The European Securities and Markets Authority (ESMA) has warned investors against dealing with unauthorised firms offering foreign exchange investments and alerted investors to the main risks involved in forex trading.

ESMA said that traders and investors should check that their forex brokers are authorised after it noticed an increase in unauthorised firms offering transactions or platforms to trade in currency derivatives in the forex market. If a firm is not regulated or authorised, it does not have to comply with investor protection rules such as safeguaring clients' assets, offering clear information, disclosing risks, checking client suitability or handling complaints. Investors will not have access to complaints procedures or compensation schemes if things go wrong, says ESMA.

"When searching for an online forex broker...you may come across some that do no specify whether they are regulated, or falsely claim to be registered," says ESMA.

Some companies claim to be regulated by ESMA but the authority does not regulate any type of investment firm, this is done by regulatory authorities in European Union countries.

"Be aware of any unauthorised activity: before making a commitment, check with the regulatory authority in your country whether the broker is listed or registered and authorised to provide those products or services," says ESMA.

ESMA also alerts retail investors to the main risks involved in forex trading which include: complexity; volatility; leverage; too-good-to-be-true marketing promises and software vulnerabilities.