Forex Brokerage Licensing and Incorporation | Apexum

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Forex Brokerage Licensing and Incorporation

June 24, 2019

A Forex Brokerage must acquire licensing in order to establish transparency and insure credibility than non-regulated Brokerage’s as these Brokerage’s do not operate under strict regulations, depending on the jurisdiction, laws and regulations differ regarding the licensing of Forex and Binary Options Brokerage’s. The regulations that are in play though are mainly to ensure proper conduct by the company and to ensure they follow all legislation and regulation set by these licenses. Many Forex Brokerage’s decide to go through the licensing process as it assures their clients of proper conduct and instils trust in their online activities.

Advantages of Licensing:

Transparency: The regulators in any jurisdiction keep records of all formal proceedings against the Forex Brokerage. A trader can find out if the firm has had serious problems with clients or regulators.

Safety: A regulated forex brokerage must keep its clients’ funds in segregated accounts that are completely separate from the company corporate bank account. This is important for the following main reasons:

  • It ensures that customer funds are protected and prevents companies from closing their offices, moving their clients’ funds away, and absconding with the money.
  • It means that a company cannot use the money in one trader account to pay-out another winning trader.

Higher Credibility: Regulation and licensing increase the credibility of the company both by the clients/traders and the employees/staff of the company.

Dispute Center: Unregulated brokers can act as judge whenever a dispute is filed against them, where regulated brokers have to answer to the regulator where their license was issued. The regulator investigates each dispute or complaint against the company and determine whether the broker acted lawfully or unlawfully in the given instance. Their decision can affect the Forex Brokerage’s license holding and in extreme cases the brokerage can lose its license, can get huge fines and can limit the brokerage to operate.

Established Forex Center’s:

  1. First-Level Jurisdiction:

USA (CFTC, NFA):

  • Time Frame: 1-2 Years.
  • Free Capital: $20 Million (Client deposit’s not included).
  • Reporting Requirements: Difficult.
  • Service Provided Requirements: High Quality.
  • Membership Fee’s: Starting at $125,000 per Annually (Compulsory).
  • Website: https://www.nfa.futures.org/

Japan (FSA Japan):

  • Time Frame: 1-2 Years.
  • Free Capital: $20 Million (Client deposit’s not included).
  • Reporting Requirements: Difficult.
  • Service Provided Requirements: High Quality.
  • Membership Fee’s: Starting at $125,000 per Annually (Compulsory).
  • Website: http://www.fsa.go.jp/en/
  1. Second-Level Jurisdiction:

Great Britain (FCA):

  • Time Frame: 1 Year.
  • Free Capital: $100,000 (Client deposit’s not included).
  • Reporting Requirements: Standard.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $35,000 – $50,000 one-time Fee (Compulsory).
  • Website: https://www.fca.org.uk/

Australia (ASIC):

  • Time Frame: 1 Year.
  • Free Capital: $100,000 (Client deposit’s not included).
  • Reporting Requirements: Standard.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $35,000 – $50,000 one-time Fee (Compulsory).
  • Website: http://asic.gov.au/
  1. Third-Level Jurisdiction:

(Hint: important feature of legal registration of the company in these countries is dealing with the European clients and a simplified process of opening a corporate bank account.)

Cyprus (CySec):

  • Assets: Office Required
  • Time Frame: 6 Month’s.
  • Free Capital: Starting at $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $35,000 – $50,000 one-time Fee for Legal Services (Compulsory).
  • Website: http://www.cysec.gov.cy/en-GB/home/

Malta (MFSA):

  • Assets: Office Required
  • Time Frame: 6 Month’s.
  • Free Capital: Starting at $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $35,000 – $50,000 one-time Fee for Legal Services (Compulsory).
  • Website: http://www.mfsa.com.mt/

New Zealand (FSP):

  • Assets: Office Required
  • Time Frame: 6 Month’s.
  • Free Capital: Starting at $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $35,000 – $50,000 one-time Fee for Legal Services (Compulsory).
  • Website: https://www.companiesoffice.govt.nz/fsp/
  1. Fourth-Level Jurisdiction:

OFFSHORE:

British Virgin Islands (FSC):

  • Assets: Physical or Virtual Office Required.
  • Time Frame: 3-4 Month’s.
  • Free Capital: Ranging from $20,000 – $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $20,000 – $30,000 one-time Fee (Compulsory).
  • Website: http://www.bvifsc.vg/

Belize (IFSC):

  • Assets: Physical or Virtual Office Required.
  • Time Frame: 3-4 Month’s.
  • Free Capital: Starting at $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $20,000 – $30,000 one-time (Compulsory).
  • Website: http://www.ifsc.gov.bz/
  1. Fifth-Level Jurisdiction:

(Hint: Forex license is not compulsory)

Seychelles (CBS):

  • Assets: Physical or Virtual Office Required.
  • Time Frame: 2-3 Month’s.
  • Free Capital: Starting at $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $20,000 – $30,000 one-time (Compulsory).
  • Website: http://www.cbs.sc/index.jsp

St Vincent (FSA):

  • Assets: Physical or Virtual Office Required.
  • Time Frame: 2-3 Month’s.
  • Free Capital: Starting at $30,000.
  • Reporting Requirements: Simplified.
  • Service Provided Requirements: Standard Quality.
  • Membership Fee’s: Ranging from $20,000 – $30,000 one-time (Compulsory).
  • Website: http://svgfsa.com/warn.html

Summery: Essentially, regulation means that there is an independent body between the trader and the Forex Brokerage that is looking out for the brokerage’s interests, making sure that everything is always above board and that Fair treatment is exercised.

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