FCA – The UK’s Financial Conduct Authority

An Introduction to FCA Regulation

The Financial Conduct Authority (FCA) is the primary regulatory body in the United Kingdom, and one of the strictest financial regulators in the world.

The UK is widely regarded as having one of the most mature and well-structured financial service systems. The FCA is recognized globally for its stringent supervisory standards, making its license one of the most highly sought-after by brokers and financial institutions.

The FCA oversees banks, insurance companies, and investment businesses, including those engaged in forex, securities, and futures trading. While the Bank of England (BOE) focuses on maintaining financial stability, the FCA enforces rules to protect consumers and maintain market integrity.

Types of FCA Licenses

1. Full License (Comprehensive Regulation)

  • Requires FCA approval and a physical office in the UK.
  • Firms with a full license are authorized to hold client money.
  • Obligations include:
    • Submitting regular financial reports and annual audits.
    • Segregating client funds in Tier-1 banks approved by the FCA.
    • Ensuring client funds cannot be used for company expenses or risk management.
  • If the firm becomes insolvent, client funds remain protected and cannot be used to pay other creditors.

2. Basic License (Registration Only)

  • Firms comply with UK registration but do not have a UK office or branch.
  • Commonly granted to white-label brokers.
  • Usually, firms under this license cannot hold client money.

3. EU License

  • Based on EU regulations, a license granted in one EU country is recognized across others.
  • While valid in Europe, this is considered the weakest form of licensing and is not equivalent to FCA authorization.

How to Verify an FCA License

  1. Visit the FCA official website: www.fca.org.uk and open the Financial Services Register.
  2. Enter the broker’s Firm Name or Firm Reference Number.
  3. Check the company details carefully:
    • Status: Must show Authorised.
    • FSCS Protection: Confirm the broker is part of the Financial Services Compensation Scheme (FSCS).
    • Client Money Permission: The firm must safeguard client funds in segregated accounts.
    • Permissions: Look for “Rolling Spot Forex Contracts” under activities.
    • Regulators: Ensure it lists both the FCA and relevant securities/futures authorities.

Many brokers claim to be FCA-regulated but may only hold a Basic License. Always verify whether the firm has a Full License to ensure proper protection.

Why FCA Regulation Matters

  • Brokers under full FCA authorization are subject to strict financial standards.
  • Client funds are safeguarded and separated from company funds.
  • In the event of insolvency, clients may be compensated up to:
    • £85,000 per person, per bank (deposits).
    • £50,000 per person, per firm (investments or financial advice).
    • 90% with no upper limit for insurance claims.

If you trade with an unauthorized firm, you will not have access to the Financial Ombudsman Service (FOS) or the FSCS compensation scheme.

FSCS Claims – How to Seek Compensation

The Financial Services Compensation Scheme (FSCS) handles claims against FCA-authorized firms that are unable to meet their financial obligations.

Steps to Claim:

  1. Contact the firm directly to check if they can settle your claim.
  2. Verify if the firm is still active via the FCA Register or Companies House.
  3. Contact FSCS if the firm is declared insolvent. FSCS will reach out to clients and provide claim forms.
  4. Submit your own claim. Applying to FSCS is free and straightforward—you do not need to pay third-party claim agencies.
  5. Understand compensation limits:
    • Deposits: up to £85,000 per person, per bank.
    • Investments: up to £50,000 per person, per firm.
    • Insurance: 90% of claim, unlimited.

Final Thoughts

The forex industry is crowded with brokers misusing the FCA name. In reality, only a limited number of brokers hold full FCA authorization. FCA is one of the most reliable regulators globally, and investors are strongly advised to check whether their broker holds a Full License before opening an account.

Tip: Always verify an FCA license via the official register. If in doubt, contact FCA directly or consult a trusted advisor.

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