A permission is granted to a legal entity, by a named authority, for a defined list of activities, in a defined territory. That sentence carries the entire distinction. Everything a client is shown instead of it, the group logo, the awards page, the certificate image in the footer, is presentation.
This matters because the differences between a supervised broker and an unsupervised one do not show up while things are going well. Spreads look similar. Platforms look identical, because both firms often licence the same one. The gap opens on the day a withdrawal is refused, and by then the client's options are set by a decision made at sign-up.
What supervision actually buys
Under a serious regime, four things exist that do not otherwise exist:
- Client money kept apart from the firm's own funds, reconciled on a schedule and held at institutions the firm must assess, which is the subject of client fund segregation.
- Product rules, including leverage caps for retail clients and negative balance protection, so a gap cannot leave a client owing money to the broker.
- A complaints route with teeth. An ombudsman or equivalent body whose decision binds the firm, rather than a support inbox that stops replying.
- A supervisor that can fine, restrict or withdraw the permission, which is what makes the first three enforceable rather than promised.
An unregulated broker can offer every one of those voluntarily, and some do. The difference is that voluntary segregation is a policy the firm can change on a Tuesday, and nobody outside the firm is checking that the money is where the website says it is.
The offshore middle, which is where most firms live
Framing this as a binary hides the real market. Very few brokers have no licence at all. Most hold something, and the something varies enormously. At one end sit regimes with capital requirements, audited accounts, client money rules and an active supervisor. At the other sit registrations that confirm a company exists and permit it to describe itself in financial terms, with no prudential requirements behind the certificate.
Both get called "regulated" in marketing. The way to tell them apart is to read what the licence authorises rather than that it exists: does the register entry mention dealing in derivatives, does it mention client money, does the authority publish enforcement actions. Our survey of the tiers is in offshore broker licences, and the distinction that catches most people is the one in licence versus registration.
The entity named in your client agreement is the one holding your money. If the agreement names a company in one jurisdiction while the homepage advertises a licence in another, the licence on the homepage is not protecting your balance.
How the presentation gets bent
Group structures do most of the work. A brand holds a tier-1 licence through one subsidiary and onboards most of its clients through another, and the website displays the first licence on every page. Nothing about that is necessarily improper, since firms are entitled to operate several entities, but the client has to know which one they signed with.
Then there is the vocabulary. "Regulated by" and "registered with" read alike and mean different things. A company registry entry is not a financial services permission. An anti-money-laundering registration is not a permission to deal in derivatives. A trademark filing is not a licence, and a membership badge from a private association is not supervision.
The last trick is geographic. A licence authorises activity in a territory. A firm permitted at home may have no permission to solicit clients in the country where the advert appeared, which is exactly the reverse-solicitation question we cover in the FCA and CySEC comparison. If your regulator has never authorised the firm to reach you, your complaint has nowhere local to go.
The ten-minute check
Open the client agreement, not the website, and write down the exact legal name and company number of the counterparty. Then go to the authority's own register directly, typing the address yourself rather than following a link from the broker, and search that name. Compare three things: the permitted activities, the status of the permission, and any conditions or warnings attached to it. The mechanics of each major register are in how to check a broker licence.
Check the withdrawal terms in the same sitting. Read the sections on processing times, on the documents required before a payout, and on the circumstances in which the firm may suspend an account. Firms that intend to make withdrawals difficult usually say so in the terms, in language nobody reads until the money is already inside.
What this means if you are building a firm
From the operator's side the calculation is different but connected. An offshore permission is cheaper and faster, and it is a legitimate starting point for a firm serving markets where it is properly permitted. What it does not do is give you access to clients in regulated markets, and firms that solicit there anyway are accumulating a problem rather than a client base.
The practical advice is to build as if you were supervised from day one. Segregate client money in a separate account. Keep an audit trail on every deposit, withdrawal and manual adjustment. Log complaints with dates and outcomes. Record which entity each client contracted with. None of that is expensive at the start and all of it is close to impossible to reconstruct two years later, which is why the audit and reporting layer of a Broker CRM should be in place before the first client, rather than added during an upgrade to a better licence.
"Ask a broker one question: which legal entity will hold my money, and on which register do I find it. If the answer takes more than one sentence, you have your answer."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- A permission belongs to a named entity for named activities, so the brand on the site proves nothing.
- Supervision adds segregation, product rules, a binding complaints route and an authority that can act.
- Most brokers sit between the extremes, so read what the licence authorises rather than that one exists.
- Check the entity in the client agreement against the regulator's own register, typed in directly.
Frequently Asked Questions
What does regulated actually mean for a broker?
It means a named legal entity holds a permission from a named authority to carry out defined activities, and that entity appears on the authority's public register. Anything else on a website, including group branding and awards, is marketing. The permission belongs to the entity, not to the brand.
Is an offshore licence the same as being unregulated?
No, but the gap between offshore regimes is wide. Some require capital, audits and client money rules; others amount to a company registration with a financial-sounding certificate attached. Read what the specific licence authorises, and check whether the register entry mentions dealing in derivatives at all.
How do I check which entity is holding my money?
Read the client agreement you signed and the footer of the website, find the exact legal name and company number, then search that name on the regulator's own register rather than on any link from the broker's site. Compare the permitted activities and the countries covered with what you were sold.