Lessons › Markets of the world › Who watches the market: regulators and safety

World 6 · Markets of the world · lesson 14 · level 3

Who watches the market: regulators and safety

Regulators are the referees of the market, so only use platforms and advisers that are registered with them.

In one line

Regulators are the referees of the market, so only use platforms and advisers that are registered with them.

Explained simply

Think of a football match: the referee does not play, but makes sure everyone follows the rules. Market regulators are those referees, and they keep lists of the firms that are registered to take part. Before you trust a platform, check that its name is on the official list.

The lesson

Each country has its referees: SEBI in India, the SEC, FINRA and CFTC in the US, and the FSA in Japan, while India's central bank, the RBI, oversees currency matters. They register brokers and advisers, set rules and publish warnings about unauthorised platforms. Registration is not an endorsement, and a firm that claims a regulator backs its investment is a warning sign. Promises of guaranteed returns or pressure to trade through an unregistered app are red flags, and in India residents may deal in forex only through RBI-authorised channels and only for permitted purposes.

A worked example

Illustrative example: a chat group promises 5% a day. Over 20 trading days that would turn 10,000 into about 26,533 (10,000 times 1.05 multiplied by itself 20 times), a gain of about 165% in a month. Over 250 trading days, 10,000 times 1.05 to the power 250 comes to about 2 billion, which shows the promise is not believable.

The same idea at four levels

1. Beginner. Regulators are the market's referees: they set rules and register the firms allowed to serve you.
2. Foundation. India has SEBI and the RBI, the US has the SEC, FINRA and the CFTC, and Japan has the FSA.
3. Intermediate. Check a firm's registration on the regulator's official website before you send any money.
4. Advanced. Registration is not an endorsement, and promises of guaranteed returns, pressure or unregistered apps are red flags.
5. Expert. Experts treat follower counts, polished apps and screenshots of profits as meaningless and rely only on official registers and warning lists.

Mistakes to avoid

• Trusting a platform because it looks professional or is popular online.
• Believing screenshots of profits as proof that a scheme is real.
• Thinking registration means the regulator recommends the firm's products.

Goal of this lesson: Name each market's main regulators and check whether a platform or adviser is authorised.