What is Financial regulator?
Moliyaviy regulyator
In short
A government body that licenses and supervises brokers and investment firms: the SEC and FINRA in the US, the FCA in the UK, CySEC in Cyprus, and so on.
Check a licence in the regulator's register yourself, not through a link the broker sends: clone sites exist.
Learn more →Also known as: SEC, FINRA, FCA, CySEC, regulyator
A financial regulator is a body that licenses brokers, exchanges and investment firms, sets the rules and supervises how they're followed. Its job is to protect investors from fraud and keep the market working fairly.
Main regulators
- US — SEC (Securities and Exchange Commission): the main government regulator of the securities market; it oversees company disclosures, exchanges and brokers.
- US — FINRA: directly examines brokerage firms under SEC oversight; its BrokerCheck service shows the history of brokers and advisers.
- UK — FCA, Cyprus — CySEC, and others. Uzbekistan also has a government body that regulates its capital market.
Why it matters to an investor
A regulated broker must keep client money separate from its own, report regularly and undergo examinations. In the US, SIPC protects customers up to a limit (a total of $500,000, including up to $250,000 in cash) if a broker fails and client assets go missing. But this protection does not cover market losses — if a stock falls, that's your risk.
How to check a licence
Get the licence number from the broker's website, but verify it yourself in the regulator's official register — not through a link the broker sends. Fraudsters build clone sites using real firms' names and numbers. The domain and contact details in the register must match the site you're dealing with. An unregulated "broker" is the first sign of a Ponzi scheme or another fraud.
Example
An illustrative situation: an investor holds $30,000 of stocks and $5,000 in cash with a broker.
- The stocks fall from $30,000 to $20,000 because of the market → a $10,000 loss. Neither the regulator nor SIPC covers this — it's ordinary market risk.
- The broker goes bankrupt and some client assets are missing → SIPC protects up to $500,000 in total (up to $250,000 for cash); here the full $35,000 is within the limit.
A clone-site case: a website states "FCA licence number 123456" (an illustrative number). The investor opens the FCA register and finds that number belongs to a firm with a different domain — a sign of a clone site.
Mistakes and tips
Verify a licence only on the regulator's official website, searching for it yourself.
An "offshore licence" and a licence from a strong regulator don't offer the same protection — check which country's regulator it is.
Regulation protects against fraud, not against losses: the trading risk is still yours.
Frequently asked questions
- How can I check if a broker is licensed?
- Open the regulator's official register yourself (in the US, for example, FINRA BrokerCheck) and check that the firm's name, number and website domain all match.
- Will SIPC refund me if my stocks lose value?
- No. SIPC only steps in when a broker fails and client assets are missing; it does not cover market losses.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
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