Forex-market is popular in many countries. The situation gave rise to the emergence of Forex brokerage companies and contributed to the expansion of their network. Today, an increasing number of companies are seeking to obtain Forex license and legally engage in this business. Currently, there are a very limited number of jurisdictions that do not require licensing of forex activities. Below we will look at the features of an offshore and onshore Forex license jurisdiction, and the specifics of obtaining such permission.
Our team has been working in the field of establishing and licensing commercial structures for many years. We know everything about the intricacies of the process of registering a company and obtaining any kind of permit. We are ready to provide you with comprehensive advisory and practical assistance with all issues in terms of any Forex license country and in obtaining a Forex-broker license in any jurisdiction.
Offshore VS Onshore Benefits for FX-Brokers
First, let’s turn our attention to onshore forex licenses. These are states that do not provide preferential tax conditions to businesses, and in such jurisdictions, data on the ultimate beneficial owners is contained in public sources. In addition, such jurisdictions comply with established rules for the mutual exchange of data between states.
Thus, the onshore company carries out its own business activities without taking advantage of the preferential tax conditions of offshore jurisdictions, as well as complying with all the rules for the mutual exchange of financial and tax data established by international regulatory organizations.
As for regulatory frameworks peculiarities, features of onshore legal entities are next-mentioned:
- fulfillment of audit requirements, as well as maintaining accounting records in accordance with all standards of the state of registration of the business;
- carrying out business activities under standard taxation conditions;
- taking advantage of double taxation agreements.
Despite the fact that such a company will in the future require more expenses than an offshore one, it is considered by potential partners as more worthy. For many large corporations, jurisdiction is a determining factor when considering a proposed collaboration. Among best Forex license jurisdiction list in this category we can mention Cyprus, Great Britain, Japan and Australia.
Now, let’s look at offshore Forex licenses. The list of offshore zones includes those states that apply preferential tax conditions or zero taxation for foreign businesses. Also, offshore zones are not always required to comply with the rules for mutual exchange of data established by international regulatory organizations.
In terms of regulatory comparison, features of offshore companies are next-mentioned:
- zero or relatively low level of tax burden;
- there is no obligation to maintain and regularly submit accounting and financial statements;
- difficulties in identifying the ultimate beneficial owner of the business;
- closed access to information about beneficiaries;
- relatively low costs for registering a legal entity and managing its activities;
- ability to remotely administer the company’s activities through a nominee service.
Thanks to offshore jurisdictions, entrepreneurs have the opportunity to optimize their own expenses. Among TOP Forex license jurisdiction lists in this category we can mention Seychelles, Vanuatu, Mauritius and Saint Vincent & Grenadines.
Licensing Procedures: Documents and Forex License Requirements
According to Forex law, next-mentioned requirements are put forward to companies obtaining a Forex broker and trader license offshore:
- the board of directors usually consists of at least 3-4 members;
- all members of the board of directors are residents of the selected jurisdiction, although conditions may change;
- the company must have a special certificate from the Securities and Exchange Commission or any local regulator;
- there is evidence of compliance with the standards specified in the directives (namely: a transparent organizational structure, a strict procedure for identifying clients, ensuring the safety of working with processing systems, the presence of a risk assessment system, effective control and management mechanisms, the availability of tools to ensure the client’s property rights).
The application form must be accompanied by a detailed and well-presented business plan, which should include information about the principals and their experience, the technology platform to be used, and the company’s specialists such as accountants and auditors. A marketing plan, financial projections and other relevant information should also be presented.
Stages of obtaining a license offshore are next-mentioned.
- Company registration (minimum 1 director and 1 shareholder, no requirements for the position of secretary, presence of an office). Completing forms and submitting an application to the Financial Services Commission or another regulative authority to request a Forex-license. Payment of state fees for filing an application for a license and for issuing a license.
- If approved by the regulator and a firm fulfilled all Forex compliance points, successful receipt of a permit.
Now let’s turn to onshore Forex-spaces. There are many countries where you can register a company for a brokerage business. It is necessary to take into account that the legal system of each jurisdiction imposes different requirements on future brokers. You need to submit to the regulator a pre-prepared package of documents for license acquisition for all founders and pay the state fee.
- Application form for obtaining a license.
- National Passport/ID.
- Papers for confirmation of fulfillment of compliance requirements.
- CVs and diplomas of directors.
- Business plan of the company.
- Corporate documents.
- AML/KYC-policies.
First of all, you also need to clearly understand what a regulated broker is. Regardless of the onshore jurisdiction, the main requirements for obtaining a license to conduct business in the Forex-market are:
- registration of corporate documents;
- registration of the company as an existing business;
- state duties;
- drawing up a business-plan;
- establishing the necessary AML/KYC-procedures;
- opening a corporate bank account;
- activation of a trading account;
- submitting an application to the required regulator.
After creating a business plan and identifying the target market you want to serve, it’s time to start taking steps to launch your Forex-business. Sequence of actions for opening a Forex-business is next-mentioned.
- Select onshore jurisdiction. Selecting your licensing source and jurisdictional framework is critical as it will determine how you operate your business, the documentation required, financial disclosure and transparency measures.
- Register your business-project. Understanding the legal environment of the industry and where your company operates is critical to registering your business.
- Open a banking account. Having a business bank account is very important because this is where you will receive money from your clients.
- Find a reliable liquidity provider. A liquidity provider is a financial corporation that connects you to the financial markets and order books where a huge number of trades take place and a variety of Forex traders are available.
- Comply with laws and regulations. Following regulations is not only a prerequisite for starting a business, but it is also an ongoing process in which legal dynamics can change over time.
Thus, a Forex broker is an intermediary acting between the trader and the market. By using its services, retail clients can gain access to financial markets that would otherwise not be possible. Most Forex brokers provide traders with the opportunity to trade not only currency pairs, but also other asset classes, including indices, metals and energies.
A developed exchange market with stable and safe exchange transactions is a definite plus for starting a business. Forex-brokers receive guarantees and do not have to worry about his activities. Of course, the emerging market is not bad, but Forex brokers considering it as business activity a will have to make more efforts and conduct all operations more carefully.
Our company is ready to conduct professional country comparison for you and provide you with comprehensive support in obtaining this type of permit and in purchasing a ready-made solution. Our specialists will become your reliable allies on this path.
Article’s author is Denys Chernyshov – founder and CEO of the globally-famous organization Eternity Law International.
