Are Prop Firms Regulated? What Traders Need to Know

Prop firm regulation confuses most traders. The short answer: most prop firms aren't regulated like brokers, but the best ones operate under legitimate business frameworks.

Here's everything you need to know about prop firm regulation in 2025.

The Truth About Prop Firm Regulation

Prop firms operate in a regulatory grey area. They're not investment firms managing your money. They're service providers offering trading capital after you pass an evaluation.

This distinction matters because:

• Brokers hold client funds and need FCA/SEC/ASIC licenses
• Prop firms provide demo accounts and pay performance bonuses
• The regulatory requirements are completely different

When you pay FTMO or TradersYard, you're buying an evaluation service. You're not investing capital. This is why prop firms don't need the same licenses as forex brokers.

What Regulation Actually Exists

Legitimate prop firms are regulated as:

• Registered businesses: Company incorporation in their home country
• Tax-compliant entities: Proper accounting and tax registration
• Consumer service providers: Subject to consumer protection laws
• Data processors: GDPR compliance for EU firms

TradersYard, for example, is registered in Austria under EU business law. They're not FCA-regulated because they don't need to be. But they are legally accountable Austrian company.

Regulated vs Unregulated: Key Differences

Regulated Prop Firms

• Registered in established jurisdictions (EU, UK, US, Australia)
• Public company information available
• Clear terms and conditions
• Verifiable payout history
• Professional customer support
• Banking with reputable institutions

Unregulated Prop Firms

• Registered in offshore tax havens
• Hidden ownership and company details
• Vague or unfair terms
• Complaints about unpaid profits
• Limited or no customer support
• Cryptocurrency-only payouts

The difference isn't whether they have an FCA license. It's whether they operate as a legitimate, accountable business.

How Regulation Protects Traders

Legal Recourse

If a regulated prop firm doesn't pay you, you have options:

• Consumer protection complaints
• Small claims court in their jurisdiction
• Credit card chargebacks for the evaluation fee
• Public reviews affecting their business

With offshore unregulated firms, you have none of these options. Your money is simply gone.

Operational Standards

Regulated businesses must maintain:

• Proper accounting records
• Registered office addresses
• Named directors with legal responsibility
• Banking relationships with compliance requirements

These requirements filter out scam operations. It's hard to run a fraudulent prop firm when you're filing annual reports with Austrian authorities.

Financial Stability

Legitimate prop firms have:

• Sustainable business models
• Proper capital reserves
• Long-term operational planning
• Established banking relationships

This matters when you're waiting for payouts. TradersYard processes withdrawals in under 4 hours because they have the systems and capital to do so.

Questions to Ask Before Joining

Before paying any evaluation fee, verify:

Company Registration

• What country is the company registered in?
• Can I verify this in an official registry?
• How long has the company existed?
• Who are the directors/owners?

Payout History

• What do Trustpilot reviews say about payouts?
• Are there consistent complaints about non-payment?
• How long does payout typically take?
• What payment methods are available?

Terms and Conditions

• Are the rules clearly stated?
• Are there hidden fees or conditions?
• What happens in disputes?
• Is there a money-back guarantee?

TradersYard publishes all rules transparently, including their 14-day money-back guarantee on evaluations.

TradersYard Regulatory Status

TradersYard is registered in Austria as a limited company. Here's what this means:

EU Business Standards

• Full compliance with Austrian Commercial Code
• Annual financial reporting requirements
• Consumer protection under EU law
• GDPR-compliant data handling

Banking and Payouts

• European banking partners
• SEPA transfers for EU traders
• Multiple currency options (EUR, USD, GBP)
• Industry-leading payout speed

Transparency

• Company details publicly available
• Clear terms and conditions
• Published rules and requirements
• Responsive customer support

TradersYard doesn't need FCA or SEC licenses because they're not a broker. But they operate with the same level of professionalism and accountability as regulated financial institutions.

Frequently Asked Questions

Do prop firms need to be FCA regulated?

No. The FCA regulates firms that hold client investments. Prop firms provide trading services, not investment management. They need proper business registration but not FCA authorization. Some prop firms use FCA-regulated brokers for execution, which adds indirect oversight.

Are unregulated prop firms scams?

Not automatically, but the risk is much higher. Unregulated firms in offshore jurisdictions have no accountability. Many legitimate prop firms operate without financial services licenses because they don't need them. The key is checking business registration, not just financial regulation.

How can I tell if a prop firm is legitimate?

Check three things: (1) Company registration in official business registries, (2) Trustpilot reviews with verified payouts, (3) Clear terms without hidden conditions. Legitimate firms like TradersYard display this information prominently.

What happens if an unregulated prop firm doesn't pay me?

Very little. Offshore companies have no legal accountability in your country. You can't sue them effectively. Chargebacks might work for evaluation fees but not unpaid profits. This is why choosing regulated jurisdictions matters.

Is TradersYard regulated?

TradersYard is registered in Austria under EU business law. They're not FCA/SEC regulated because prop firms don't require these licenses. But they operate as a legitimate Austrian company with full legal accountability and EU consumer protection.

Making the Right Choice

Don't confuse "unregulated" with "unsafe." Many excellent prop firms operate without financial services licenses because they don't need them.

Focus on:

1. Business registration: Legitimate company in a real jurisdiction
2. Track record: Years of operation with proven payouts
3. Transparency: Clear rules, terms, and company information
4. Reviews: Consistent positive feedback from funded traders

TradersYard meets all these criteria. Austrian registration, thousands of verified payouts, transparent terms, and 4.5+ Trustpilot rating.

Start your TradersYard evaluation with a prop firm that takes regulation seriously even when it's not legally required.

For detailed verification steps, read our guide on how to verify prop firm regulation.