FCAFinancial Conduct Authority

What the FCA is

The Financial Conduct Authority is the conduct regulator for financial services firms and markets in the UK — around 35,500 businesses, by the FCA's own published figure at the time of writing. It took over from the FSA in 2013 and is funded by the firms it regulates rather than general taxation. For retail traders, the practical question is what FCA authorisation actually entitles you to — and the answer is more concrete than most marketing implies.

Who and what it regulates

Any firm offering CFDs or spread bets to UK retail clients must be authorised by the FCA or operate under a passporting arrangement through another EEA jurisdiction. The FCA supervises conduct standards, capital adequacy, client money handling, marketing materials, and the design and distribution of complex products like CFDs.

For CFDs specifically, the FCA implemented ESMA's product intervention measures in a permanent UK regime. Retail leverage caps, negative balance protection, leverage by risk, standardised risk warnings, and restrictions on inducements to trade are all in force.

Client money and segregation

FCA rules require client funds to be segregated from the firm's own operating capital and held in trust. Brokers must perform daily calculations to ensure segregation is maintained and cannot use client money to fund their own operations. If the firm fails, segregated money is ringfenced and is the first resource available to return to clients.

This is not the same as insurance. Segregation protects you from the firm's creditors — not from the firm's bad bets or from your own trading losses.

Capital requirements

CFD brokers must hold regulatory capital well above the headline minimum. The base requirement sits in the low hundreds of thousands of pounds; in practice, firms with material CFD books hold substantially more, and the FCA scrutinises the underlying composition of that capital. This is one reason FCA-authorised brokers tend to look like properly capitalised businesses rather than lightly-resourced intermediaries.

Compensation scheme (FSCS)

The Financial Services Compensation Scheme provides protection if an authorised firm fails and cannot return client money. The compensation limit is published and updated periodically — at the time of writing it sits at £85,000 per eligible claimant per firm. FSCS does not cover losses from trading; it covers losses arising from the firm's failure.

This distinction matters. If your broker goes bust while holding your £10,000 segregated balance, FSCS may step in. If your broker goes bust and you had an open losing position, FSCS cannot compensate you for the trading loss — only for the inability to return your funds.

Leverage and product rules for retail CFDs

Retail clients face capped leverage under FCA rules that mirror ESMA's framework: roughly 30:1 on major FX pairs, lower on more volatile assets, and down to a small fraction on crypto. Negative balance protection means you cannot lose more than your deposited funds. The FCA also requires firms to publish standardised risk warnings and to assess whether clients understand the product.

Higher leverage is available, but only through a professional-client classification, which requires meeting eligibility criteria and gives up certain retail protections.

How to verify a licence before you fund

Use the FCA Register. Search the firm name. Confirm authorisation status is "Authorised", not "Registered" or "Appointed representative" without a properly authorised principal. Check the permissions granted cover the activity you are using the firm for. Read the firm reference number back to the broker and ask for confirmation. None of this takes more than five minutes and it catches the bulk of cloned or unauthorised websites.

The honest caveat

FCA authorisation is the strongest single piece of evidence you can find about a CFD broker. It is not, however, a guarantee that you will make money — and the leverage caps exist precisely because retail clients on average lose money on CFDs. Pick an FCA-authorised broker when you have the choice, verify on the register, then spend the rest of your effort on position sizing and the question of whether your strategy has an edge at all.