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Reveling In The Higher Regulation Standards Of BaFin Forex Brokers

BaFin is a German regulatory authority that acts as the independent regulator for financial firms that include banks, insurance companies, brokers, investment funds, stock markets, and other financial entities. BaFin is responsible for maintaining the conduct of more than 4000 official financial organizations as well as hundreds of independent financial agencies that operate in Germany. BaFin is notorious in the industry for being one of the toughest regulators in the market, and the agency is considered to be in a league of its own. The BaFin is supervised by Germany’s Federal Ministry of Finance, and unlike other regulators, the BaFin is not an entirely autonomous agency.
bafin-forex-brokersThe BaFin regulatory framework is determined by the German federal authorities, which forces BaFin Forex brokers to conform to a strict set of rules and regulations for ensuring a safe and transparent marketplace. Since Germany is a prominent member of the EU, BaFin comes under the MiFID directive; thereby allowing BaFin regulated brokers to operate in the European continent under the EEA agreement. Although BaFin stipulates strict conditions for Forex brokers, the country allows all EU based Forex brokers that are regulated under the MiFID derivative to operate in the country without a valid BaFin license.

Why Do Forex Brokers Tend To Stay Away From BaFin Regulation?

The EEA initiative allows European regulated financial companies to offer their services throughout the continent without setting up satellite offices in individual countries. Therefore, brokers find it easier to set up their base of operations in a country that offers a lenient set of regulatory guidelines. BaFin has one of the most stringent regulatory protocols in the EU, which is one of the main concerns that prevent brokers from setting up their office in Germany.
Germany is known to be hugely expensive regarding setting up a business, and the tax rates are among the highest in the world. Therefore, it will be difficult for Forex brokers to turn up a sizeable profit after all the operational expenses, which forces FX brokers away from BaFin. Brokers enjoy several other advantages of opening up a brokerage in other European countries such as the UK and Cyprus, as it is more common to find brokers regulated by the FCA or the CySEC rather than the BaFin. BaFin Forex brokers are also significantly low in numbers when compared to other regulatory agencies, which further reduces the overall popularity of BaFin.

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How Are BaFin Regulated Brokers Monitored?

BaFin has a detailed structure in place that is designed to monitor all firms through a rigorous regulatory process to ensure that the German financial markets operate freely without the risk of market manipulation, fraud, and other types of market eventuality that might affect the integrity of the markets. In other terms, BaFin is considered to be more proactive than other regulatory agencies in the world, as the BaFin is controlled directly by the German Federal Authorities. BaFin undertakes the role of supervising different entities in the market by giving equal importance to both the business as well as the consumer. The efficiency and stability of a market are determined by the ability of a country to create equilibrium between a firm and its investor, which can only be achieved by proper implementation of transparent guidelines that benefit both parties.
Ultimately, the job of any regulatory agency is to protect the interests of an investor, and BaFin has several guidelines in its framework to safeguard consumer rights and their invested capital. Here are a few regulatory guidelines that BaFin Forex brokers are mandated to adopt for offering FX brokerage services in the EU:

What Can An Investor Do In Case Of Violation Of Consumer Rights?

BaFin provides great online avenues as well as hotline numbers for investors to get in touch with the BaFin directly for any concerns regarding member firms. BaFin is highly oriented towards ensuring a transparent marketplace by encouraging investors to approach the agency for complaints regarding the malpractice or fraud by any Forex brokers. Most regulatory agencies encourage brokers and investors to sort their differences through arbitration, financial ombudsman, or the court, but BaFin acts as a mediation agency to resolve all issues without taking them to court. However, in the event of dishonest practices, BaFin will investigate all instances of consumer complaints, and if there is any genuine concern against a broker, BaFin will initiate strict sanctions against the company.

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