Check Yo Broker!

We discussed this issue in our Pre-School but we feel it's so important that we will repeat what we've said....

MAKE SURE YOUR FOREX BROKER IS REGULATED!

When selecting a prospective Forex broker, find out with which regulatory agencies it is registered with. The Forex market is labeled as an "unregulated" market, and it basically is. Regulation is typically reactive, meaning only after you've been bamboozled out of your entire savings will something be done.

In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA were made to protect the public against fraud, manipulation, and abusive trade practices.

In December 2007, the NFA raised its capital requirements for retail brokerages to $5 million. This move was made to eliminate companies without enough cash reserves to guarantee customer funds in the case of fraud, trading losses, or bankruptcy.

Firms without the minimum net capital can still do business, but undercapitalization usually hurts their chances to attract new customers because they're not accepted as members of the NFA.

Be careful, it's often difficult to distinguish between regulated and unregulated forex brokers!

According to the NFA Web site, there are about 2,000 retail forex brokerages and solicitors of accounts that are not subject to the new rules.

Out of that 2,000, the NFA has only 24 registered member firms!

You can verify Commodity Futures Trading Commission (CFTC) registration and NFA membership status of a particular broker and check their disciplinary history by phoning NFA at (800) 621-3570 or by checking the broker/firm information section (BASIC) of NFA's Web site at www.nfa.futures.org/basicnet/.

Among the registered firms, look for those with clean regulatory records and solid financials.

Stay away from non-regulated firms!

The NFA is stepping up their efforts in educating investors about retail forex trading. They've created a brochure fit for a Pulitzer Prize called, "Trading in the Retail Off-Exchange Foreign Currency Market". The NFA recommends you read it before taking the forex plunge.

They've also developed a Forex Online Learning Program, an interactive self-directed program explaining how retail forex contracts are traded, the risks inherent in forex trading and steps individuals should take before opening a forex account. Both the brochure and the online learning program are available at no charge to the public.