Checking a provider
Four checks in a fixed order. They take a few minutes and sort out the vast majority of dubious offers.
Step one: authorisation. Is the provider listed in the public register of a financial regulator? Anyone can search these registers for free, in the US for example FINRA BrokerCheck. If you can't find the provider there, stop here.
Step two: the contracting party. Which company are you signing the contract with? That's in the legal notice and the contract documents, not in the advertising. Often a regulated firm does the advertising while another firm in a faraway country signs the contract with you.
Step three: withdrawals. Search specifically for experiences with withdrawals, for example with the provider's name and the word withdrawal. With dubious providers, paying in works smoothly and paying out doesn't. That's the single most reliable sign there is.
Step four: how you were approached. Did someone contact you, or did you search yourself? Legitimate providers don't call anyone, don't push and don't promise returns. Anyone pushing you to deposit wants exactly that and nothing else.
Check authorisation in the national regulator's databases and, in Europe, in the central register of the securities regulator ESMA. Many regulators also publish warning lists of firms operating without permission. These lists are free and are updated continuously.
If the provider belongs to a group, the firm you sign the contract with is what counts. Its home country determines supervision, investor protection and where you can sue. If a sister company is authorised in one country, that doesn't protect you if your contract is with a firm somewhere else.
You can also check whether customers' money is held separately and by whom. Legitimate, regulated providers name that body. If the information is missing or names a sister company, nobody independently checks whether the money is even there. In the big collapses of recent years, that was exactly the core of the damage.
Check your own provider
Six questions about an offer you're checking right now. None of it is stored or sent anywhere.
Summary
- Register, contracting party, withdrawals, outreach. In that order.
- What matters is the contracting entity, not the advertising one.
- Smooth depositing with difficult withdrawing is the clearest signal.
Did you get it?
Which entity determines your protection?
The firm you sign the contract with. A sister company's authorisation doesn't protect you.
What are regulators' warning lists?
Free lists published by regulators of firms operating without permission. They're updated continuously.
What trait was central in documented collapses?
That customers' money wasn't held separately and no independent body looked after it.
Sources and further reading
- BaFin's official company database for checking whether a provider is licensed. View source ↗
Related
- Finding a reputable brokerStage 2
- Loss rates on CFDsReality Check
- Reading a balance sheetStage 4