07 Aug Types of licenses and methods of brokerage company registration
The number of brokerage companies is growing every year, which indicates the demand that comes from the key clients, the traders. However, not every brokerage company at its first stage of launching a business is able to work in the legal field. Madly, this trend will come up from the fact that there is a huge number of shadow companies on the market (to put it simply, brokerage cuisines), which are created with only one purpose – to take away the investors’ capital. But even the companies that want to build a quality brokerage business also create their own enterprises without a direct regulation.
The thing is that most countries simply do not have a law on the forex market regulation, and some other countries completely prohibit the trading in this market. The absence of a supervisory authority, which should be the Central Bank or a specializing organization, simply does not give a chance to create a company inside the desired country. Therefore, companies are forced to register themselves in other countries to obtain the desired license or to open a business offshore.
Obtaining a license for brokerage activities in the forex market
First of all, it should be noted that obtaining an international license is not an easy matter and not feasible for any company. This is primarily due to the fact that an extremely high entry threshold is required to obtain a license. Thus, you have to go through a strict registration procedure and meet all the necessary parameters, one of which is a minimum starting capital of several hundred thousand dollars (or even millions). In addition, the brokerage company undertakes to pay taxes, to count for its financial statements, and also to undergo a regular audit. This is why not every company has this capability.
If we consider the most popular types of licenses that allow the brokerage companies to get an opportunity to conduct activities in the legal field, then these can include:
- LFSA (Malaysia): This license allows the brokerage business to operate in the legal field and moreover, the companies in this region are not taxed. The application for opening a brokerage business takes on average of 10 days and has a standard business registration form and a number of requirements.
- IFSC (Belize): Just like the region in Malaysia, it exempts from paying taxes, allows you to get a formal business regulation, but most importantly in the registration process. To obtain this license, you do not need to meet a number of requirements. Of course, simply opening a company in a few clicks will not work, but the process is much simpler.
- FCA (England): It is the most popular and significant license for the brokerage companies, but at the same time it is extremely difficult to register a business in this region. It is very difficult to comply with the requirements of the Great Britain legislation, which is famous for its financial sector. Therefore, in order to obtain this license, you need a considerable amount of capital, or you can apply for a loan only after several years of a stable work as a brokerage company.
Registration of a brokerage company in the offshore zones
Offshore zones are the most popular type of launching a brokerage business. The reason for this is not because everyone wants to hide their income, but because it is not necessary to have a license to open a brokerage company. The offshore areas today the huge corporations have their own subsidiaries, both in Europe and the United States. Offshore does not mean activities outside the legal form or illegal. No. This is a standard process for starting a business in the first stage with a further transition to other regions.
The whole complexity of creating a company in an offshore zone is that the customers cannot trust such companies. As the practice shows, they do not trust them a lot, but still use their services. It should be understood that the company’s activities according to the “kitchen” scheme or an honest enterprise are not at all dependent on the offshore, because these two types can be registered in one region.
Considering the offshore zones for launching a brokerage business, you should also highlight a list of the most popular options:
- Saint Vincent and the Grenadines: perhaps, this is the most popular offshore for brokerage companies. In this offshore, 95% of all the forex companies in the world are registered. The simplicity lies in the quick registration form, which takes an average of 3 days. Also, each offshore is exempted from paying taxes.
- Vanuatu: the only offshore from the list, which recently started to give an opportunity to obtain a license for providing financial services, which include brokerage companies as well. However, with the advent of the license, the registration process became a little more complicated, and the license itself is not yet popular on the international market.
- Panama Islands: one of the most popular offshore regions. The brokerage business here does not receive any advantages and is registered the same way as the other enterprises. However, the data confidentiality is guaranteed at the highest level.
- British Virgin Islands: they allow you to operate in the legal form of the UK, but at the same time they do not fall under the audit or payment of taxes. This format allows you to show your customers your business registration directly in the territory of Foggy Albion, but you will not own the license.
- Cayman Islands: are the most standard offshore, which is suitable for both brokerage business and for any other business.
If you consider starting a business in an offshore zone initially and then obtaining a license, then the most beneficial will be the combination of establishing the brokerage company in the territory of St. Vincent and the Grenadines, with the subsequent receipt of a Belize license (IFSC). This combination allows you to develop the company in its early stages, so that you can initially get the first financial results. Only after this, you can think about scaling the business and get the necessary licenses. Of course, everyone has the right to decide what strategy to adhere to, but you need to clarify the strategy you will have about your clients, the stock market speculator, and build the company based on his needs.