Checking a Broker Before You Deposit

Step by step

• Find the entity: the footer of the website and the client agreement name the licensed company and its licence number.
• Go to the regulator's register directly, never through a link on the broker's site. The regulator pages on this site link to every register.
• Search by the company name, not the brand. Confirm the licence number, the status, the permitted activities and the listed website match.
• Check the regulator's warnings list for clones of the firm.
• Read the client agreement: execution model, client money terms, negative balance policy, fees, the governing law, and any restrictions on scalping, hedging or automated trading.
• Search for the broker on the regulator's enforcement pages and in the news.

Clone firms

A clone copies the name, licence number and address of a genuine licensed broker onto a fake website. The register shows the real firm's details, so the trick works only if you do not compare the website address on the register with the one you are looking at. The FCA in particular publishes clone warnings by the hundred. If the domain on the register differs from the one in your browser, walk away.

What the client agreement tells you

It is long and dull and it is the contract. Look for the section on order execution, which states the model and what the broker promises about prices. Look for client money, which states whether and where funds are segregated. Look for negative balance. Look for fees, including inactivity and withdrawal charges. And look for the clause on abusive trading, which at some brokers is broad enough to void profits from ordinary scalping.

Key takeaways

• Verify the entity on the regulator's register, reached directly.
• Compare the registered website with the one you are on to catch clones.
• Read the client agreement for execution, client money, negative balance, fees and trading restrictions.