eToro FCA Regulation 2024: Supervision, Investor Protections, and More

eToro is a leading forex and CFD broker that provides online trading services to traders and investors worldwide. It offers an extensive range of trading instruments, including Cryptocurrencies, Stocks, Commodities, Currencies, crypto, ETFs The broker supports various trading platforms and tools such as eToro Trading Platforms.

eToro is highly regarded for its regulation by multiple authoritative bodies, including the SEC, FINRA, FCA, CySEC, FSA-S, SIPC, ADGM. This multi-regulatory oversight underscores its commitment to maintaining high standards of safety and transparency.

In this article, we will explore eToro’s FCA regulation, its importance, the investor protection scheme, and negative balance protection. Additionally, we will provide information on other brokers regulated by the FCA. 

Does eToro Operate Under FCA Regulation?

Yes, eToro operates under FCA regulation. The FCA reference number of this firm is 5832. This regulation ensures that the broker adheres to the high standards set by the FCA, providing a layer of security and trust for its clients. Being FCA-regulated means that eToro must follow strict guidelines to protect client funds, ensure transparency, and maintain the integrity of its operations.

What is FCA?

FCA stands for the Financial Conduct Authority. It is one of the top-tier regulators in the world, responsible for overseeing financial markets and firms in the United Kingdom. Established on April 1, 2013, the FCA took over from the Financial Services Authority (FSA). The FCA oversees approximately 42,000 businesses, including banks and investment firms. Its goal is to ensure that these firms, banks, and financial institutions operate fairly and transparently. The FCA enforces strict rules; for instance, it requires firms to keep client money in separate accounts. It also limits leverage to 30:1 for retail clients and provides negative balance protection.

Additionally, the FCA mandates a 50% margin close-out rule. It also offers dispute resolution through the Financial Ombudsman Service (FOS). Furthermore, the Financial Services Compensation Scheme (FSCS) provides compensation of up to GBP 85,000 if a firm fails. These measures help protect consumers and maintain trust in the financial system

How FCA Regulation Safeguards Retail Traders

Here are five key protections for retail traders under FCA regulation. As an FCA-regulated forex broker, eToro offers these protections

1. Safety of Client Funds:

The FCA’s primary function is to protect consumers from unfair practices. This includes requiring brokers to hold client funds in segregated accounts, separate from their operating funds. This safeguard helps protect your money from potential misuse. By ensuring these accounts are compliant with strict regulations, your funds remain secure even if the broker faces financial difficulties.

2. Negative Balance Protection:

 The FCA mandates negative balance protection for retail clients, meaning you cannot lose more money than you have deposited. Additionally, the 50% margin close-out rule automatically closes your positions when your account balance falls below a certain level. This rule is designed to prevent significant negative balances, offering peace of mind while trading.

3. Strict Leverage Limits:

To help manage risk, the FCA enforces strict leverage limits of 30:1 for retail clients. This measure is particularly crucial in volatile markets, where high leverage can lead to substantial financial losses. By capping leverage, the FCA aims to reduce risk exposure and protect investors from excessive losses.

4. Stringent Reporting Requirements:

FCA-regulated brokers must adhere to rigorous reporting standards, providing regular updates on their operations. This includes client asset reports, transaction reporting, and market data reporting. Such transparency ensures that brokers operate fairly and honestly, giving you confidence in their practices.

5. Dispute Resolution and Compensation:

 In case of disputes with your broker, the Financial Ombudsman Service (FOS) serves as an independent body to resolve issues fairly and impartially. If a firm fails, the Financial Services Compensation Scheme (FSCS) offers protection of up to £85,000 per eligible investor, ensuring you are not left out of pocket. This compensation provides an additional layer of security for your investments.

How Can I Verify If My Broker is FCA Regulated?

To verify if your broker, such as eToro, is regulated by the FCA, follow these steps:

1. Find the Broker’s Reference Number or Name: Obtain this information from the broker’s website.
2. Search the FCA Register: Visit the FCA Financial Services Register and enter the broker’s reference number or name.
3. Check the Broker’s Authorization: Ensure that the broker is authorized to provide “Rolling spot forex contract” services to retail customers in the UK.
4. Match Firm Details: Verify that the details on the FCA website, such as the broker’s website and email, match those provided by the broker. Any discrepancies might indicate an unauthorized broker, and you should avoid trading with them.

FCA-Regulated Forex Brokers: Who Else Is on the List?

eToro is one of the leading FCA-regulated forex brokers. However, there are other FCA-regulated forex and CFD brokers that can serve as alternatives to eToro. These alternatives include:

These brokers operate under FCA regulation. According to FCA rules, they offer leverage up to 30:1 and provide investor protection and negative balance protection for retail traders. To learn more about FCA-regulated forex brokers, you can read our content on the best FCA-regulated forex brokers.

What Other Regulations Does eToro Have?

CySEC :

eToro is regulated by CySEC. Established in 2001, Cysec is Cyprus’s financial regulator. Since Cyprus joined the European Union in 2004, CySEC’s regulations align with the MiFID directive, ensuring compliance with EU-wide financial standards and investor protection. This regulation allows the broker to offer services across the European Economic Area (EEA) under the MiFID II directive, ensuring investor protection and transparency. CySEC regulation requires brokers to follow strict guidelines for handling client funds, including segregation and periodic reporting.

SEC:

eToro is regulated by the U.S. Securities and Exchange Commission (SEC) under the regulations that apply to foreign financial service providers operating in the U.S. The SEC, established in 1934, is the primary regulatory body overseeing securities markets and protecting investors in the United States.

For brokers like eToro, the SEC requires adherence to rigorous standards for transparency, financial stability, and investor protection. This includes regulations for maintaining sufficient capital, safeguarding client assets, and providing clear and accurate financial disclosures. The SEC’s oversight ensures that eToro operates with high standards of integrity and reliability for clients dealing with U.S. markets.

FINRA:

eToro is also regulated by the Financial Industry Regulatory Authority (FINRA) for its operations involving U.S. clients. FINRA, established in 2007, is a non-governmental organization that regulates member brokerage firms and their registered representatives.

FINRA requires eToro to adhere to strict standards for financial stability, transparency, and client protection. This includes maintaining adequate capital reserves, keeping client funds separate from company assets, and ensuring accurate and timely reporting. FINRA’s oversight helps ensure that eToro operates fairly and transparently, protecting U.S. investors and maintaining trust in the financial markets.

FCA:

eToro is regulated by the Financial Conduct Authority (FCA) in the UK. The FCA, established in 2013, is responsible for regulating financial markets and firms in the United Kingdom.

The FCA requires eToro to adhere to strict guidelines for financial conduct, including maintaining adequate capital, safeguarding client funds, and ensuring transparency in its operations. This includes keeping client money separate from company funds and providing regular financial reports. FCA regulation helps ensure that eToro operates securely and fairly, offering a high level of protection and trust for clients in the UK and across Europe.

SIPC:

eToro is a member of the Securities Investor Protection Corporation (SIPC). The SIPC, established in 1970, protects customers of brokerage firms if the firm fails financially.

While SIPC protection primarily covers the return of customers’ securities and cash (up to $500,000, including a $250,000 limit for cash claims) in cases of broker-dealer insolvency, it does not protect against losses from market fluctuations or investment losses. The SIPC helps ensure that client’s assets are protected in the event of a broker’s financial failure, adding an extra layer of security for investors.

ADGM:

eToro is regulated by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM). The ADGM, established in 2013, is an international financial center located in Abu Dhabi, United Arab Emirates.

The FSRA of ADGM oversees financial institutions to ensure they operate with high standards of integrity and transparency. For eToro, this includes requirements for maintaining adequate capital, safeguarding client funds by keeping them separate from company assets, and providing clear financial reporting. This regulation helps ensure that eToro offers secure and reliable services for clients in the ADGM and globally.

FSA -S : / FSA in Seychelles

eToro is regulated by the Financial Services Authority (FSA) of Seychelles. The FSA, established in 2013, oversees the financial services sector in Seychelles to ensure compliance with regulatory standards and to protect investors.

The FSA requires eToro to adhere to guidelines for managing client funds, which include keeping client money separate from company funds and providing regular financial reports. This regulation helps ensure that eToro operates securely and transparently, particularly for clients in Seychelles, and maintains a trustworthy trading environment.

Frequently Asked Questions

What is eToro?

For over 15 years, eToro has been championing the art of social trading among forex traders. It has built a huge community comprising over 30 million traders who interact with each other while investors automatically copy the trades of expert traders. Additionally, you can trade real stocks, ETFs, and cryptos with eToro. 

Is eToro Considered Safe under FCA regulation?

Yes, eToro is considered safe under FCA regulations. FCA is one of the top regulators in the UK and is recognized globally. The FCA offers key protections for retail clients, including a leverage cap of 30:1, segregated client funds, and negative balance protection, ensuring clients can’t lose more than their deposits. The 50% margin close-out rule adds further safety by automatically closing positions to limit losses. 

The FCA also ensures investor protection through the Financial Services Compensation Scheme (FSCS), which covers up to £85,000 per eligible investor. For disputes, the Financial Ombudsman Service (FOS) provides free resolution services, ensuring transparency and safety under FCA supervision

Besides FCA, the broker is regulated by other major regulatory authorities, including the SEC, FINRA, FCA, CySEC, FSA-S, SIPC, ADGM. These regulations ensure strict compliance with industry standards and provide protection for client funds.

What is the Maximum Leverage of eToro Under FCA regulation?

The maximum leverage offered by eToro under FCA regulation is 30:1 for retail traders. However, leverage may vary based on the tradable assets.

Here are the eToro leverage limits under FCA regulation:

• 30:1 for major currency pairs (e.g., GBP/USD, EUR/USD,)
• 20:1 for non-major currency pairs, gold, and major indices (e.g, S&P 500, Nasdaq 100 (US)
• 10:1 for commodities other than gold and non-major equity indices
• 5:1 for individual equities and other reference values

What is the Minimum Deposit for eToro Under FCA regulations?

  The minimum deposit at eToro is $50.

Does eToro Offer Negative Balance Protection?

Yes, eToro offers negative balance protection. All FCA-regulated brokers must offer negative balance protection. Negative balance protection means that traders are protected from losing more money than they have in their trading accounts. If a trade results in losses that exceed the amount of funds in the account, negative balance protection ensures that the trader’s balance cannot go below zero. This prevents the trader from owing the broker any additional money.

Does eToro Offer an Investor Protection Scheme?

Yes, eToro offers an investor protection scheme in accordance with FCA regulations. All brokers regulated by the FCA must provide this protection. In the event of a bank’s liquidation, losses would be distributed among clients based on the proportion of their funds held with the failed bank.

Any loss of funds resulting from this may be compensated under the Financial Services Compensation Scheme (FSCS). The FSCS provides compensation up to a strict limit of £85,000 per person, per institution, and this limit is subject to the total balances held with that institution.