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October 17, 2019

How To Spot Illegitimate Brokers


Brokers are an important compost in the financial markets and link the trader to the trading platform or give them access to the trading instruments. As such your choice of a broker is an important decision that needs you to be keen with several factors.

At the moment, several brokers are coming up and setting up online trading platforms which is a trend in the financial market. The online trading concept that comes, as a result, is a convenient way to trade when looking at its accessibility. The downside is that they are prone to cases of fraud with some being initiated by the brokers.

For the safety of your funds, you need to be on the lookout for such illegitimate brokers. The following are some of the pointers to some of these sites that you need to avoid.

·         Lack Of A Physical Address
Most of the credible brokerage sites operate under firms such as banks, investment trust or brokerage companies. The firms have a physical address in known places where you can access them in case of any issue.

Illegitimate companies will lack a physical address or have a non-existing one. When looking for a legit trading service provider, visit their website and look if they have one. You can also make an extra step and try visiting the offices to know the profile of the company to be safe.

Additionally, they may also lack contact lines or have ones that do not go through.

·         Lack Of Regulation
Regulation is very important when focusing on the operations of a broker in a particular territory. Regulation refers to the authorization of the broker to operate in the territory after meeting certain requirements set by the regulatory body. The authorization part is very strict and looks at factors such as tax compliance, client goodwill and corporate responsibility in some instance. The process also looks for hints at fraudulent activities such as money laundering.

If the company is not regulated then try avoiding it and look for other options. You can confirm this at their website and conforming with the regulatory body to be sure.

·         Dealing In Banned Securities
You can also detect a crooked company by the trading instrument they stock particularly the ones banned in the territory. Some countries have bans imposed on some financial instruments such as the United States of America prohibits trading CFDs.

Many other territories prohibit cryptocurrency units due to their decentralization and undetectable activity. If a broker deals in such securities in areas banning them then it is a pointer of a fraudulent firm.

·         Reports Indicating Dishonesty
There may also be reports that show dishonesty on the broker's part. The reports are mostly from users with experience dealing with the trading provider. You can get such information from review websites, forums, and notices. In case it is unauthorized to run in a given territory, the relevant regulatory bodies may release a statement indicating caution when procuring services from the firms.

·        Lack Of Information Of The Company
Most credible companies provide information on their sites regarding their history activities and many more. If you find that a company is not disclosing such relevant information, then there is a chance that it is trying to hide something. You can conduct a background search to be sure if you want to deal with it.

·         Hidden Fees
Some sites are notorious for having hidden fees which may get deducted from your account without your knowledge. This is a fraud and which the regulatory bodies are against. Knowing about their hidden fees can be a problem if you are new to the site and you can depend on the experience of the platform's clients.

Bottom Line
The online broker is a convenient link to the financial markets and provides a platform where you can trade. However, you need to be keen not to land in the jaws of deceitful establishments under the cover of brokerage platforms as you can lose your investments. It is advisable to carry out a background search on their profile before seeking out their services.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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