Before entrusting your money to an investment company or broker, it is important to make sure that it is licensed and operating in accordance with the law. A license is a guarantee that the company is regulated by financial authorities and adheres to strict standards of operation. In this text, we will look at the basic steps to help you check a company for a license and avoid scams.
Why does company need a license?
A license from a financial regulator confirms that a company:
- Is subject to financial laws and regulations.
- Has been verified to meet minimum capital requirements, security of client funds and transparency of operations.
- Is ready for regular audits and reporting to regulators.
If a company does not have a license, it means that your funds and rights will not be protected, and in case of problems, the chances of getting your money back are minimal.
Stages of company due diligence
Check the information on the company’s website
Reliable companies always indicate data about their license on the official website. Usually, this information is located in the “About Us”, “Regulatory” or in the footer of the page. Look for a mention of the regulator (e.g. FCA, CySEC, ASIC, SEC) and the license number.
If this information is missing or hidden, this is the first signal that the company may be fraudulent.
Checking the license with the regulator
You can verify the authenticity of the license on the website of the relevant regulator.
- Go to the regulator’s website (e.g. FCA, CySEC, ASIC).
- Find the license verification section or company register.
- Enter the license number or company name.
If the company is indeed licensed, you will find all the necessary information: name, address, types of permitted activities and license status.
Analyze the information provided
Even if the company claims to be licensed, pay attention to the following points:
- The appropriateness of the company name. Sometimes scammers use similar names to mislead.
- License status. A license can be suspended or revoked, making it illegal for the company to operate.
- Permitted Activities. Some companies have licenses, but not for the activities they offer to clients (for example, they may be licensed only for consulting, but not for asset management).
Check the address of incorporation
Compare the address listed on the company’s website with the information provided in the regulator’s register. If the addresses do not match, this could be a sign of fraud.
Contacting the regulator
If you are still in doubt, you can contact the regulator directly for clarification. Regulators usually provide advice and can confirm the legality of the company.
Additional methods of verification
- Reviews and reputation
Look for reviews of the company on independent forums, websites and social media. Fraudulent companies often receive negative reviews from affected customers. - Blacklists
Check to see if the company is blacklisted by regulators or international organizations. Regulators regularly publish warnings about unscrupulous financial market participants. - Legal information
Ask for a copy of the company’s license, service agreement and other legal documents. Real companies provide such documents without problems. - Presence of offices and contacts
Companies without a physical address or with non-working contacts are suspicious. Also pay attention to the quality of customer service: real companies provide qualified advice.
Signs of no license
- The company does not provide information about the license.
- The specified regulator does not exist or is not related to the financial market.
- The license information is fake and the license number is not in the regulator’s register.
- The company is registered offshore (e.g. Seychelles or St. Vincent and the Grenadines) where regulation is minimal or non-existent.
Conclusion
Checking a company for a license is a key step in protecting your funds. Always approach this process with the utmost care. If you cannot confirm the legality of the company, it is better to refuse cooperation and find a reliable broker or investment platform. Investing time in verification will protect you from serious financial losses.
