“Questionable” Forex Jurisdictions.

Let’s examine what we consider being “questionable forex jurisdictions.

Here’s a map showing jurisdictions that are questionable regarding adequate customer protection.

Either the jurisdiction is “lightly” supervised by a regulatory agency.

With minimal requirements (red) or has no supervision at all (black) and allows brokers to self-regulate themselves.

On the map, you’ll notice a lot of small tropical islands that are more well-known as expensive tourist destinations with their fancy beach resorts.

We know these islands as “offshore jurisdictions” which are low or no-tax countries.

In addition, they have corporate laws that maximize financial privacy and minimize regulatory interference for both individuals and corporations.

Why do forex brokers like to go “offshore”?

• Fast and cheap to start a business
• Minimal capital requirements
• Minimal or no taxes
• No need to report activities to the authorities
• No need for a local physical office and staff

Forex brokers like to set up shops in these offshore jurisdictions.

It allows them to get around overly restrictive regulations and high compliance costs in their own countries.

Basically, the cost and difficulty of setting up a company and operating as a forex broker are much lower.

Be Wary of Unlicensed Forex Brokers

If you Google “forex broker”, you’ll probably come across many companies that operate as forex brokers without a license.

Unlicensed forex brokers argue that instead of having to spend a lot of money (and time) to get a license and comply with all the rules and requirements.

Operating without a license allows them to reduce their operating expenses.

Thus leaving them with more available funds to spend on the actual business, such as on marketing and promotion to acquire new customers.

I don’t know about you but it’s hard to trust a forex broker that started up with $1,000 of capital, has no license, has no physical office or staff, and is strictly an online operation.

Any regulatory agency does not regulate an unlicensed company.

This means that it is not bound to abide by consumer protection rules such as safeguarding customer funds.

Nor do are they required to provide simple information and disclosure of how it executes trades

Or resolve customer issues and complaints.

They may promise better trading conditions, including deposit bonuses, “tight” spreads, and ridiculously high leverage.

However, we recommend avoiding them since the probability that these companies are scams is high.

If you experience unfair treatment, such as manipulation of trades that result in losses or the inability to withdraw your funds, no specific law or regulation will not protect you.

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