Each regulation differs, but mostly there are only benefits to investing in regulated platforms from a risk perspective.
Potential benefits of the regulation are the following:
- Investments and uninvested funds are kept in separate accounts, so the marketplace cannot mix its operational funds with the investors' funds.
- Investor compensation scheme - if the platform is fraudulent or goes out of business, an investor can likely receive compensation for the uninvested funds. The compensation size and rules are defined by each regulation separately.
- Usually, the regulatory body overviews the platform and receives regular reporting which should reduce fraudulent activity and increase transparency.
- Marketplaces are required to undertake investor assessment which limits investors' investing possibilities in more complex instruments if the necessary knowledge is not present.