The old English adage of “If it sounds too good to be true, it probably is” could well have been created as the maxim for those searching through the internet or social media for a trustworthy and genuine financial opportunity.
Always Ask Yourself “Can it be true?
Pictures of self-proclaimed professional traders with their fast cars, expensive properties and suitcases of money litter the social media channels alongside claims that all one needs to do is invest money with them to reap the same rewards. This is very enticing but how does one find out whether these traders really have made money from trading, that they are honest, that your money will actually be invested and the profits returned to you?
How to Spot A Scam?
A great deal of these scams can be dismissed immediately once one is aware that regulated firms have to abide by the very strict rules applied to financial promotions. These rules are especially stringent to promotions aimed at the retail investor and apart from prohibiting using claims of potential profits to incentivise, they go so far as to insist on a warning to be added warning potential investors as to the risks of investment. When these promotions relate to leveraged investments, such as CFDs, this warning has to go so far as to state the proportion of retail investors that lose money when using the advertised service.
How to Choose A Legitimate Broker?The simplest way is to ensure that the trader/broker that you invest your money with is regulated and authorised by your local regulator. In the UK the Financial Conduct Authority (FCA) is the regulator. To become authorised by FCA individuals and companies have to complete an arduous and exacting application process to satisfy FCA of their complicity to all existing regulation. Only then will they be listed on the financial register where the details of the authorised activities can be found. The FCA is very aware of the numerous scams. Once the scams are uncovered they are placed on the unauthorised list but it must be noted that this is non exhaustive. If you contact or are contacted by a firm or an individual the first thing you need to ask is who they are regulated by and where you can get proof of this. A proper company will immediately answer and give you their FRN (reference number) which you can then use to find them in the FCA register
How Do I Know If This Firm Is A Legitimate Forex Broker?
Firms who are authorised and regulated by FCA are proud of that and will make sure that this fact is very prominent in all their promotions and on their website. USG UK, for example, state that it is authorised and regulated by FCA with an FRN of 798776 on their company regulation, advantages, profile and various webpages on the website.
In short, be aware of broker’s posts that promise, or infer, guaranteed profits, especially when they do not have a warning to the risks of investment, do not state authorisation and regulation from the regulator. In all probability, it is a scam and too good to be true!