Brexit, what about the clients of FCA regulated brokers?


BREXIT or “British Exit” is a significant event, not only for the United Kingdom, but also for the entire financial world. The detachment of the country from the European Union will have serious consequences, particularly in economic terms. In the field of trading, the players are particularly concerned about the situations of brokers regulated by the FCA and the risks for their clients. So here’s a little clarification on the subject

An authorisation to operate in the European Union

The basic rule of trading is that each broker must hold a licence issued by the regulatory authority of his country, in order to be able to offer financial services in the territory. Especially for the United Kingdom, only brokers regulated by the FCA or Financial Conduct Authority are officially recognised and are authorised to offer investment services in the country.5MiFID or Financial Instruments Markets Directive. Thanks to it, brokers regulated by the FCA then have the possibility to operate freely on European territory. A freedom which, after the United Kingdom’s departure from the European Union, could however be subject to some changes. Nevertheless, the CFA made a statement on its website on June 24, 2016, that the institution intends to ensure investor interests even after BREXIT.

So, do customers have to worry?

For the time being, there is still no risk for the clients of English brokers. Although BREXIT is already official, the process of leaving the United Kingdom could take another two years. There will still be a need for new arrangements, in particular as regards relations between the United Kingdom and the European Union. In fact, in its statement, CFA indicated that it wanted to follow the terms and conditions on this point.

In the meantime, the rules put in place remain in force, in particular as regards the freedom of exercise of FCA regulated brokers and MiFID members on European territory. The clients of these English brokers can thus continue to use their services, while benefiting from the protections put in place. They can deposit, wager and withdraw according to their trading habits. But only until further notice! Pending changes in legislation.

Fca brexit

Let’s be vigilant!

Indeed, BREXIT will have consequences, some of which cannot be anticipated and the legislation in force will sooner or later be amended. It is up to everyone to remain cautious about this situation. Although the process can take up to two years, the British government can implement changes at any time, particularly because of the likely pressure from other European countries. As of today, clients of English brokers should anticipate these brutal changes and opt instead for brokers regulated by the AMF or the Autorité des Marchés Financiers.

Several scenarios remain possible and, among others, traders may sometimes make massive withdrawals, which will be difficult for brokers to manage. Even if regulated brokers apply the principle of account separation, and traders’ accounts should be fully independent, there may still be risks of non-solvency. Fortunately, clients of FCA regulated brokers are covered by the FSCS or Financial Services Compensation Scheme. In the event of non-solvency, they receive compensation of £50,000 per person. However, it is always safer to switch accounts now for clients of English brokers. The future remains uncertain and, as a precaution, it is better to choose a broker regulated by the AMF.

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