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A background on FCA & What is prudential regulation?
We have done our best to compile to test and research FCA Regulated Brokers to help you stay safe when trading CFDs, Stocks, Forex or Cryptocurrencies.
The Financial Conduct Authority (FCA) is the UK’s regulator of firms providing financial services and markets, overseeing 58,000 operations across the country.
They strive to ensure these organisations are run with integrity and transparency – ultimately aiming for all consumers to get a fair deal.
Additionally, FCA seeks that their regulations assist in helping individuals and small & large businesses as well as provide benefits towards economic stability on an overall basis.
What do they do?
Financial regulation plays an integral role in the modern economy, affecting countless facets of daily life – from pension and ISAs eligibility to credit cards, direct debits and loan investments.
With over 2.2 million people employed in financial services within the UK alone, it’s no wonder that this sector contributes a staggering 65.6 billion pounds worth of taxes to our country’s economic growth each year!
When staying abreast with current market trends keeps business fair for shareholders while creating opportunities for investment through customers – we are not only helping maintain but also increasing confidence amongst global investors towards the British finance hub as well as boosting domestic trustworthiness on all levels!
How do they do it?
The FCA’s objective is in ensuring that the markets in their jurisdiction function well, and their operational objectives follow these guidelines:
- ” To protect consumers – they secure an appropriate amount of protection when it comes to consumers “
- ” Protection of financial markets – they enhance and protect the truthfulness of the United Kingdom’s financial system. We will cover the Investment Markets (Stock and OTC derivative markets) “
- ” To promote competition – they promote effective competition “
FCA is an independent public body, and it charges a fee (FCA fee) to the companies it regulates, this is how FCA is funded entirely. The Treasury is responsible for the United Kingdom’s financial system and so FCA is accountable to the treasury and the parliament.
This is no different in the United States where the US Congress created the Securities and Exchange Commission (SEC) to carry out the same objectives.
FCA set up
The FCA (Financial Conduct Authority) operating in the United Kingdom is considered to be one of the best-reputed regularisation organizations worldwide for the regulation of financial firms and forex brokers.
Before 2013, the regulatory process for financial companies was carried out by the FSA (Financial Services Authority).
To streamline the whole regulation process and ensure truthfulness and transparency in the United Kingdom’s markets of finance, a resolution was passed by the United Kingdom government.
The Financial Regulatory Authority forms part of the agreement between the European Economic Area (EEA) and also the MiFID.
This allows online trading platforms regulated by the FCA to be able to function in all parts of the European Union without having to set up offices in other European countries.
There is a baseline that has been stipulated by the MiFID, which sets the tone for the regulatory framework. This baseline is enforced via specific regulatory authorities of different countries that form part of the European Union.
Today, the United Kingdom is critically acclaimed in the world for having the best regulatory systems in place that ensure the prevention of broker scams, financial malpractices, as well as other kinds of frauds that impacts both institutional and retail traders (traders of Forex, Stocks, Commodities etc.).
It also leads to loss of confidence in the financial markets for in general public when such scams are uncovered.
FCA Regulated Brokers are committed Towards Client Fund’s Protection
The FCA is fully committed towards the protection of funds of customers. It does so by pursuing various regulatory protocols which prevent brokers in the jurisdiction of the FCA to commit any fraud of financial nature.
They lay out strict guidelines from time to time and all brokers regulated by the FCA have to adhere to these strict guidelines. FCA-governed brokers are required not to use the client’s funds for any other purposes.
FCA requirements are long-listed for Financial Investment Brokers so they can offer the best services to their clients. One of the most important requirements that Forex brokers have to be compliant with is keeping clients’ funds in separate accounts from their company’s accounts.
To ensure that the client’s positions are maintained in the United Kingdom market, all FCA brokers are required to maintain a minimum of one million pounds as operating capital. This is not a fixed number and as the number of traders along with trading capital increases, this also goes up.
Established forex FCA-regulated brokers such as & XTB all have more than 500,000 plus active traders.
The broker is obliged to make sure that the processing of all withdrawals happens instantly and that the company’s financial obligation is met without fail. Brokers need to submit various financial statements to the FCA periodically.
This includes audit reports which have to be submitted every year. This helps ensure that all the facts submitted to the FCA have an accurate representation. FCA is very strict when it comes to the reports related finance of its member companies.
They actively engages with member brokers and audit firms to make sure that the financial data match what is expected.