The Advantages of Trading with Regulated Brokers

There’s a lot of talk among new traders about which brokers are the best. Of course, it turns out that the definition of best is related to what a given customer needs and wants. Some, for instance, want super-charged response times from brokerage reps. Others want low commissions, a massive list of securities they can trade, etc. But there’s one area where there’s almost universal agreement, and that’s regulation. While there are unregulated brokers out there, and people do use them, serious traders always seek providers who are bound by various local, national, and international regulations, guidelines, rules, and ethical standards.

There are distinct and specific disadvantages of doing business with unregulated financial institutions of any kind, particularly brokerage firms. People who like the idea of protecting their accounts from fraudulent schemes, the financial failure of the firm, and other negative events understand the value of laws and regulations. They also know that a highly regulated industry acts as a kind of safety net for all sorts of situations.

What are the advantages of dealing with online brokerage companies that operate under regulatory restraints? The good news is that there are multiple reasons for doing so. Plus, opting to open an account with a reliable, regulated, reputable firm means getting the peace of mind you need when your hard-earned capital is on the line. The following is a short list of why every serious investor and trader should avoid unregulated brokerage firms and only open accounts with organizations that operate under at least one set of national or international laws.

Honest Management


In the financial industry, laws and rules have a way of weeding out dishonest business owners. Those who attempt to deceive clients, or who attempt to do so, have trouble meeting all the transparency guidelines and other regulations under which legitimate firms must operate. Regulatory bodies do one thing very well in that they drive away nearly all the potential nefarious operators from the industries they oversee.


Reputable service providers like Friedberg Direct and other industry leaders, operate under vast sets of guidelines, laws, and regulatory rules that set them apart from unregulated companies. For millions of investors, reputation is a crucial component of the overall character of a financial organization. When companies take the time and make an effort to earn regulatory approval, it means their owners and managers are serious about protecting the interests of their clients.

In the digital age, consumers have many resources at their fingertips. All it takes is a simple, fast internet search to find out about management teams, company histories, and the overall public reputation of any company. When you begin to seek a worthwhile broker who offers the kinds of service and types of assets you wish to trade, spend at least 30 minutes reviewing the available choices. Don’t waste time with unregulated providers or ones that don’t respond to casual inquiries.

Appropriate Warnings


If you ever visit an online trading site that encourages account holders to buy and sell to their hearts’ content and offers no warnings about protecting capital or doing research before risking money, beware. Chances are you have wandered into the world of unregulated financial investing and trading. The better sites include written statements about the common pitfalls of risking too much capital on a single transaction. Always look for warnings. You’ll find them up front on the better websites, and they’ll include cautionary words about how to manage your funds. Additionally, you want to see plenty of educational material for newcomers. Examples include blogs, videos, tutorials, and articles that explain basics and intermediate skills for anyone who wants to trade or invest.

Avoidance of Fraud

When regulatory authorities oversee a business or group of businesses, customers don’t have to worry nearly as much about falling victim to blatant fraud. Such illegal and borderline illegal activities include a vast range of crimes, some of which can wipe out account holders’ balances through outright theft, embezzlement, misleading advertising, and more. When authorities discover a case of fraud, they have the power to not only turn offenders over to law enforcement agencies but to immediately suspend a company’s or individual’s license to operate a financial entity. In the absence of such rules, owners of investment firms can essentially run amok and do as they wish with clients’ capital deposits.

Protection of Funds


One of the first things prospective investors notice about a service provider’s website is whether there’s any mention of account protection. What happens if the company holding your hard-earned money goes out of business, goes broke, or chooses to close its doors? Reputable financial organizations in a number of industries, including the investing sector, offer account protection in varying amounts. So, if the entity goes bankrupt or shuts its doors for any reason, there’s a form of financial insurance in place that protects customer accounts up to a specific amount. Always read the fine print on contracts and account applications to find out what the amount is, as it varies by a lot. It’s often the case that depositors from one or more countries are protected, but others are not. That’s why double-checking the particulars of fund protection clauses is essential.

Transparency of All Transactions

One of the hallmarks of a well-regulated broker’s business is transparency. Benefits for customers include knowing the precise amounts of commissions, fees, fines, deposit minimums, transaction results, and much more. Laws surrounding transparent practices work to the advantage of clients in dozens of ways. When you enter into a transaction to purchase foreign currency, for instance, it’s necessary to know whether the deal went through, what the result was, and if the purchase price and other parameters were met. People who work with honest companies will be able to see all that data in an online account statement whenever they log into the site.

Plus, weekly, monthly, and annual statements are available whenever you need them. This kind of clear, honest record keeping is one of the primary benefits of modern financial regulations. When they’re in place, consumers have a much better chance of getting fair value for their money. When rules and laws are absent or when you choose to deposit funds with an unregulated organization, there are no guarantees.

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