Why Deal With FSA Regulated CFD Brokers?

One of the most fundamental requirements when choosing a CFD broker to trade with is whether or not the broker is regulated by the FSA, and most experienced traders would advise strongly against doing business with an unregulated broker. In the UK, CFD brokers are required to be regulated by the FSA by law, and those that trade without FSA approval are doing so illegally. But as a trader, what are the benefits of choosing a broker with FSA approval, aside from knowing they're operating above the law?

The FSA, or Financial Services Authority, have the power to regulate and enforce regulations against brokers, to ensure they are treating customers fairly and playing by the rules. With powers to fine, name and shame and even put rogue traders out of business, the FSA are an ever important party in regulating the behaviour of traders and ensuring they're managing your money in a safe and legitimate way.

The powers of the FSA and the importance of their role cannot be underestimated, and there is no better example than recent investigations into a financial broker for market abuse. The broker, formerly of Sucden Financial, was found to have manipulated the commodities markets, specifically coffee futures on behalf of a client, and the FSA have reported the broker encouraged unlawful activity across the board.

An FSA investigation into the broker found there had been foul play, and imposed a fine of £100,000 and a life-time ban on the broker from the financial services industry.

But isn't market abuse of this sort a victimless crime? Absolutely not, and as a legitimate trader who is excluded from the market abuse you could stand to lose a fortune off the back of these illegal and illegitimate practices. Market abuse also serves to undermine confidence in the markets, and thereby undermines the whole process of investing and the capital markets.

Without the regulation and oversight of the FSA, actions such as these would be far more common than they are at the moment, and have a potentially serious impact on the fortunes of your investments. By ensuring that you only trade with FSA regulated brokers, you're minimizing the risks of dealing with a dodgy provider. You wouldn't bank with an unregulated institution, and nor should you trade with one - for the safety and security of your deposits and trading activities, look for FSA regulation as the first point on your checklist when choosing your broker.