Regulation problems
how to choose a reliable Forex broker
Problems with broker regulation depend on where the broker is legally based and which countries it operates in. Since the Forex market is decentralized, there is no single regulatory authority for the entire market. Some countries or regions have stricter regulations.
Many Forex brokers are based in so-called offshore zones, such as the Caribbean Islands or small Pacific Islands. One of the reasons for this location is an attempt to avoid or optimize tax costs, and the second reason is that there are practically no regulatory authorities. Formally, of course, they are there, but in practice they are not.
This means that if a broker cheats and clients suffer any losses because of it, there is little they can do, because it is difficult and very expensive. In addition, these remote locations do not have the human resources to investigate all the problems that arise.
On the other hand, there are Forex brokers that operate in regions where there is strict control and this control becomes even more stringent. These are regions such as the European Union, the United States, the United Kingdom, Cyprus, Australia, Canada, Japan and New Zealand. Brokers that operate under these jurisdictions operate under increased control.
In this case, customers will have an option to contact someone if something goes wrong. However, keep in mind that this does not mean that the broker's work in a strictly regulated area means total security. I traded through Forex brokers located in New Zealand and Cyprus, which canceled my profit and did not allow me to withdraw the Deposit. In a more strictly regulated area, it is less likely that this can happen.
In addition, some of these regulators insist that customer deposits are insured against bankruptcy or loss of funds due to the broker's fault. Usually up to 50,000 units of the base currency are insured, depending on the regulator.
In General, I would recommend that you refrain from working with brokers based in regions with little developed financial market regulation.