Two Offshore Brokerage Companies Stop Providing Unlicensed FX Services

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15-233MR Two overseas entities agree to stop providing unlicensed FX services

Following ASIC concerns, British Virgin Island company FIBO Group Limited (FIBO) and a Cyprus company, Trading Point of Financial Instruments Limited (also known by the trading name XM.com) (Trading Point), have each agreed to cease providing unlicensed financial services to Australians.

Both entities have Australian clients but neither entity is appropriately licensed to provide financial services in Australia.

The entities were advertising their services on their respective group websites which contained information about an Australian group entity which has a similar name that had an Australian financial services (AFS) licence, namely:

  • Trading Point of Financial Instruments Pty Ltd who obtained a licence in December 2020; and
  • FIBO (Australia) Pty Ltd who obtained a licence in September 2020.

ASIC was informed by the Australian AFS entities of each group that they had not commenced providing financial services and therefore were not required to meet a number of obligations, including complying with the $1 million minimum net tangible asset requirements.

ASIC Commissioner Cathie Armour said, ‘ASIC has received a number of complaints from investors who have mistakenly believed they are being provided services by an Australian financial services licensee when in reality the agreements are with a different company.

‘Often these investors have signed up via a website run by a group of entities that heavily promotes one company within the group as having an AFS licence and being regulated in Australia. What makes it even more disappointing in these cases is the Australian entities’ services were being advertised when they were not even in a position to commence their businesses and with many of the usual regulatory protections not being in place.

‘Investors need to be diligent when entering into any contracts that relate to the provision of financial services. They need to make sure they know who they are dealing with and be aware of the country or regulatory regime in which the entity operates.’

Consumers can check if a company or individual is appropriately licensed by searching ASIC’s Professional registers.

AFS licensees advertising and offering their services on websites before they are able to commence providing those services could be found to have engaged in misleading and deceptive conduct. Trading Point and FIBO have agreed to remove references to the Australian entities and Australian regulation from their group websites. These types of references should not be used until the respective Australian entities are ready to start providing financial services under their AFS licenses.

Background

Australian clients who receive financial services from an entity which is not appropriately licensed may have the right to rescind their agreement with the entity and may be entitled to recover brokerage, commissions and other fees paid to that entity.

This work continues ASIC’s focus on the retail OTC derivative sector, including margin FX, CFDs and binary options.

Recent outcomes include:

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  • suspending the AFS licence of Australian Capital Advisory Services Pty Ltd on the grounds it had ceased providing financial services after a change of control (refer: 15-217MR)
  • following an investigation, Advanced Markets agreeing to change potential misleading statements on its website (refer: 15-085MR)
  • following an investigation, suspending the AFS licence of FX provider AGM Markets Pty Ltd (AGM) (refer: 15-075MR)
  • warning investors not to deal with Grandegoldens (refer: 15-066MR). It is not licensed to trade in margin FX in Australia.
  • cancelling Enfinium’s AFS licence because, among other things, concerns around inadequate risk management systems (refer: 15-026MR)
  • following a surveillance, Calibre Investment changed the way it offers FX services to retail clients (refer: 14-327MR)
  • restraining Monarch FX and its former director and general manager, Quinten Hunter, from carrying on a financial services business (refer: 14-342MR)
  • shutting down Vault Market and removing its sole director, Mr MD Anamul Amin, from the financial services industry (refer: 14-309MR)
  • warning investors not to deal with YoutradeFX (refer: 14-306MR). It is not licensed to trade in margin FX in Australia
  • Pepperstone agreeing to stop providing financial services in Japan following inquiries by ASIC that revealed they were not licensed by the Japanese Financial Services Agency (refer: 14-267MR)
  • cancelling the AFS licence of online FX broker Global Derivative Services after an investigation found it failed to comply with a number of its licence obligations (refer: 14-226MR)

Brokers to Avoid

The Forex Market currently is the largest offering worldwide with hundreds of opportunities and high potential gains, while investors from around the globe seeking the most convenient platforms with access to trade. Among the market proposals, there is a huge number of brokerage firms while some of the companies are regulated, means hold a license or authorized by the industry regulator and some companies are not regulated by any or are just licensed by offshore.

The whole concept of regulation is the client’s protection, which ensures the safe trading environment and investment itself. The regulated brokers have to comply with various rules and criteria set by the recognized international authority with the purpose to provide secure trading and remain licensed. In addition, authorities protecting clients by the compensation schemes that recover the client’s investment in case of the company insolvency. And of course, the regulatory body overseeing constantly how exactly the broker delivers its operation to the clients thus can detect if the things going wrong and take necessary action.

Thereof, there are a few reasons why the Brokerage House may decide not to be regulated:

  • Either the company saving operational cost since the licensing requires strict capital maintenance, follow of best practices, protective measures and so, which can be very costly.
  • Alternatively, the company might be a deceptive Broker with allegedly professional services seeking the frauds.
  • Most often the new brokers choosing to provide their service under the offshore licenses that brings partition regulation and saves total provisional cost yet does not bring the necessary protective guarantees.

Security of funds is always first in forex trading. Therefore, we always recommend and it is better to choose a Regulated Forex Broker, thus open an account with proper security of investments and follow of protective guidelines. The following list of brokers are Unregulated Brokers Reviews or the Brokers to Avoid companies, which we do not recommend trading with, due to their unlicensed operations.

Offshore FOREX License FX

OBTAIN A FOREX LICENSE – YOUR SIMPLE SOLUTION TO PROFIT FROM THE FINANCIAL INDUSTRY FAST, EASY AND VERY AFFORDABLE

You can now obtain a forex or foreign exchange / fx broker license and enter the very lucrative business of trading foreign currencies. There is reportedly three trillion dollars in foreign exchange trades on a daily basis. The foreign exchange market is where money in one currency is exchanged for another. The fluctuation in value between one currency and another can make for a profitable venture. For example, we have people who have earned over 20% per year trading US dollars for Canadian Dollars and Euros.

What’s in This FX License Tutorial?

The most lucrative avenue in this industry is to have an offshore Forex license. Although money can certainly be made in forex, the long-term winner is Forex is the broker. The old saying from the California Gold Rush days comes to mind. “When everyone is digging for gold it is the time to sell picks and shovels.” With an offshore Forex license you or your corporation could collect commissions and fees on trading in a market that trades up for $4 trillion per day.

BENEFITS OF OBTAINING A FOREX LICENSE:

  • Any nationality can be directors or owners
  • Simple due diligence requirements
  • Quick approval
  • Very affordable license fees
  • Low cost renewal fees
  • Can operate around the globe
  • Minimal capital deposit
  • No bookkeeping reports required
  • No accounting reports required
  • No audit reports
  • Low cost to own and operate

The key is to be sure that you have a legitimate license. That is where Offshore Company can help. We can help you obtain your own forex trading license. Naturally we recommend that you operate legally, ethically and responsibly. Get and keep continuous legal advice from a knowledge licensed attorney and tax advice from a licensed accountant.

Times have changed. Many jurisdictions have stopped licensing in this profitable arena. So, the Internet has been inundated with companies selling artificial licenses. By securing your FX trading license through Offshore Company, you can feel confident that you are working with a professional and experienced organization and that the documentation is authentic and has been legally and correctly filed.

Because of our direct contacts in foreign jurisdictions, we can obtain forex broker licenses with minimal paid up capital. Moreover we can obtain the licenses within a relatively short time. With a forex license one can legally offer forex trading, subject to your legal counsel’s advice. The forex license allows one to conduct business around the globe through the internet. One may also elect to open branches in multiple locations. Our virtual office program may be a good fit for this purpose. The actual trades are conducted through your offshore company. This is to provide for a buffer between you, personally, and your trading business. Obtaining a forex license typically takes 2-4 weeks depending on government processing times and your speed in providing us with the legally required, yet simple, due diligence.

What Is Included With Your Forex License

  • The registration of the forex license
  • Name check
  • Legal verification
  • Company filing to gain legal protection
  • Preparation and registration of the license application documents
  • Filing and registration with notary and government officials
  • Certification by notary
  • Filing fees
  • Corporate kit and record book
  • Registration and license certificates
  • Board meeting minutes documents
  • Bank account opening resolution
  • Office rent resolution
  • Resolution to choose a company attorney
  • Resolution to choose an accountant
  • Agreement of employment
  • Nondisclosure agreement for employees
  • Noncompete agreement
  • Power of attorney
  • Director registration
  • Shareholder register
  • CD containing business forms

Want to Start a Forex Brokerage?

Here is a scholarly research article to give you information that may help you make that decision. Some of the questions are: What is the best location to form a corporation to operate a new Forex business? Where should I get the license?

We should say up front that we assist clients in obtaining licenses,including Forex licenses. We have formed literally tens of thousands of corporations worldwide for our clients and have been in business since 1906. So, once you get the information the next step is to pick up the phone and call a representative.

That being said, we will list five separate categories of jurisdictions and label them A through E. We will consider how difficult it is to obtain a license as well as the costs and the hoops you must jump through to obtain and maintain a license. We consider if you need a physical presence, if you need employees, the reporting requirements, and the reputation of the jurisdiction.

Prior to delving in, we should set a framework for the questions that wise prospective Forex broker should ask prior to launching the enterprise. Here are some important considerations:

  1. In which country will you base your operations? Most people operate online brokerages. So, you can live in the US, Canada,EU, Australia but operate the brokerage out of Belize, for example. Doing so without a license in certain jurisdictions could result in some stiff fines and business closure, to say the least.
  2. How quickly do you want to start your Forex brokerage?
  3. How do you want to process transactions? (STP, ECN, Hybrid, Market
    Maker)
  4. How important is the jurisdiction to secure and maintain clients?
  5. Which bank will you use to establish the corporate bank account?
  6. How much cash do you have available?

The answers to above questions can help you decide which jurisdiction to choose.

Many jurisdictions have put in place regulations and governmental or private organizations to help protect the public from fraud in the Forex industry. The United States has the CFTC and the NFA. Japan has FSC Japan,for example. We refer to these as Level A jurisdictions.

Level A Forex Jurisdictions

The USA and Japan fall into this category. To secure a license, you will need to prove that you have $20 million of freely accessible capital, not including client funds. There are extremely strict reporting requirements and customer complaints to regulatory agencies may result in a strong reaction from the regulators. Reuters news agency reports on May 20, 2020 that banks were fined nearly $6 billion in Forex probes.

Level B Forex Jurisdictions

The jurisdictions of Great Britain (regulated by the FCA) and Australia (overseen by ASIC) are level B jurisdiction. They have less stringent reporting requirements and less capital is needed in order to launch the enterprise. Obtaining a license can cost around $35,00-$50,000. A physical office presence is required. $100,000 of capital is needed aside from client deposits.

If the Forex transactions are completed in-house rater than referring them to third parties, one needs about $1 million of liquid cash. If a third party is used for the transactions, only about $100,000 is needed.

Level C Forex Jurisdictions

These countries have regulators that offer a fair amount of protection for Forex brokerage clients. Level C jurisdictions include Cyprus (regulated by CySec), Malta (overseen by MFSA) and New Zealand (watched over by FSP).

A local office is required. There is a low level of reporting and the taxes are quite reasonable. Initially, only $30,000 is needed, which varies by license type. The price and time to obtain the license is about the same as the Level B locations. It is about $35,000-50,000 for legal services and takes about six months once the documentation is provided to the government before the license is granted.

When registering in these countries and interacting with EU clients, opening a bank account is easier than some of the jurisdictions below.

Level D Forex Jurisdictions

These jurisdictions include Vanuatu and BVI. Between the two, we have seen Vanuatu as the most favorable. These countries do have regulations and license requirements, so you will have a license to show prospective clients and post on your website to gives clients a level of comfort. Speed is a big benefit. The incorporation process takes just a few days the and licensing process takes about 3-4 months, on average, once you turn in all of the required documentation. The whole process is typically under $30,000. You will also need to deposit a minimum of $125,000 in your corporate account. This latter amount is not an expense, as you still have access to the money. A huge advantage is that once you have a license it is much easier to open a corporate bank account for your Forex brokerage. Without a license, we know of few banks that will open a bank account if they find out you are in the Forex brokerage business.

Level E Forex Jurisdictions

We will place the remainder of the world’s most popular Forex brokerage jurisdictions in this category. In these jurisdictions a Forex license is not required. Nevis, Seychelles and St. Vincent fall in to this group. In about a week and a few thousand dollars you are the proud owner of a new Forex company. The advantages are speed and low cost. The disadvantage is that, with out a license, it limits the number of banks that will open an account for your business if they are aware you are doing Forex. The reason why is that if a client for which you are offering Forex services to be a bad guy whose money is moving through that bank, the bank could be punished by the regulators. They could lose their license, lose the ability to transmit funds in US dollars or Euros, face huge fines, etc. Few banks are willing to take this risk for one account.

The good news is that there are still a number banks that will open accounts for an unlicensed forex company, especially if the company engages in other types of business than just forex. Boasting that you are in the Forex business or having the word “Forex” in the company name is not advisable. While still using full disclosure, emphasizing the other business purposes for your company such as “international diversification” or “to expand internationally” might be a in your favor. With our guidance, we have been able to successfully help people obtain bank accounts for their offshore brokerage business.

In this category, we might also place Latvia, and to lesser degrees, Estonia and Lithuania. The company registration process takes about two to three months. Opening a bank account is fairly easy, and may, or may not, require travel to the region. Because Latvia is part of the European Union, it has a greater degree of credibility than some of the other jurisdictions. Latvian registration is common among new brokers because it is easier to pull in clients from Europe and Russia.

What Do I Do Now?

Call the number above on this page and speak with a consultant. They can answer many of the questions you may have. Now, the lawyers insist that we say this, so here you go: We do not give legal or tax advice. That being said, we can offer support to you in a way to get you up and running.

After we establish your offshore company for you, we assist you in opening a bank account. The next step is for you to form an association with a bank or large forex broker. Our clients will either have funds that their customers want to exchange for other currencies wired into their offshore company accounts or paid directly to the broker. You keep the spread or your broker pays you a piece of the spread.

So, What Is the Conclusion?

  1. 94.2% of Forex companies start without licenses and operate places such as the Caribbean island of Nevis. (Seychelles and St. Vincent are also used but are less favorable in our experience.)
  2. It costs 5-10 times more, or much greater, to register in countries in levels A-C.
  3. Levels A-C require a local office presence and local taxes.
  4. It takes an average of 6 months to obtain a license in categories A-D.

In order to garner trust from the public, get a license. If you simply don’t have the resources to do so and want to get into the business, there are some good options. If there is anything but pure, honest intent, don’t bother. There is plenty of money to be made in the Forex business. It is one of the more profitable business on the planet compared to the low startup costs in categories D and E. So there is plenty of money to be made long-term for a credible broker with a longstanding reputation.

Here is an example of how you make money. Let’s say that for $10 US you can buy 8.7885 Euros from one of the big brokers or banks you have aligned yourself with. You have a customer who wants to give you $100,000 US in exchange for Euros. If you gave him or her $100,000 US worth of Euros, or 87,885 Euros you would not make any money. So, you charge a commission of, let’s say, $1000. Thus, you give him or her $99,000 US worth of Euros. At the exchange rate of $1 US for .87885 Euros, that $99,000 US amounts to 86,936.29 in Euros that you give your client. You have just earned a $1000 commission.

Most commonly, as Forex brokerages grow, they obtain licenses higher up in the chain in order to gain greater credibility. There are brokers we have established in Belize who have been in the business for quite some time.

In conclusion, if you want credibility, get a license. If you do not have the resources available to you to get a license and want to get into the Forex brokerage business, we can establish a company for you in Nevis along with a bank account. In addition, we offer nominee officers and directors for personal privacy and protection, and virtual office program with mail forwarding and telephone answering services. Again, honesty and integrity are essential factors for being in the Forex business. So, if you want to earn a healthy, honest living with your own Forex brokerage call and speak with a consultant.

THE ABOVE WRITING IS FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL OR TAX ADVICE. FOR SUCH ADVICE, SEEK THE GUIDANCE OF AN ATTORNEY OR ACCOUNTANT. IT IS BELIEVED TO BE ACCURATE AT THE TIME OF WRITING BUT NO GUARANTEES ARE BEING OFFERED THAT THE INFORMATION IS RIGHT FOR EVERY INDIVIDUAL OR CIRCUMSTANCE.

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