Guide to Forex Trading in Portugal and CMVM Regulated Brokers
Forex trading has become a very popular form of investment for the average man or woman. What was once the investment of choice for banks and large businesses is now possible online for everyone. Traders are located all over the world and unfortunately there is still no single regulatory authority to oversee the industry. Countries are left to develop their own regulatory system and not all offer the same level of protection. Some regulatory bodies have better reputations than others, but for those traders located on European Economic member states, there is a basic level of protection provided by MiFID. So what about those of you looking for Forex brokers in Portugal?
CMVM is the body responsible for regulating Portuguese Forex brokers
The Portuguese Securities Market Commission, in Portuguese Comissão do Mercado de Valores Mobiliários, also known as CMVM, was founded in 1991. It was given the task off supervising and regulating financial instruments and securities markets. And also the operations of those participating in the markets and providing services. It is an independent public institution that enjoys administrative and financial autonomy. It receives no funding from the General State Budget but instead makes its income from supervision fees which it charges for its services, including those paid by CMVM regulated brokers. As well as regulating brokers in Portugal, it also regulated the operations of the securities markets, all market operators, and public offerings. And generally, all matters relating to these areas. CMVM is a member of IOSCO, the International Organization of Securities Commissions and the CESR, the Committee of European Securities Regulators. It is actively involved in the work of both groups and helps to bring together the securities, insurance and banking sectors around the world, and in Europe.
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What regulations CMVM Forex brokers have to comply with
The regulations for CMVM regulated brokers and other regulated entities comprise of rules relating to the functioning of the financial markets and any respective operators. The CMVM is responsible for publishing monthly bulletins to keep consumers informed, and these are available on the CMVM website. The Bulletins include news of:
- New regulations
- Recommendations in relation to individuals which are subject to supervision
- Instructions defining internal processes and procedures of entities
- General opinions in relation to issues raised in writing by any of the supervised entities or associations
The goals of the CMVM are to protect investors, provide for the efficient and regular functioning of markets, reduce risk, control information, and prevent and suppress illegal acts. The CMVM protects investors as this section of the industry have difficulty defending their rights, and it does this through constant supervision and regulation defined in law. It also provides support for the general public, in particular, investors. The CMVM offers a number of services for the general public including investor assistance, conflict mediation, and an investor compensation scheme. All of which are requirements of MiFID.
What is MiFID?
MiFID is a Directive on Markets in Financial Instruments, which came into force in April 2004 and was implemented on November 1st, 2007. It is a European Union law intended to provide harmonized regulation for investment services in all countries of the European Economic Area, including Portugal. The main objections of the legislation are to increase consumer protection and competition in investment services. Forex brokers in Portugal are able to take advantage of passporting rights provided by MiFID if they perform both investment services and activities. Passporting rights allow a broker to provide its services in all member states. Any firms covered by MiFID have to be authorized in the country in which they have a registered office. Once it has been authorized it is possible for the company to use the MiFID passport to provide services in other EU member states but remain regulated by the regulatory body of its registered office. MiFID is currently under review and MiFID II should come into force by 2018.
What recourse you as a trader have for any complaints
The CMVM has developed a department with the aim of providing investors with service information, education, and complaints. The name of the department is the Investor Assistance and Communication Department (DAIC – Departamento de Apoio ao Investidor e Comunicação). By providing these services the CMVM is looking to reinforce investor confidence in the securities markets and those operating in the sector, and help consumers gain a better understanding of all savings and investment matters. As well as an online complaint form for disgruntled traders to complete there is also a form for reporting suspicious transactions. If you are unable to reach an amicable resolution to your complaint there is also the option of conflict mediation. The Conflict Mediation Service was created to protect non-institutional investors in the area of the activities of financial intermediaries, independent consultants, and the management bodies of securities markets or issuers. It is able to mediate between parties, pacify parties in order to reach a consensus and to resolve conflicts. Using a conflict mediation service provided as part of the services of CMVM allows both parties to express their opinions freely, is swift and informal, confidential and a form of effective non-regulated intervention.
The Investor Compensation Scheme (SII)
The CMVM also operates an Investor Compensation Scheme. The Scheme is designed to protect investors in the event of an entity being unable to repay or return money or financial instruments belonging to the investor. The Scheme is only for small investors and excludes institutional investors such as credit unions, insurance companies, financial institutions, and entities of the general government sector. The maximum compensation available is €25,000 per investor. Now you know all there is to know about CMVM Forex brokers it’s time to start your search. Your choice is going to be a little limited if you only look for CMVM regulated brokers. So don’t forget about passporting rights of Forex brokers in other EEA member states.