Forex broker regulations are regulations issued by the authorities to supervise forex brokers. The rules are set as the standard to eliminate frauds that might be committed by brokers. In addition, broker regulations ensure that the quality level of service, features, and facilities of a broker can be maintained. In other words, forex broker regulation is very important because it can protect the interests of traders.
Below are aspects that are carefully maintained by broker regulations:
- Separate financial accounts. Regulated brokers must keep their clients' funds in accounts segregated from the company's financial assets. This policy is set to ensure the broker does not misuse clients' money under any circumstances. If a company or broker goes bankrupt, the broker's creditors are not allowed to access investor funds to pay off the broker's debt.
- Solvability and capital requirements. One of the most important requirements for any regulated forex broker is the ability to service debt (solvency) and have enough capital to pay off their own debts without using client funds.
- Regular audits and investigations. Once regulated, forex brokers must submit regular reports on all their operations to the relevant authorities to prove their compliance with forex regulations. In addition, they must be regularly audited and investigated to verify their capital adequacy ratios.