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- CySEC Regulated Forex Brokers
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CYSEC is the largest regulatory body operating in Cyprus and overseeing the activities of hundreds of Forex brokers and even casinos which operate within the EU jurisdiction. CYSEC stands for Cyprus Securities and Exchange Commission. This regulatory body was founded in 2001 before it joined forced with MiFID regulatory organization for purposes of regulating CYSEC Forex brokers and binary options activities across the EU. As it is now, many Forex brokers who operate both locally and internationally are registered with CYSEC. The reason why most Forex brokers prefer setting up base in any of the EU jurisdiction where CYSEC covers is because these areas have low tax requirements and entry conditions. That explains why many Forex brokers will prefer setting up base in Cyprus than in any other part of the world. CYSEC regulation is one of the criteria we follow for best Forex Brokers reviews.
Why You Should Invest Only With CYSEC Regulated Forex Brokers
- 1 Why You Should Invest Only With CYSEC Regulated Forex Brokers
- 2 Reasons why CYSEC is now registering many Forex Brokers
- 3 How problems are resolved where a client and a CYSEC regulated Forex broker is involved?
- 4 How are Forex Brokers verified before they can be issued with a license?
- 5 Conclusion
- 6 Related
When Cyprus was absorbed into the EU, it gave CYSEC an automatic ticket to form a subsidiary within the MiFID regulation. Also, because of this merger which happened in 2004, Forex brokerage firms which operate from Cyprus and are registered with CYSEC are able to access all markets in the EU countries.
According to MiFID requirements, a Forex broker is often required to seek authorization in their country of residence before applying for the MiFID regulation. But this is also where CYSEC comes in. So far, CYSEC has been charged with the following mandates:
(a) They control and supervise the activities of the local stock exchange, the brokerage firms, and the companies that are involved.
(b) Give out licenses to CySEC Regulated Forex brokers as well as other players who are directly involved with the local stock and FX/CFD markets.
(c) Imposing penalties to CYSEC regulated Forex brokers and investment consultants who don’t adhere to the requirements of the regulation.
Reasons why CYSEC is now registering many Forex Brokers
Any Forex broker who wants to start their operations with minimal formalities would be doing themselves a favor by setting their eyes on Cyprus or any other part of the EU. This is because, for a long time, Cyprus has been famed for being a tax haven to companies that want to save on taxes, thereby increasing their revenue.
The inclusion of Cyprus into the EU is now being seen as an incentive for the CYSEC regulated Forex brokers who don’t want to be bothered by complicated regulatory requirements and difficulty of approval.
Another reason why CYSEC became popular is that it used to let all Forex brokers set up shop because these brokerages didn’t feel threatened by their low fines or suspension of licenses that would come about as a result of engaging in fraudulent activities.
This attracted a protest from the EU member states as well as their regulatory bodies. As a result, CYSEC revised their regulatory guidelines to ensure that clients who traded with CYSEC regulated Forex brokers would not loose money to fraudulent FX brokers.
How problems are resolved where a client and a CYSEC regulated Forex broker is involved?
Ever since CYSEC came under sharp criticism, they have been working on their regulatory framework by introducing even tighter initiatives which CYSEC Forex brokers are required to adhere to. This is to safeguard market integrity while protecting investors from financial crimes in the money markets.
CYSEC has now officially teamed up with MiFID in creating guidelines which ensure that compliant members are following the regulations as spelt out in their guidelines. But in case there is a problem, CYSEC will not handle it directly as the regulatory organizations has a set of channels through which such problems can be dealt with.
CYSEC requires that all CYSEC Forex brokers provide a clear and direct channel of communication between them and their clients at any given time. So the first step to reaching a resolution in case of a problem would be to speak to the Forex broker in question.
However, in the event that the CYSEC Forex broker in question doesn’t address the problem, the client is advised to seek help from the Financial Ombudsman or to go to court as an alternative.
CYSEC is only concerned with regulating and overseeing the activities of the financial companies that are answerable to them. However, it is ironical to state that protecting the consumer is their number one priority when they (CYSEC) doesn’t handle consumer complains directly.
How are Forex Brokers verified before they can be issued with a license?
Because of the generally relaxed regulatory requirements of the CYSEC, there is a threat of some rogue Forex brokers coming into the market with the intent of disappearing with clients’ money. However, in a move to counter this, CYSEC states that all CYSEC Forex brokers must state their licensing number on their website. This number must be visible in all pages of the website in question. But how do we know whether or not this number is authentic? Well, CYSEC has an official website where licensing numbers can be verified. If a Forex broker claims that they are operating under the guidelines of CYSEC and MiFID respectively, they should be able to produce this number for purposes of cross-checking with the relevant organization.
Another thing that CYSEC does is to update their circulars or warning notices concerning CYSEC Forex brokers who have been fined or denied their license numbers for engaging in financial malpractices. Circulars of this nature also include the company’s physical address, the revoked license number, and contact information.
If you are not sure of the status of the broker which you want to do business with, you should probably contact CYSEC for more information.
Generally speaking, CYSEC is regarded as the most popular and preferred way to get licensing for any Forex broker. Financial companies know that CYSEC is more lenient unlike other regulatory agencies, and this has made the organization grow tremendously. However, consumers need to realize that not all CYSEC regulated Forex brokers are safe to do business with. Of course the first step to checking the authenticity of a broker would be to look for this licensing number. But that is not everything. One should conduct their research to learn other details as well, including what clients are saying about that particular Forex broker, and should read Forex Broker reviews from trusted sources such as 10ForexBrokers.com. That way, an investor will have a fair chance of signing up with an honest broker.