Tuesday, January 18, 2011

Regulation (the "Legitimacy Test")

Furthermore, if the broker does keep client funds segregated, it is certainly a bonus, since it provides additional protection of client funds even in case of insolvency. FSA regulated brokers, for example, are required to keep client funds segregated. This of course begs the question, where are the funds being kept? Are they in a safe account at a large bank or some dodgy private bank in the Cayman Islands? You can find answers to these questions in our broker reviews section. Alternately, the broker’s customer support should be able to answer these questions. If they cannot, they may be hiding something (or the customer service rep may simply be incompetent - either way it's not a good sign).

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