The short answer
A licence is only as useful as the rules behind it. When you see “regulated”, ask five questions:
- Leverage: does the regulator cap leverage for retail clients?
- Negative balance protection: can I lose more than my deposit?
- Client money: must my money be kept separate from the firm’s money?
- Complaints: is there a free, independent ombudsman if the firm says no?
- Compensation: is there a scheme that pays out if the firm collapses?
Some regulators answer “yes” to all five for retail clients. Some licences answer “yes” to one or two. No licence protects you from trading losses. That part is always your risk.
We never call any country “good” or “bad”. We describe what each kind of protection does, and where the gaps are, so you can check any licence yourself.
Why “regulated” is not one thing
Every country writes its own financial rules. A regulator that supervises firms selling to its own residents often sets conduct rules: how much leverage, how warnings look, how client money is held. Some jurisdictions mainly register companies that serve clients in other countries, and set fewer conduct rules for those clients.
Neither is a crime. But if something goes wrong, the protection you get comes from the regulator of the company that holds your account, not from the advert. Many brands run companies in several countries, so check the company named in your client agreement. Our licence check guide shows how.
Protection 1: leverage caps
Leverage lets you open a big gold position with a small deposit. Caps limit how big.
- EU: ESMA’s 2018 measures set retail CFD leverage between 30:1 and 2:1, with 20:1 for gold (ESMA).
- UK: the FCA limits retail CFD leverage to between 30:1 and 2:1, depending on the volatility of the underlying (FCA PS19/18).
- Australia: ASIC’s CFD product intervention order sets leverage limits from 30:1 to 2:1 (ASIC 22-082MR).
The gap: where no cap applies, you may be offered 1:500 or more on gold. That is not a free gift. It lets a small account open a position that one normal gold move can wipe out. See gold leverage explained.
Protection 2: negative balance protection and margin close-out
- The EU, UK and Australian CFD rules all require negative balance protection for retail clients, so you can’t lose more than the money in your account.
- EU and UK rules also require the firm to start closing positions when your funds fall to 50% of the margin needed. ASIC’s order standardises margin close-out too.
The gap: without these rules, a fast gold move over a weekend or a news spike can leave your account below zero, and the firm’s terms may say you owe it. Read negative balance protection on gold.
Protection 3: client money kept separate
In the UK, the FCA says a fundamental requirement of its client-money rules (CASS) is that firms keep client money separate from firm money, so client assets are protected if a firm fails (FCA).
The gap: if client money rules are weak, or not checked, your deposit may sit in the same pot as the firm’s own money. If the firm fails, you may be one creditor among many. Ask any firm in writing how and where your money is held.
Protection 4: a free ombudsman
An ombudsman is an independent referee. If the firm rejects your complaint, you can take it to the ombudsman for free.
- UK: the Financial Ombudsman Service handles complaints about authorised firms. The FCA’s published warnings about unauthorised firms say that if you deal with one, you will not have access to the Financial Ombudsman Service or be protected by the FSCS, so you are unlikely to get your money back (FCA Warning List).
- Australia: AFCA says it is an “independent and impartial ombudsman”, its service is free to access, and it is compulsory for all licensed financial services providers in Australia to be AFCA members. It usually asks the firm to try to resolve the complaint first (AFCA).
The gap: without an ombudsman, your options after the firm says no may be a regulator complaint form (which may not get your money back) or a court case in another country.
Protection 5: compensation if the firm collapses
A compensation scheme pays out when a firm fails and can’t return client money. It does not pay for trades that lost money.
| Scheme | Who it covers | Limit (from the official site) |
|---|---|---|
| FSCS (UK) | Eligible clients of authorised investment firms that have gone out of business | Up to £85,000 per eligible person, per firm, for firms that failed from 1 April 2019 (FSCS) |
| CySEC ICF (Cyprus, EU) | Non-professional clients of ICF member firms, when the conditions in the ICF Directive are met | The lower of 90% of covered claims and €20,000 (CySEC) |
The FSCS says plainly: “We can’t accept any claims that are for poor investment performance.”
A worked example of the ICF rule (example claims):
- Covered claim of €10,000: 90% is €9,000, which is below €20,000, so the cover is €9,000.
- Covered claim of €30,000: 90% is €27,000, which is above €20,000, so the cover is €20,000.
The gap: many jurisdictions have no compensation scheme for trading clients at all. If the firm fails, there may be nothing behind your deposit except the firm’s own assets.
Your five-question licence test
Use this table for any broker. Fill it in from the regulator’s website, not the broker’s.
| Question | Where to look | Your answer |
|---|---|---|
| Is there a retail leverage cap on gold? | Regulator’s rules or consumer pages | |
| Is negative balance protection required? | Regulator’s rules; your client agreement | |
| Must client money be segregated? | Regulator’s rules; ask the firm in writing | |
| Is there a free ombudsman? | Regulator’s consumer pages | |
| Is there a compensation scheme, and what is the limit? | The scheme’s own website |
If you can’t find the answer on an official website, write “unknown”. Unknown is not the same as “yes”.
Things that look like protection but aren’t
- “Insurance up to $1 million” on a broker’s website. Read who the insurer is, what it covers and who can claim. It is a private policy, not a public scheme.
- “Member of a financial commission” or a private dispute body. It may help, but it is not a government regulator or a statutory ombudsman.
- A company registration number. Being registered as a company is not the same as being licensed to deal in investments.
- A licence for a different activity, such as payment services. Check the permissions on the register.
- Logos of regulators on the website. Anyone can paste a logo. Only the register counts.
Sources
- ESMA retail CFD measures, 27 March 2018: ESMA press release
- FCA PS19/18, rules for retail CFDs: FCA
- FCA, client money (CASS): FCA press release
- FCA, unauthorised firms and the Warning List: FCA
- FSCS, investments: What we cover (limit and “poor investment performance” wording, read 5 November 2026)
- CySEC, Investor Compensation Fund information: CySEC ICF (read 5 November 2026)
- AFCA, information for consumers: AFCA (read 5 November 2026)
- ASIC, CFD product intervention order: 22-082MR and 26-239MR. ASIC says the order is due to expire on 23 May 2027 and has proposed extending it.
Educational content only, not financial or legal advice. Rules and limits change; always check the official website before you rely on them. We never name, rank or recommend brokers.
Frequently asked questions
What is the difference between a strong regulator and an offshore licence?
It is about what the rules require. Some regulators cap retail leverage, require negative balance protection and segregated client money, and give clients a free ombudsman and a compensation scheme. Other licences require fewer of these things. Check each protection on the regulator’s own website rather than relying on a label.
Does the FSCS protect my trading losses?
No. The FSCS says it can’t accept claims for poor investment performance. It may pay compensation, up to £85,000 per eligible person per firm for firms that failed from 1 April 2019, when an authorised investment firm has gone out of business and can’t return what it owes you.
How much does the CySEC Investor Compensation Fund cover?
CySEC says the ICF covers the lower of 90% of a covered client’s total covered claims and €20,000. It is for non-professional clients of ICF member firms when the conditions in the ICF Directive are met. It does not cover trading losses.
What is AFCA?
The Australian Financial Complaints Authority. It describes itself as an independent and impartial ombudsman, and its service is free to access. AFCA says it is compulsory for all licensed financial services providers in Australia to be AFCA members.
Is an offshore broker illegal?
Not in itself. A firm licensed in one country may be allowed to serve clients elsewhere, or may not, depending on the rules where you live. What changes is the protection you get. In India, RBI rules restrict residents to authorised persons and authorised platforms; read the box on this page.
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