The following is a guest editorial courtesy of Steve O’Hare, COO of FCA-regulated trading ideas provider Signal Centre.

In this article Steve discusses why Signal Centre prioritised getting FCA approval for their business and why industry regulation is essential for keeping the markets on track and providing protection for traders and brokers.

Since inception PIA First, now known as Signal Centre, made the decision to be authorised and regulated by the FCA in order to give us a solid foundation of trust to build upon with clients. We invested extensive time, money and effort into getting FCA approval and over the years we’ve built up a reputation for fairness, transparency and security with our client base across investors, brokers, individuals & stakeholders.

Our ethos has always been to place the interests of the traders at the forefront, as we strive to assist in increasing their chances of success through education and support.

The Signal Centre team has implemented compliant business processes and adheres to high level standards in line with FCA guidance. We also spend time investing in our processes and business practices to ensure that our clients can be assured of account details integrity and excellent standards of education provision for clients, customer service and technological integrations.

What is the Financial Conduct Authority (FCA)?

The Financial Conduct Authority is the UK’s official financial trading regulatory authority. It is an independent public authority promoting fair & effective competition within the finance sector by managing conduct of financial service providers (both retail & wholesale). Their aim is to create and maintain the country’s financial stability. The FCA’s influence within the industry ensures that investors’ interests are protected, and standards of products & services are upheld. With significant powers over British financial firms, their credibility for protecting the market & reputation is of a high standard.

Why is FCA regulation important?

The FCA’s strategic objective is to ensure that the relevant markets function well.

It has three operational objectives:
● To secure an appropriate degree of protection for consumers
● To protect and enhance the integrity of the UK financial system
● To promote effective competition in the interests of consumers

The strict FCA regulations serve to enhance market integrity for individuals, businesses and the economy. The regulations give retail customers, and in our case brokers, added due diligence assurance and protection against manipulative marketing practices and financial mismanagement.

When traders or investors have confidence in the financial services sector then the result is industry growth, which fuels healthy competition between brokers. There are extensive benefits to being FCA licensed but there are also consequences for brokerage businesses that are not FCA regulated.

What are the pitfalls of working with a company that isn’t FCA compliant or approved?

False profit claims and manipulative marketing strategies are all ploys used by unregulated trading companies to entice brokers into their services. Indeed, it can be very difficult for a broker to tell the difference between an FCA approved company like Signal Centre and another company that offers unregulated trading insights. Many of these ‘rogue’ companies play with words to give the guise that they are regulated, for example they may use terms such as:

‘registered investment adviser expertise’
or
‘company complies with the regulations in force’

Financial services companies that are not FCA regulated risk causing damage to their brand & their reputation by failing to achieve industry regulation. Penalties may also apply if the company is required to be authorised by the FCA. In addition, it’s important to note that the regulatory landscape is constantly changing, when financial institutions and businesses are not aligned with industry standards and best practice their operations risk being suspended with very little notice. By investing time and effort into becoming FCA approved, companies in the trading signal market are better positioned to address new changes and challenges as they happen while continuing to deliver quality trading insights.

What should brokers be looking for in a trading signal provider?

Contracting a provider that is FCA regulated is highly recommended. The FCA is one of the most prestigious financial governing bodies in the world and is aligned with the MIFiD II guidelines, passed by ESMA. This means, any changes in the EU regulatory framework will result in new leverage limits and position requirements from the FCA as well. The FCA approval process is extensive and ensures that a business is reliable, safe & credible to spend money with or invest into.

What you need to know about other financial regulatory bodies:

The Financial Conduct Authority isn’t the only regulatory body. The industry is also guided and regulated by ESMA and MiFD II, these organisations in conjunction with the FCA set the industry benchmark.

The European Securities and Markets Authority (ESMA) is an independent European Union (EU) Authority that contributes to safeguarding the stability of the EU’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets. https://www.esma.europa.eu/about-esma/esma-in-brief

MiFID II is a legislative framework instituted by the European Union (EU) to regulate financial markets in the bloc and improve protections for investors. Its aim is to standardize practices across the EU and restore confidence in the industry, especially after the 2008 financial crisis. https://www.investopedia.com/terms/m/mifid-ii.asp

Other regulators also include CySEC (Cyprus) and ASIC (Australia).