Is the firm regulated?

In the European Union (EU), firms can only provide investment services if they are authorised to do so by an EU regulator. If a firm is not authorised to provide investment services, it is not allowed to provide them. Before you invest always check if the firm is regulated.

Investors have already become victims of fraud due to financial services sold by unregulated firms. To avoid that you also fall victim to fraud, it is very important that you find out whether the firm you are dealing with is regulated, before you invest any money. To be authorised, the firm must comply with a number of requirements, including about how they should treat you.

How to find out if a firm is regulated?
Via registers

Authorised firms must appear in the public register of the regulator of the country where they provide investment services. So, to check if a firm is regulated, you can access the public registers of investment firms set up by the regulators/national competent authorities (NCAs) of the EU/European Economic Area (EEA) member states below. The registers show you if the firm that you are in contact with or through which you are planning to invest your money has been authorised in the respective member states.

Additionally, EUFSC provides a public register of firms that are authorised by the NCAs of the EEA/EU Member States.

How to use EUFSC’s public register of authorised firms

  • Type the name of the firm you are in contact with into the “keyword search” function.
  • If, as a result of your search
    • the name of the firm appears in the register in the column “entity type” as “Investment firm”; and
    • if in the same line, the column “Status” shows “active”;

this firm is authorised by the NCAs of the EU Member States. To be granted this authorisation, the firm must comply with certain requirements and standards which set out, among other things, how firms should treat you and what sort of information they should give you. 

By asking the person you are in contact with

If someone is trying to sell you an investment product or service, such as shares of a company or units of an investment fund, you should check out this person, for example, by asking: “Are you authorised to sell me this investment product?” If you receive the reply that s/he is not authorised, then you should not buy anything and stop dealing with the person..

Unauthorised firms

Unauthorised firms try to avoid complying with the controls that legal, authorised entities are subject to, leaving investors totally unprotected. This means if you engage with an unauthorised firm you are not protected by regulation and you can lose access to crucial protections which have been created to help you, if things go wrong.

So, if you deal with an unauthorised firm, you can lose access, among others, to the following protections:
- investor compensation funds: set up to protect you if an investment firm goes bankrupt and cannot pay back the money you invested through them in assets, such as shares or investment fund units.
- Financial Service Ombudsmen/-women: created to take care of complaints on behalf of consumers like yourself against firms.
In some cases, NCAs identify a company or a person that is not authorised to provide investment services and who they have evidence, or suspect, of carrying out these services without proper authorisation. The details of these companies/persons are usually published on the websites of the regulators.

It is also helpful to check the Investor Alerts Portal of the International Organization of Securities Commissions (IOSCO). It gathers its members’ alerts and warnings about firms which are not authorised to provide investment services in their respective countries and are believed to have been targeting investors.