Regulated broker

Family VIII · Regulation

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

Regulated broker is a firm that holds a licence from a financial regulator to execute client orders, hold client money or give investment advice. The licence defines which activities are permitted, which clients may be served and what safeguards apply. Regulation varies by jurisdiction, so the same firm may operate under different rules in different countries.

What regulation covers

Regulatory status is not a single attribute. A licence typically specifies:

the permitted activities, such as dealing, arranging or advising;
the classes of client that may be served, for example retail or professional;
minimum capital and how client money must be segregated;
reporting, record-keeping and complaint-handling obligations.

Supervision is ongoing. Regulators may inspect, fine or withdraw authorisation if a firm breaches these conditions.

Checking a licence

A firm's name on a website is not evidence of regulation. The licence should be verified on the regulator's public register, using the firm's legal name and licence number. The register entry states the permitted activities and any restrictions. A firm may be authorised in one country but not in the client's own, and cross-border permissions vary.

Worked example: capital and client money

Regulatory capital and segregation

Client deposits100,000held in segregated account

Minimum capital50,000firm's own funds

Client money available if firm fails100,000segregated from firm assets

Figures are illustrative. Actual capital requirements and segregation rules differ by regulator and licence type.

Limits of regulation

Regulation reduces certain risks but does not eliminate them. It does not guarantee that a firm is solvent, that advice is suitable or that losses will be compensated. Investor compensation schemes, where they exist, have caps and eligibility rules that vary by country. A regulated broker can still fail, and clients may face delays in recovering assets.

Often confused with

forex broker: A forex broker is a firm whose core service is currency trading, which may or may not be regulated; the visible sign is whether the firm appears on a financial regulator's register for that activity.
broker: A broker is any intermediary that executes orders for clients, whereas a regulated broker is one holding a specific licence; the visible sign is the licence number and regulator named in the firm's disclosures.
broker insolvency: Broker insolvency is the failure event itself, not a licence status; the visible sign is an administrator or liquidator appointed to wind up the firm.