The word that gets used loosely
"Regulated" appears on the homepage of almost every broker in the world. It is one of the most reassuring words in finance and one of the least precise. A broker can be regulated in a jurisdiction with rigorous client-money rules or in one with almost none, and use the same word for both.
So this piece does something simple. It explains what regulation actually does, in the order you would meet it as a client, and then shows you how to check what a specific broker's regulation means for you. It uses our own licence as the example, because that is the one we can speak about with certainty.
What a regulator does
A financial regulator does four things that matter to a trader.
It decides who is allowed to operate. Before a broker can take clients, it has to apply for a licence, show that it has capital, systems, qualified people and a compliance function, and satisfy the regulator that it is fit to hold client money. Most applicants who are turned away are never heard of.
It sets rules for how client money is handled. This is the part that matters most and is discussed least. A regulated broker is required to keep client money separate from its own, in designated accounts, and to reconcile them. If the broker fails, client money is not part of the broker's assets.
It supervises. Regulated brokers file reports, submit to audits and answer questions. The regulator can fine them, restrict them or remove their licence.
It gives you somewhere to go. If a regulated broker treats you unfairly and does not resolve it, you can complain to the regulator or an ombudsman. With an unregulated broker, there is no one to complain to.
Licences and categories
A licence is not a single thing. Regulators issue different categories that permit different activities, and a broker's category tells you what it is actually authorised to do.
Arabian Markets Ltd holds an Investment Dealer licence from the Financial Services Commission of Mauritius, in the category Full Service Dealer, excluding Underwriting. In plain terms, that permits the company to execute orders for clients, to deal on its own account and to act as an intermediary in securities, but not to underwrite new issues. It is the category under which online brokers in Mauritius operate.
When you check a broker's licence, check the category as well as the name. A licence that permits advisory work but not dealing, or that covers a different product from the one you are trading, is not the protection it appears to be.
Jurisdictions: which entity is yours?
This is where most people get caught out, and it is worth reading twice.
A large broker may hold licences in several countries and operate through a separate legal entity in each. Each entity is regulated by its own authority, with its own rules and its own protections. When you open an account, you contract with one of those entities, and that entity's regulator is the only one that protects you.
The homepage usually shows the strongest licence. Your client agreement shows the entity you actually signed with. If they are different, the strongest licence does not apply to you. It is entirely legal for a broker to do this. It is also the single most common way for a client to end up with less protection than they believed they had.
So find the entity name on your agreement, and check that entity, not the brand.
For us, this is simple: there is one entity, Arabian Markets Ltd, licensed in Mauritius, and no other licence. Our regulation page says so in the first paragraph. Whoever you are, you are contracting with that entity under that licence, and you should decide with that understood rather than assumed.
Client fund segregation: the part that protects you
Of everything regulation requires, segregation of client money is the piece that most directly protects you, so it deserves a plain explanation.
Segregation means your money is held in a bank account that contains client money only, designated as such, and kept apart from the accounts the broker uses to pay its rent and its staff. The broker cannot use your deposit for its own purposes. If the broker fails, the client accounts are not part of what its creditors can claim.
At Arabian Markets, client money is held in segregated client accounts with regulated banking institutions, reconciled daily, and reviewed by compliance. Our operating costs are paid from our own funds.
When you read a broker's website, look for the word "segregated" specifically. "Secure", "protected" and "safe" are marketing. "Segregated" is a regulatory term with a definition behind it.
How to check it yourself, in two minutes
Every credible regulator publishes a public register of the firms it licenses. Here is the method for any broker.
First, find the legal entity name and licence number in the footer or the client agreement. Second, search for the regulator's own website; do not follow a link from the broker. Third, search the register for the entity name or licence number. Fourth, check that the name matches exactly, that the category covers the service you are using, and that the licence is current, not suspended or lapsed.
For Arabian Markets, the regulator is the Financial Services Commission of Mauritius, the entity is Arabian Markets Ltd, and the licence number is GB26206439. The register is public. If anything you find there does not match what our website says, contact us and do not deposit until it is resolved. We mean that.
What regulation does not do
Regulation does not make trading safe. It makes the broker accountable. Leveraged trading carries a high level of risk under any licence, and you may lose some or all of your invested capital with a perfectly regulated broker. What regulation gives you is confidence that the counterparty holds your money properly, deals with you fairly and can be held to account if it does not. That is a great deal. It is not everything, and any broker that implies otherwise is misusing the word.
