“An investment in knowledge pays the best interest.” – Benjamin Franklin

It is becoming glaringly apparent that, although there is a substantial amount of scaremongering going on in the financial trading space, there is also merit to the school of thought that says it is vital to make sure that you trade with an authentic online trading brokerage and not a fraudulent investment house.

The question that immediately begs is how do you determine whether the online trading brokerage that you choose to sign up with is legitimate or scam.

Trading safely and avoid fraudulent operations

By way of answering this question, let’s conduct a case study and investigate an existing online trading brokerage, Jones Mutual to determine whether it is authentic or not.  Because, as the quotation mentioned above by Benjamin Franklin states, investing in knowledge (and truth) allows us to ascertain authenticity.

Exposure to risk

One of the primary reasons for fraud is greed. In other words, people who set up fraudulent operations are driven by desire. It does not matter to them whether they obtain money legitimately or nefariously. Consequently, the understatement of the high-risk nature of online trading is a simple way to catch investors. Therefore, as in our case study, an authentic online broker will have the following warning displayed on their website:

Risk Disclaimer: “Online Trading has the potential to yield high profits, but it also involves significant risks. For this reason, Jones Mutual advises consumers not to trade funds that they cannot afford to lose. The trading outcome is dependent upon an unpredictable market. It is possible to lose one’s initial investment, and we, therefore, recommend that traders devise a money management system, including seeking professional advice, in order to protect their investments.”

Educational resources

An online brokerage that cares about its clients will make sure that its website includes a complete trading academy with detailed materials from beginner to expert instruction. Again, in our case study, the Jones Mutual site has a comprehensive education section, including eBooks, videos, glossary, and online trading courses.

Thus, it makes sense that a financial trading house that does not make the effort to help their traders invest successfully, is more than likely a scam.

Know Your Customer (KYC)

The KYC methodology is intended to make sure that an online trading broker verifies its customers’ identity. Thereby, ensuring that its customers are bona fide and not part of any illegal or fraudulent organisation.

Because digital organisations are by default potentially exposed to unauthorised monetary transactions, it is especially critical for an authentic brokerage to ensure it is dealing with a legitimate client. Jones Mutual takes its clients’ protection and online security seriously. And they guarantee that when a new client opens an account with them, s(he) will be asked to provide proof of identity, proof of residence, and confirmation of banking details.

Also, an online trading company that does not pay attention to the KYC process and collecting the related documents from its investors should be avoided. There is an unreasonably high risk that this broker is fraudulent and will honour client withdrawals.

Customer support

A brokerage’s customer support staff’s availability, knowledgeability, and professionality are of fundamental importance to business success.  This vital business concept can be turned on its head. In the same way, an online trading company who does not make customer support a priority does not care about its traders’ success.

Furthermore, this fact is one of the clear indicators of a fraudulent company and should be avoided. Jones Mutual, on the other hand, has an extensive customer support division consisting of professional, skilled, and knowledgeable financial analysts and dedicated staff who can attend to all queries, both big and small.

Privacy policy plus terms and conditions

The European Union adopted its General Data Protection Regulation (GDPR) in 2018 and, from 25 May 2018, made it compulsory for all digital organisations to ensure that their privacy policies comply with the GDPR’s customer privacy and protection regulations.

It is also important to note that even though the GDPR is only applicable to the European Union and its economic area, it also comprises of rules around the export and protection of consumer personal data moving in and out of the EU.

Therefore, as we can see on the Jones Mutual website, it is critical to ensure that the brokerage fulfils the GDPR requirements. All authentic brokerage firms will make sure that they have complied with the GDPR’s regulations.