EU regulator warns about unregulated Forex brokers

The European Securities and Markets Authority (ESMA) has made a strong announcement warning retail investors to be wary of unregulated

The European Securities and Markets Authority (ESMA) has made a strong announcement warning retail investors to be wary of unregulated Forex brokers. The regulator, which is based in Paris, wrote a detailed paper on the subject after investors claimed huge losses in FX and CFD (OTC products). 

The report is more of a ‘how to guide’ for retail investors giving them information on FX, how markets fluctuate, leverage and even trading via an online platform.

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Undoubtedly an important reminder for investors who are not familiar with the dynamics of OTC margin products.

Most FX brokers in the EU are regulated with some authority; Cyprus and Ireland have been the notable locations after UK’s FSA and Germanys BAFIN.

The report has key messages which include:

• Do your homework: check if the firm is authorised.

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• Don’t use money you can’t afford to lose; you could lose more than your initial investment.

• Be aware that some product or service offerings could be misleading.

• Know the risks involved.

Source Date: 5 December 2011 ESMA/2011/412

The report has come when the European Commission has been discussing the Tobin Tax and MIFID 2. Forexmagnates team will be discussing MIFID 2 in the next quarterly report.

 

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