St Vincent and the Grenadines forex broker

 


 

In November of 2012, the St Vincent and the Grenadines FSA (Financial Services Authority) was established to control the island‘s financial industry, as demand for registrations and company incorporations was increasing drastically. As always, not far behind followed a good number of companies looking into becoming a St Vincent and the Grenadines forex broker.

That beings said, it’s important to take into consideration, that although the name FSA in most jurisdictions actually means supervision, regulation, fines, reporting, audits etc, in St Vincent and the Grenadines, forex activity still remains unsupervised and for all intends and purposes, unregulated.

By registering a company in St Vincent and the Grenadines, by no means does it imply regulation and the FSA itself warns everyone to be cautious of forex trading websites and forex brokers that claim to be “regulated” under their authority.

 

Firstly, to answer the most frequently asked questions we receive:
  • Local office and employees are not a requirement
  • There is no capital requirement since there is no regulation
  • Important – you cannot open a bank account as a forex brokerage (more about this below)
So how does someone become a St Vincent and the Grenadines forex broker?

Straight forward process of collecting/submitting documents and incorporating a company. Once everything is done, the broker can proceed with bank arrangements (extremely hard if not impossible), systems and overall operations setup.

The documents required for incorporation are:

  • Notarised copy of Passport
  • Notarised government Utility Bill (water, electricity – no older than 3 months)
  • Bank reference letters for Shareholder(s) and Directors
  • CV of Shareholder(s) and Director(s)
  • Company documents
  • Clean criminal records

Important note: The documents must be in the English language – if they can’t be provided in their original form in English, a notarized English translation must be sent as well.

 

Information on the corporate structure of a St Vincent and the Grenadines forex broker

At least one shareholder and at least one director are required. The company can be up and running with a wide range of types of shares including registered or bearer shares, voting shares, non-voting shares, shares which may have less than 1 vote per share, common shares, preferred shares, limited shares, shares limited by guarantee or redeemable shares, and shares which entitle participation only in certain assets. The company must maintain a registered office and a secretary and there is excellent privacy control with regards to publicising the names of the shareholders and directors. The company can manage the business from anywhere in the world, no annual external audit requirements and this is basically it.

 

Why register as a St Vincent and the Grenadines forex broker?

Some key characteristics of a St Vincent and the Grenadines forex broker include but are not limited to the very low costs and fast set up compared to most regulated jurisdictions, no limits on share capital (a company can start with $1), exemptions from corporate taxes, income taxes, capital gains, no annual reports, no limitations with physical offices and employees.

Although all of the above are such great conditions for the forex brokerage, it can mean doomsday and hellish conditions for clients that fall victim to certain unregulated activities.

That being said, without disclosing names we want to make sure that we balance the scales a little bit. Most websites that pretend to be a forex trader’s best friend by reviewing jurisdictions, warn caution and run disclaimer campaigns against brokers, they raise massive red flags about trading with forex brokers registered in offshore jurisdictions. Just because of the jurisdiction, some websites instantly label a broker, scam.

We can attest to the fact that there are quite a few brokers that don’t run a chop shop but instead use these registrations to reach milestones that will enable them to get licenses in more reputable jurisdictions in the near future.

Just because a shareholder has the funds and means to pay the costs of a reputable jurisdiction, by no means does it imply that he/she does not run a chop shop. No regulation can prevent misbehaviour in its entirety and there are plenty of small operations that want to run a good business. Yes, the regulated “big” broker gets fines, warnings, extra hassle in reporting, massive costs and guidelines to work with but does this stop them from running clandestine dealing rooms and conduct naughty behaviour? Anyone who thinks this is the case is up for small, big, explosive hiccups in their forex experience.

Some of these offshore companies are so small, that you don’t even speak with a sales person. You go direct through the owner or director and the relationships you can establish with them, are far more serious than dealing with an employee of a regulated company.

All we’re saying is traders must definitely be very cautious as not everyone is into forex activities to grow a proper business. Knowing who you’re dealing with is a must before the deposit of any funds. That being said – you never know, these “offshore” invisible brokers might actually surprise you.

 

Time frames to get registered:

For all intends and purposes, with the submission of all documents you can be up and running in less than a month. Cautious reminder though – don’t register a company for forex activities before you look into your banking possibilities. If you already did though and you’re stuck, contact us now to examine what to do next.

 


 

How allFX-Consult can step into this picture:

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer so that we can meet any corporate forex challenge that comes our way.

Because of this, allFX-Consult always has a counterpart/partner for any corporate structure. But before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.com, partners@allfx-consult.com.

#forexlicense #offshorelicense #labuanforexlicense #forexib #whitelabel

You might find this interesting

What is a Tied Agent | Should you really look into becoming one?

Check our comprehensive list of worldwide supervising authority bodies

Vanuatu Forex License


 

Another excellent alternative to set up a brokerage operation is under a Vanuatu Forex License. Regulated and supervised by the Vanuatu Financial Services Commission (VFSC), it gained a lot of respect and interest in recent years mainly due to the low operational cost, more lenient requirements and tax incentives.

The Securities Dealer license application can be prepared and submitted by an international company or individual that must be a Director/officer of the company.

Before moving ahead, it is important to note here that Vanuatu along with Iraq have been commended by the Financial Action Task Force (FATF), the international organisation that lists countries with inefficient measures to combat money laundering, for their efforts to ensure that their framework is strong enough and relevant to current AML/CFT requirements. As a result, in June of 2019, Vanuatu was removed from the FATF Grey List.

 

Firstly, to answer the most frequently asked questions we receive regarding a Vanuatu Forex License:
  • Local office (after the amendment act of 2018) is a requirement. The office must maintain software for filing, management and accounting, a business continuity system and server.
  • No capital requirements – instead the law requires brokerages to hold a securities bond of $50,000.

 

So how does someone start the process to obtain a Vanuatu Forex License?

Through a comparatively fast procedure, the company is required to register a Vanuatu company, prepare and submit for evaluation all documents pertaining to its ID and activities (current and past activities), a detailed business plan, an AML manual as well as a corporate bank account.

 

In this regard, the documents required are more or less the same:

  • Notarised copy of Passport
  • Recent notarised government Utility Bill (water, electricity – no older than 3 months)
  • Criminal record
  • CV and reference letters for Shareholder(s) and Directors
  • Bank statement not older than 3 months, confirming the where the funding is coming from
  • A certified copy of Academic qualifications (true copy stamp from the university/college is enough) for Shareholder(s) and Directors

Important note: The documents must be in the English language – if they can’t be provided in their original form in English, a notarised English translation must be sent as well.

 

Information on the corporate structure requirements of a Vanuatu Forex License

The Shareholder of the company can be a legal person, unlike the minimum of 1 Director (that must be pre-approved by the VFSC) and appointed on the board. The Shareholder(s) and Director(s) must have proper backgrounds and experience and their approval is at the discretion of the regulator. The Shareholder(s) and Directors are not required to be residents of Vanuatu.

The Director(s) must have a minimum of 5 years’ experience (proved by the reference letters needed to accompany the application) and shall reside for 6 months of a calendar year in Vanuatu. There must be an AML officer approved and appointed as well as a procedure in place that specifies the officer’s replacement.

Quick note here, it’s also common practice under MiFID2 where brokers are required to maintain a replacement policy for all the key personnel of the company, to avoid any setbacks in their duties, due to resignations/removals.

Recent changes

After announcements on guidelines, changes and updates on the conduct of business of forex brokers (that came into effect on January 1st, 2019), a more clear understanding of reasons for possible application rejection or license revocation is set, minimum professional indemnity insurance for partners, employees and consultants, financial statements are required to be prepared by an independent auditor that is approved by the Commissioner 3 months after the end of the year.

Moreover, the amendment introduces the new classification system that obligates applicants to choose between Class A, B and C Principal’s license, depending on the activities the broker intends to conduct. This classification will further support the VFSC in its supervising duties and control.

Here is the full Amendment Act of 2018

 

Why a Vanuatu Forex License?

Some key characteristics of the Vanuatu Forex License include but are not limited to the very low costs compared to most regulated jurisdictions, the recognition it receives on an international level for its efforts in combating money laundering (important if later the broker will apply for a license with another jurisdiction), the swift adaptation in controlling and supervising uninterrupted relative to the increase in demand for its forex licenses, the favourable tax conditions (no tax on profit or capital gains) and much, much more.

 

Time frames to get the license:

Although people/offices will try to convince you that they can get your setup up and running within 6 months (or less), we will refrain from making any promises for obvious reasons. It’s in the discretion of the national regulator to approve, ask questions or even reject any application depending on its complexity and structure.

 


 

How allFX-Consult can step into this picture:

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer so that we can meet any corporate forex challenge that comes our way.

Because of this, allFX-Consult always has a counterpart/partner for any corporate structure. But before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.com, partners@allfx-consult.com.

#forexlicense #offshorelicense #vanuatuforexlicense #forexib #whitelabel

Useful Reading

What is a Forex White Label – should you go ahead and get one?

Check our comprehensive list of worldwide supervising authority bodies

Labuan Forex License | Definitions and application requirements

 

The Labuan Forex License gained a lot of respect after the very recent changes in the regulatory regime of more reputable jurisdictions, just like our very own European MiFID ii, which made it inevitable for forex brokers to look into other possibilities to rest their brokerage operations.

Supervised by the Financial Services Authority (Labuan FSA), the arm of the Labuan International Business and Financial Centre (IBFC), a money broking license allows a Forex Broker to operate uninterrupted within a low tax regime, limited restrictions in the corporate structure and a relatively quick setup (relative to the complexity of each case and compared with other jurisdictions).

Firstly, to answer the most frequently asked questions we receive regarding a Labuan Forex License:
  • Local office and employees are a requirement
  • The capital requirements of RM500,000 (approx. $125,000) can be used as operating capital

 

So how does someone start the process to obtain a Labuan Forex License?

Same as with most licenses, initially there is a process of collecting/submitting documents and after receiving conditional approval by the Labuan FSA, the capital requirements as well as the office set up must be arranged.

In this regard, the documents required are more or less the same:

  • Notarised copy of Passport
  • Recent government Utility Bill (water, electricity – no older than 3 months)
  • Reference letters for Shareholder(s) and Directors from a Bank and a CPA
  • Bank statement not older than 3 months, confirming the funds required for the capital requirements (RM 500,000 equivalent to approximately $125,000)
  • A certified copy of Academic qualifications (true copy stamp from the university/college is enough) for Shareholder(s) ad Directors

Important note: The documents must be in the English language – if they can’t be provided in their original form in English, a notarized English translation must be sent as well.

 

Information on the corporate structure requirements of a Labuan Forex License

The Shareholder of the company can be a legal person, unlike the minimum 2 Directors (that must be pre-approved by the Labuan FSA) and appointed on the board. The 2 Directors must have proper backgrounds and experience and their approval is at the discretion of the regulator. The Shareholder(s) and Directors are not required to be residents of Malaysia. There are also no restrictions to where the board holds its meetings although the minutes must be signed by a resident secretary.

An office with minimum annual expenditure of $20,000 and 2 local employees is mandatory, as well as audited financial statements and the filing of annual and tax returns. A RM 5,000 (approx. $1,500) yearly license renewal fee is due before the 15th of January of the next year.

The Labuan FSA offers a very discreet and private environment for licensed entities, allowing for strict confidentiality and no public disclosures of the beneficial owner’s info.

Recent Changes

After announcements on guidelines, changes and updates on the conduct of business of forex brokers (that came into effect on January 1st, 2018), an approval from the authorities of countries intended to do business in, became mandatory. The Labuan FSA will require this before allowing the broker to commence operations. Transactions in the Malaysian Ringgit are prohibited as well as soliciting Malaysian residents. There are margin requirements and leverage restrictions (although not as bad as Europe and US) that are capped depending on the experience of the trader. Segregated client accounts, timeframes for client withdrawals, a detailed business plan and compliance with the AML/CFT Act on money laundering issued by the Central Bank of Malaysia (CBM) are part of the mandatory supervised operations.

Link to the guidelines

 

 

Why a Labuan Forex License?

Some key characteristics of the Labuan Forex License include but are not limited to the very low costs compared to most regulated jurisdictions, the stability of Malaysia’s political environment, its strategic location relative to potential target countries as it shares the same time zone with major Asian countries like China, Hong Kong, parts of Russia & Indonesia, Philippines and also a small 1 hour difference with parts of Russia, Indonesia, Cambodia, Laos, Bangladesh, Japan, South Korea, Thailand, Myanmar, Vietnam.

 

Time frames to get the license:

Although people/offices will try to convince you that they can get your setup up and running within 6 months (or less), we will refrain from making any promises for obvious reasons. It’s in the discretion of the national regulator to approve, ask questions or even reject any application depending on its complexity and structure.

 


 

How allFX-Consult can step into this picture:

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer so that we can meet any corporate forex challenge that comes our way.

Because of this, allFX-Consult always has a counterpart/partner for any corporate structure. But before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.com, partners@allfx-consult.com.

#forexlicense #offshorelicense #labuanforexlicense #forexib #whitelabel

 

Useful reading

Understanding the nature of a Forex IB

Check our comprehensive list of worldwide supervising authority bodies

Seychelles Forex License | Definitions and application requirements

A great offshore forex license option, the Seychelles forex license established itself amongst one the best to have, a fact substantiated by the large list of established forex brokers, that chose it to support their operations as well as smaller networks that choose this jurisdiction to start a forex brokerage.

 

With a medium sized capital requirement that can later be used for operations, a corporate bank account coming with the package (unlike registering a company in St Vincent and the Grenadines or Marshall islands), no restrictions in the number of clients you can accept, a good reputation required to get new clients.

 

Firstly, to answer the most frequently asked questions we receive on a Seychelles Forex Licnse:

 

  • Local office with at least 1 employee is a requirement
  • The capital requirements are $50,000 and can be used as operating capital

 

So how does someone start the process to obtain a Seychelles Forex License?

Same as with most licenses, initially a Seychelles company will need to be incorporated followed by the process of collecting/submitting the necessary documents and finally evaluation and approval/rejection of the license by the regulator. Further questions, documents might be requested throughout the process but with the final approval of the license, the license fees are paid to the regulator and the steps for opening a corporate bank account to deposit the capital requirement can start.

 

In this regard, the documents required are more or less the same:
  • Notarised copy of Passport
  • Recent notarised government Utility Bill (water, electricity – no older than 3 months)
  • Notarised reference letters for Shareholder(s) and Directors from a Bank and a CPA
  • A certified copy of Academic qualifications (true copy stamp from the university/college is enough) for Shareholder(s) ad Directors
  • Director(s) and Shareholder(s) CV
  • Clean criminal record

Important note: The documents must be in the English language – if they can’t be provided in their original form in English, a notarised English translation must be sent as well.

 

Information on the corporate structure requirements of a Seychelles forex license

 

There will be a minimum of 2 Directors (that must be pre-approved by the Seychelles FSA) and appointed on the board. The 2 Directors must have proper backgrounds and experience and their approval is at the discretion of the regulator. A compliance office must be appointed that will submit the same documents mentioned above and it can be either a director or an externally appointed person. A local employee will be the point of contact with the regulator and maintain all records. The FSA will visit and make sure the offices are fit for approval. Same as with a Vanuatu forex license, a professional indemnity insurance is required as well as a legal advisor.

 

Although the application process is pretty straight forward, high demand and increase in number of applications are making it impossible for the regulator to fast process everything. Therefore inevitable bureaucratic delays push the time frames a lot longer (in some cases it takes extremely long time), a fact that supports the reselling of already approved licenses in hopes to speed up the process.

 

Time frames to get the Seychelles forex license:

 

People/offices will try to convince you that they can get your setup up and running within 6 months (or less) but we will refrain from making any promises for obvious reasons. It’s in the discretion of the national regulator to approve, ask questions or even reject any application depending on its complexity and structure. Also, as mentioned above bureaucracy can cause significant delays in the process.

 


 

How allFX-Consult can step into this picture:

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer so that we can meet any corporate forex challenge that comes our way.

Because of this, allFX-Consult always has a counterpart/partner for any corporate structure. But before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.com, partners@allfx-consult.com.

 

#forexlicense #offshorelicense #seychellesforexlicense #forexib #whitelabel

 

Relevant reading

How to Start a Forex Brokerage

Check our comprehensive list of worldwide supervising authority bodies

 

Redefining speculation; where are we really going, regulatory speaking?

Redefining speculation; where are we really going, regulatory speaking?

It’s indeed gloomy to see the “speculative” ecosystem collapse on itself, while it undergoes dramatic changes in its regulatory regime. Looking back to 2004 when MiFID I was created to ensure a harmonised, more contextual framework and as such industry participants saluting its posh, arrogant posture, one has to wonder “Where are we really going, regulatory speaking?”

Following last Friday’s ESMA statement in relation to CFD’s and after the diverse opinions in comments we received on our recent article about MiFID II, it is true that we are deviating more and more from what the word speculation means in its core. Google (and who can argue with Google) says that speculation is “the forming of a theory without firm evidence” and as such, “investment in stocks, property, etc. in the hope of gain but with the risk of loss.”

Speculation is part of our everyday life, whether you’re buying groceries (recent example of salmonella found in baby food products), a TV, kitchen appliances, a laptop, accepting a new job, riding a motorcycle, driving a car or even climbing a tree to show off to your girlfriend (not sure to whom this applies for, thought it would make a valid point). Although you might have some information on what you’re about to do, you’re still speculating on whether the outcome will be beneficial for you or not – my wife this morning speculated that a “frozen” box with sandwiches would be humorous (photo above); and it was… nothing humorous about the sandwiches though, those things were seriously delicious!

And although the sentiment projected by news outlets shows a positive people’s view towards tighter regulations and investor protection (even though these same people lose more and more market share and are in danger of closing shops), it seems that industry participants have other views as well that they don’t publicly share… why, I do not know. It’s not constructive not to express one’s thoughts therefore we decided to do it for you.

When you go into buying property, does the seller give you – without being asked – a file with the property’s historical breaks and fixes (a.k.a. fines disclosed on a broker’s website), does he tell you what’s about to be broken (plumbing, electrical, tree roots that will slowly elevate your house),do you know if there’s a cat buried in the yard? Where are the corresponding directives/authority guidelines in this case, limiting the leverage, the distribution and/or sale accordingly?

When you get into a casino and you’re about to lose your life savings, is there anyone limiting the amount of chips you can use on tables? Is there a risk warning hand-stamp on entrance and/or on the casino sign and/or on the chips and/or on the tables in front of you saying “gambling involves significant risk of loss?”, is there a prohibition of specific tables that you’re not allowed to go and empty your wallet?

When you go buy a car and you’re about to damp 30-50K on a second hand SUV or a shiny looking vehicle imported from a dark corner of the world, is there a limit on the incentives the seller is providing to get the thing off his hands? Is there a negative protection rule in case you need to spend double the money fixing that shiny looking piece of garbage?

My point is that more than a decade in the financial services industry can testify to the fact that investors that look into speculative markets, get into them knowing exactly what the risk vs. reward ratio is. Putting in place a framework that colours a personality on a faceless sinkhole is a great idea, welcomed and supported by every single participant. Shouldn’t we be careful though not to deviate too much from the point of it all and as a result redefine words like speculation? It’s a Google definition after all…

Not to level everything, we were never really advocates of specific products ourselves like binary options and we always urged caution towards them. We were also against vile marketing/sales practices that turned more and more people against the idea of FX trading, we were against lists of leads being harassed and funnelled like dirty laundry.

That being said, contracts for difference (CFD’s) and margin trading are exactly what their names imply. Trading on contracts with the use of margin, maximising your potential gains/losses through leverage and you being the sole decision maker of when you want in/out. And so industry participants with opinions they don’t share, would want the leverages where they are – more like back to where they’ve been – they wouldn’t want prohibition but instead regulation on the marketing, sale and distribution of financial instruments, they would want a strong framework fearful enough to any party not willing to comply. They also wouldn’t want taken away, the thing that makes the market tick.

And I don’t mean supply and demand, but the ups and downs of traders, beginners or not, who even though they constantly complain to the regulators (because they can), they get angry because they lost a trade or even broken because they lost everything they own, we all have to remember that these same people will eventually register with another broker, they will demand high leverages, lower stop out levels, bonus on their deposits, referral incentives and lower spreads and so the cycle goes on and on.

Just like there are no limitations in the examples above, maybe there should be grounds for more exceptions in the speculative world of financial instruments as well. But in the end, who are we to consult on how laws should be drafted, we just gave our 2 cents to anyone who cared to read.

#carebearwhoreads, #frozen, #cfds, #mifid, #regulation, #speculation

MiFID II / MiFIR ladies and gentlemen – if you’ve got an issue, here’s a tissue… with a twist

MiFID II / MiFIR ladies and gentlemen – if you’ve got an issue, here’s a tissue… with a twist

Following a decade of regulated activities that MiFID I introduced when it became law in 2007, participants of the financial industry are now facing one (more like two) of the biggest challenges they faced to date. “Dr. Evil” – MiFID II – accompanied by “Mini-me” – MiFIR – have been the subject for debates, lobbying and groovy contests these past few years. Are you ready to face reality?

The new Directive and Regulation were created back in 2014 and will become law in January of 2018, following a series of uncanny practices (Libor and FX fixing/rigging – in this doc referred to as “situations” which is French for situations), relating to deeds of banks and institutions whose greedy, slimy fingers are a disgrace to what the industry stands for. Who can really blame though someone (some more than one) who, given the opportunity to pocket gazillions, his/her conscience is not enough driving force to stop them? Oh well, maybe (and I say maybe) if we were in their shoes we would probably do the same, but since we’re not, we might as well keep name calling and blaming them for everyone’s misfortune.

Past the name calling though, we thought a good idea to share our understanding and views on the matter, written in plain English for the faint hearted and allow room for simple yet beautiful brains to comprehend. Remember magistrates of the world, that we train sales teams. We don’t draft laws so give us a little credit for understanding this much. So here it goes:

 

In simple words, MiFID I consists (ed?) of 73 Articles which cover(ed?):

 

  • Conduct of business
      • Best Execution Policy ensuring all reasonable steps were taken and enforced by institutions.
      • Suitability and Appropriateness tests, usually performed through the registration process, client categorisation, conflicts of interest identification.
      • Investment advice , inducements.
      • Handling of client orders to ensure firms are acting in the client’s best interests.

     

    • Compliance
      • Licensing, authorization and passporting.
      • Compliance monitoring, record keeping, internal and external audits.
      • Corporate Governance relating to how companies collect and store client information.

     

    • Transparency
      • Pre/post trade reporting so as to prevent market manipulation (see the irony or is it just me?)
      • Systematic Internalisers executing client orders against their own books or other clients.

 

The new-fangled monster called MiFID II consists of 97 Articles and MiFIR (mini-me) of 55 Articles, which cover:

 

  • A new regulated trading platform, abbreviated OTF, since it stands for Organized Trading Facility:

It’s a multi-lateral system (that is not an MTF or RM) and allows buying and selling in a form that creates a contract.

It aims for more transparency and structure to OTC trading.

– Through tighter exception rules (more on this later), publication of trade details using an Approved Publication Arrangement (APA), reporting of data to national authorities to vet on pre/post trade transparency/translucency/vale-on-vale-off.

– Demands more “neutral” operators; it restricts execution of client orders against the operator’s own capital. Discretion is permitted under specific circumstances.

 

  • Extended Trade and Transaction Reporting:

Under MiFID I trade reporting, the buy side could avoid reporting all together through an exception. Under MiFIR (mini-me), this exception a.k.a. expressed agreement of who has the obligation between the buy and sell sides, is not possible.

Under MiFID II transaction reporting, the buy side may rely on its broker to create a report (on top of their own) on its behalf through a transmission of order arrangement. Buy side must accept though that the information necessary to complete such a report are detailed (report field numbers sky rocketed), they are personal and may well conflict with best execution requirements. Food for thought – will all transactions – even with non MiFID brokers – be reported by the sell side? (How do you like your thoughts, rare, medium or well-done? now wait, there’s more…)

Words like MiFID I’s “reasonable” Vs MiFID II’s “sufficient” referring to the steps taken to achieve best execution results, already wreaked havoc since as ambiguous as they sound, minimum standards that are not defined must be met.

The execution per category of financial instruments must be published. Constant monitoring of the effectiveness must be in place with adequate adjustments when necessary.

 

  • Enhanced Investor protection:

By forcing firms to provide total overview of expected costs and must inform their clients about the way these costs are charged.

By forcing any “independent” investment advice to actually be independent like it should from ground zero (ground zero is the day the words independent investment advice were connected and meant just that). If it’s independent or non-independent, it must be communicated before the advice is given.

Also through enforcing research that once was offered for free by the sell sides (investment bankers, commercial bankers, stock brokers, market makers) to buy sides (mutual funds, pension funds and hedge funds) in exchange for transactions placed with their banks and brokerages, to be now paid. Some of the aftershocks of this quake aka quacker, aka quackadoudledou, aka quakabanga (see what we did here? Ninja turtles? No? ok moving on..) include but not limit themselves to these:

  • – Buy side will probably not be willing to pay for the analysis, mid-tier providers will stop producing it, distribution of a number of funds will be reduced since they will not have enough information to invest in markets unfamiliar to them, there will be lower liquidity for smaller and mid-tier stocks and finally widening of their spread (which is the opposite of what MiFID II was targeting in the first place… Ouf..now I can breathe….
  • – The ones that walk among us with the supernatural gift should begin to see the ghosts of small to mid-tier research providers whose struggle to stay in business signified their doom. To return to the living, they must match the quality of top tier research providers (here lie the ruins of your dreams to become a mid-tier research provider…)
  • – Specialists and/or niche research providers will have their 5 min of fame since buy side willing to buy research will go after their service, which might well be in competition with top quality service providers. You see their pizza is now pizza special…

 
Stricter corporate governance:

Since board of directors of institutions (including non-executives) must pay attention like good boys and girls, be aware – better yet awake – of the activities and attend their meetings for real (yes I wrote “for real” in a document that describes highly sensitive, regulation matters).

 

Algorithmic and High Frequency Trading requirements:

Systems that aim to control the execution of algorithmic trading in the marketplace.
 
Product governance and supervision as in:

National regulators can now ban and/or restrict marketing, sales, practices, activities and products they don’t agree with as they see fit. We should also see higher fines, penalties, reprimands and of course Santa not delivering gifts at Christmas.

A manufactured financial instrument must have a measurable target group whose needs, characteristics and objectives are met. The strategy for distribution must be appropriate and consistent with this target group and its potential risks to the target group consistently re-evaluated.

 

Non EU firms selling to EU citizens:

Although full harmonisation was not possible since EU member states can continue to apply national rules, it remains a choice of the national regulator to:

– Enforce a detailed set of rules set by MiFID II, designed to harmonise granting access and the compliance requirements of the non EU firm, in order to be authorised to provide services in its country (the rules don’t include dress code, food preferences and opinions on space exploration).

– In the above case, the non EU firm can provide services to these clients only through an authorised branch, compliant with these rules. That being said, MiFID II will Europeanise y’all, whether ya like it or not.

– An authorisation can only be given to branches whose mama-firm is authorised already in its own country to provide all services it’s applying for. If some of the services are not regulated in the mama country, they will be restricted in the EU Member State as well. It goes without saying that it’s a no-no to unregulated branches as well.

– A cross border service can be provided to eligible counterparties and professional clients if the non EU firm is authorised by ESMA, who will only register countries whose legal framework is equivalent to MiFID II and both co-operate on a supervisory level through the exchange of information (among other things).

– All entities trading with European counterparties will be required to obtain legal entity identifiers (LEIs) which they need to store in their reporting system. No LEI – No trade; or something like that…

 

The sales function never really saw eye to eye with compliance and laws that only add more obstacles when trying to meet your goals. It’s also a fact though, that if these laws did not exist, sales people would rule a world where there is  no more money to target since all of it would fall into the hands of a few, opportunistic corporations that target loopholes and prey on the desires of  “investors” to force their hens to lay more eggs.

 

We should be therefore grateful that we have these “watchdogs” as many times referred to by news outlets, regulating these fellows and allowing room for a healthier financial industry that enjoys its eggs in a fashionable and fabulous manner, whether runny, scrambled, omelette or poached (no pun intended).

 

#mifid, #mifir, #egg, #eggplant, #ninjaturtles, #mini-me, #watchdog, #doubleeyedog, #tomandjerryanddog

CySEC License – What is a CIF and what are the application requirements?


 

Updated 2019 – Since we started offering complete Forex Brokerage Solutions, one of the main questions we’ve been receiving regarding licensing, relates to the requirements necessary to submit a CySEC license application for a CIF.

allFX-Consult outsources this to experienced offices in Cyprus that specialise in this regard. We do not undertake licensing projects, in any jurisdiction.

Everybody sells “experience” but if you choose the wrong office for your project, you will unnecessarily lose loads of time and money.

For the past decade, we have worked with almost every office offering these services so let us point you to the right direction, and your next moves can be viable.

 

What is a Cyprus Investment Firm (CIF)?
  • A registered, regulated and supervised firm, reporting in regular intervals to the Cyprus Securities and Exchange Commission (CySEC).
  • CIFs must be licensed by the Cyprus Securities & Exchange Commission, which is the relevant regulatory and supervisory authority.
  • A CySEC license application is necessary to be submitted, with the Investment and ancillary services the CIF is planning to provide (Please see below all services).

 

CySEC License – Investment Services
  • Reception and transmission of orders in relation to one or more financial instruments;
  • Execution of orders on behalf of investors/clients;
  • Dealing in financial instruments on own account;
  • Portfolio management;
  • Investment advice;
  • Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
  • Placing of financial instruments without a firm commitment basis;
  • Operation of Multilateral Trading Facility.

 

CySEC license – Non-Core – Ancillary Services
  • Safekeeping and administration of financial instruments for the account of clients (includes custodianship and related services such as cash-collateral management);
  • Granting credits or loans to an investor (to allow investors to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction);
  • Advice to undertakings (relating to capital structure, industrial strategy and related matters and consulting, and services in relation to mergers and the purchase of undertakings);
  • Foreign Exchange services (in cases when they are connected to investment services);
  • Investment research and financial analysis (relating to transactions in financial instruments);
  • Services relating to underwriting.

 

The CySEC license application requires the following documents:
  • Completed application form as provided by the CySEC (recent)
  • Information about the directors, managerial staff and shareholders with special participation (for example CVs, completed questionnaires as provided by CySEC etc)
  • Company legal documents (certificate of incorporation, Memorandum and Articles of Association etc)
  • Certificates of the registered office in Cyprus
  • Certificates by the Republic of Cyprus confirming the Directors & Secretary of the Company
  • Group structure
  • Organizational structure
  • Clean criminal records and Certificates of Good Standing of the shareholders with special participation, the Board of Directors and employees of the Company
  • Company procedures manual for all activities and operations
  • Together with the above document bundle, a three year business plan, the internal procedures manual and anti-money-laundering and know-your-client procedures must be filed with the application.

 

Share Capital Requirements
125,000 Euro:
  • Reception & Transmission
  • Execution of orders on behalf of clients
  • Portfolio management
  • Investment advice

 

730,000 Euro:
  • Dealing on own account (market maker)
  • Provision of underwriting services in respect of issues of financial instruments
  • Reception & Transmission
  • Execution of orders on behalf of clients
  • Portfolio management
  • Investment advice

 

Employees of the CIF – Managerial positions may require certificates (Basic/Advanced examination)
  • 3 Resident Directors and 1 non-resident (if need be)
    • Two Executive Directors
    • Two Non-Executive Directors
  • Money laundering, risk manager and compliance officer
  • Head of each department
    •    – Dealing Room
    •    – Sales,
    •    – Backoffice
    •    – Dealing on own account
    •    – Accounting
  • Internal and External Auditors

 

Important Notes

It’s important to consider that the above is for information purposes only. The actual requirements will be thoroughly discussed with the application promoter that will handle your CySEC license.

There is no “guarantee”, no matter what people/companies tell you regarding the time frame to receive a license and/or a successful application outcome. The granting or rejecting of the application as well as the complexity of each application determines the outcome and the CySEC committee is the sole decision maker.

CySEC is an independent public supervisory Authority, currently supervising over 500 entities, of which 208 are Cyprus Investment Firms, 155 are Administrative Service Providers, the Cyprus Stock Exchange and 12 issuers registered in foreign markets (information taken from a public document published on CySEC website).


 

How allFX-Consult can step into this picture:

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer ensuring we can meet any corporate challenge relative to how to start a forex brokerage.

allFX-Consult always has a counterpart/partner for any corporate structure. Before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss any forex related topic through the contact form or one of our emails at info@allfx–consult.compartners@allfx-consult.com. We specialise in training sales teams and forex corporate structures for individuals that want to Start a Forex Brokerage.

 

You might also be interested in:

Understanding the nature of a Forex IB

What is a Tied Agent | Definitions and detailed information

Worldwide Forex Regulators, by region.