Fca regulated broker

Family VIII · Regulation

Not to be confused with forex broker, broker, broker insolvency.

FCA regulated broker describes a brokerage whose investment activities fall within the scope of authorisation by the Financial Conduct Authority, the UK regulator for financial services firms. Authorisation is not a single status: permissions, prudential categories and the level of protection attached to a firm vary according to the business it conducts. The term therefore indicates which regulator supervises the firm, not that the firm is safe or suitable for any particular client.^[1]

What authorisation involves

The FCA grants permissions that define the activities a firm may carry out, such as dealing as principal, dealing as agent, arranging deals, or holding client money. A firm's entry on the public register lists these permissions and any restrictions.

Authorised firms must meet threshold conditions on an ongoing basis, including adequate financial resources, suitable management and appropriate systems and controls. They also fall under conduct rules covering client assets, complaints handling and financial promotions, and must report to the FCA at set intervals.

Two points are often conflated. First, a firm can be authorised for some activities but not others. Second, the FCA's rules apply to the firm's UK-regulated business; the treatment of a client depends on where the client is located, which entity holds the account, and the terms of the client agreement.

Protection schemes and their limits

Eligible claimants may have access to statutory compensation if an authorised firm fails and cannot meet claims. The scheme, its eligibility rules, the maximum payout per person per firm, and the categories of business covered are set by the scheme's rules and change over time; they should be checked against the current published terms rather than assumed.

Compensation arrangements differ between countries and between legal entities within the same group. A firm operating in the UK through a branch or a separately incorporated subsidiary may sit under a different regulator and a different scheme from its parent. Client money rules, ombudsman access and dispute procedures likewise vary by jurisdiction and by the type of account.

Worked example: checking a firm's status

A trader is told a firm is "FCA regulated" and wants to verify what that means for a GBP 20,000 account.

Account balanceGBP 20,000 held with the UK entityGBP 20,000

Compensation limitScheme limit per person per firm, as published at the time of failureLimit applied, not the full balance

Amount potentially recoverableLower of balance and the applicable scheme limitDepends on the limit in force

The register entry confirms which activities are permitted; it does not confirm that a claim would be paid in full. The recoverable figure depends on the scheme limit, the claimant's eligibility and the type of business, all of which are set by rules that change.

Points that vary

Prudential category and the amount of capital a firm must hold.
Whether client money is segregated and under which client asset rules.
Access to a statutory ombudsman and the scope of that access.
Compensation scheme eligibility, per-person limits and covered products.
Which legal entity contracts with the client, and under which country's law.

Because these differ by firm, entity and jurisdiction, the label alone does not establish the protections attached to a given account. The relevant documents are the firm's register entry, its client agreement and the current rules of the applicable scheme.

Often confused with

forex broker: A forex broker is defined by the market it serves, foreign exchange, and may be regulated in any jurisdiction or not at all, whereas an FCA regulated broker is defined by its UK authorisation; the visible sign is whether the firm appears on the FCA register with the relevant permissions.
broker: A broker is any intermediary that executes or arranges transactions for clients, a general role, while an FCA regulated broker is a broker whose investment business is authorised by a specific UK regulator; the visible sign is the presence of an FCA firm reference number and listed permissions.
broker insolvency: Broker insolvency is the event of a brokerage failing and being unable to meet client claims, whereas an FCA regulated broker is a supervisory status that exists before any failure; the visible sign is that insolvency is described in the past or present tense of an administration or liquidation, not as a licence.

References

↑ Financial Conduct Authority, permanent rules restricting the sale of contracts for difference and CFD-like options to retail clients, in force since 2019. UK retail clients. The FCA extended the restrictions to closely similar products.

Family: VIII · Regulation · Index A–Z