What is an Unregulated Forex Broker? Are Unregulated Forex Brokers Illegal?

If you are new to the world of forex & CFD trading, then you probably have already read about unregulated forex brokers. Even if you’ve come across the term before, you may still be curious to understand, what is an unregulated forex broker?

Since many of our readers have limited experience trading forex, we’d like to properly define exactly what an unregulated forex brokers is. In addition, we’ll also help you understand whether or not is illegal to trade with an unregulated forex broker. And, as a final thought, we’ll address a common question we often receive: are all unlicensed forex brokers scams?

What is an Unregulated Forex Broker? – A Basic Definition

An unregulated forex broker is simply an online forex & CFD brokerage that does not possess any type of financial license. This means that an unregulated forex broker is not legally authorised to offer forex & CFD trading services in any part of the world.

Just because a forex broker is unregulated doesn’t imply that the company has no physical footprint in some part of the world. In fact, it’s quite common to find that many unlicensed forex brokers are registered in offshore regions like St. Vincent & The Grenadines, or SVG for short. St. Vincent isn’t the only offshore region where unlicensed forex brokers register their businesses. Marshall Islands, St. Kitts and Nevis are some additional offshore jurisdictions where many forex brokers register their businesses.

Whether it’s Marshall Islands or St. Vincent, unregulated forex brokers opt for these regions because they are inexpensive and quite easy to establish. It’s worth noting that even though a forex brokerage is not licensed, it is perfectly legal for the company to operate out one of these offshore jurisdictions.

Are Unregulated Forex Brokers Illegal?

Unregulated brokers themselves are not undertaking any illegal activity since operating an unlicensed forex broker in a region like St. Vincent (SVG) is not against the law. With that said, some financial regulators do not allow unlicensed forex brokers to target their citizens. In the United States, for example, it is against the law for an unlicensed, offshore broker to accept account applications from US citizens.

Is it Safe to Trade with an Unregulated Forex Broker?

The answer to this question depends on each investor’s own tolerance for risk. Bear in mind that even a forex brokerage registered in St. Vincent or other regions must undergo some basic due diligence by the local authorities. It’s also worth mentioning that many of the largest forex brokers we currently see in the marketplace started off as unregulated. Nevertheless, unlicensed forex brokers do not offer any type of financial protection to their investors. If you are seriously concerned about the safety of your funds, then do not trade with an unregulated forex broker.

Why Would Anyone Trade with an Unregulated Forex Broker? Are Unregulated Brokers Scams?

The answer is that the regulation of forex activity has increased across the globe in recent years. In Europe, Asia and Australia, leverage on forex & CFDs has been reduced by local regulatory bodies making forex trading less attractive for those investors who have grown accustomed to higher leverage.

As such, some traders seeking leverage greater than 30:1 accept the risk of trading with an unregulated forex broker in exchange for greater account flexibility. Additionally, unregulated brokers often are able to offer deposit / “no deposit” bonuses along with other promotions and giveaways that are now illegal in many parts of the world. Consider some of these reasons when you are asking yourself why someone would trade with an unregulated forex broker.

Not all unregulated forex brokers are scams but investors must proceed with caution. For the reasons mentioned previously, there will always be safety of funds and reputation concerns with any unregulated forex broker. Furthermore, many unlicensed brokers never end up growing or obtaining a license, meaning that you should only consider opening an account as a temporary option. If you uncertain whether or not to trade with an unregulated forex broker, then it’s best to get in touch with our team of consultants today. We are more than happy to guide you in the decision process.

Forex Consulting Services – Helping Traders Select the Best Brokerage to Meet Their Needs

If you are looking to open an account with an unregulated forex broker but aren’t certain about the risks, we are here to help. Our team of forex industry experts are more than happy to address your questions about forex regulation and also recommend some licensed and highly reputable forex brokers to consider trading with.

To learn more about trading with a regulated forex brokerage and the risks of opening an account with an unregulated forex broker, don’t hesitate to contact our team today!

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