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UK's FCA Wants Social FX Networks to Get Investment Manager Licenses

The Financial Conduct Authority (FCA) has finally made a step we've been expecting for quite some time - it is demanding that social Forex trading platforms obtain special regulatory permissions to offer their services in the UK. According to a letter, sent to companies offering copy trading services on the island and seen by the Financial Times, all such networks should obtain registration as investment managers. 
 
The logic behind the move is that social trading platforms represent a kind of discretionary portfolio management.  This means that traders bestow control of their investments on a manager who is responsible for all the trading decisions. And although, according to the City watchdog, the brokers don't themselves choose the investment, they are still managing investments at their own discretion.   All Forex brokers with such services will now have to contact their homeland regulators and get permissions to manage money. 
 
A handful of companies have already done so. In July 2013 it became clear that TradeSlide had obtained an FCA license to operate as a money manager. Then, in November 2013, we saw the emergence of TradeCrowd, which secured a license as a financial services firm from the UK watchdog. 
 
But the most peculiar issues are arising for Forex brokers that offer their signal copy services in the UK but are licensed elsewhere. One example is FxPro, which has its registration and regulation with the Cyprus Securities and Exchange Commission (CySEC). The broker, however, has the CySEC permission to manage investments – it got this right in September 2013. Hence, no problems loom for FxPro's SuperTrader network in the UK. 
 
But we have the eToro Openbook issue at hand too. The broker is licensed in Cyprus and can provide its services in the UK, as the company can offer its services in the entire area where the MiFID functions. And yet, eToro does not have permission to manage money. 
 
Apparently the regulatory climate is getting more severe for Forex brokers in the UK. The latest move by the FCA gets business to think deeper about the difference (if any) between advise, execution and management. 
TAGS: financial conduct authority  fca  uk forex  forex signals  forex rules  forex regulation  forex platform  signal copying  fca license  forex license  investment managers  money managers  social forex trading  social forex regulation 

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