements, retail leverage capped at 1:30, compensation schemes.
• The middle tier — FSCA (South Africa), FSA (Japan), various regional authorities.
• The offshore tier — FSA Seychelles, VFSC Vanuatu, FSC Mauritius. Much lower capital requirements, leverage of 1:500 or more.

The crucial point few people know: a broker usually operates several legal entities under several different licences, and clients outside the major jurisdictions are nearly always registered under an offshore entity — not the FCA or ASIC one in the advertising.

3. The ten-minute check

• Step 1 — Find the licence number. Usually in the website footer, as “Regulated by X, licence number Y”.
• Step 2 — Look it up on the regulator’s own site, not the broker’s. The FCA has a public register, ASIC has ASIC Connect, CySEC publishes its list of licensed firms.
• Step 3 — Match the legal entity. The name on the licence must match the name on the agreement you signed. If they differ, that licence does not protect you.
• Step 4 — Check the scope. Does the licence permit offering CFDs to retail clients, or only to professionals?
• Step 5 — Read the withdrawal terms. Processing time, fees, conditions. This is where real-world problems most often arise.

4. Signals to stop

• A guaranteed return in any form. No legitimate broker does this.
• No licence number to be found, or one that does not appear on the regulator’s register.
• Pressure to deposit more to “unlock” a withdrawal. A classic fraud pattern.
• Deposits accepted only to a personal bank account rather than a corporate one.
• Staff placing trades on your behalf — generally not permitted under any framework.

5. Past the licence: compare costs

Once a broker clears the legal bar, the next criterion is real cost — the thing that shows up in your result every month:

• Average spread at the hours you actually trade, not the advertised figure.
• Commission on an ECN account, per round-turn lot.
• Overnight financing if your strategy holds for days.
• Deposit and withdrawal fees — these add up, especially with a currency conversion attached.

6. A criterion usually left out

Two brokers with the same licence and the same spread can still differ on net cost — because the commission paid to the introducing broker differs, and that part can be returned to the trader.

When comparing brokers, work out cost after rebate rather than spread and commission alone. That is the figure that actually leaves your account.

Sources

• Compare Forex Brokers — Leverage limits by regulator
• DailyForex — Broker regulation and platform comparison 2026
• FxScouts — Broker vetting criteria

This article is for information only and is not investment advice. It is not a recommendation of any particular broker either — check the licence yourself on the regulator’s own register. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.

This licence check is step one of five in the complete guide to choosing a forex broker; the other four run from net cost through to funding.