In contrast with the rigorous regulatory requirements of well known institutions such as the Financial Conduct Authority (FCA) in the UK, the Australian Securities and Investments Commission (ASIC) and the Cyprus Securities and Exchange Commission (CySEC) offshore regulators are much more relaxed.
Here is what you need to know about the most popular offshore destination, where the regulatory requirements regarding forex brokers are either “light” or non existent.
The Cayman Islands
The most notable requirement with all offshore regulators is the requirement for some minimum operational or payed up capital. In the case of the Cayman Islands Monetary Authority (CIMA) under the local Securities Investment Business Law (SIBL) all licensed brokers should have a minimum payed up capital of at least 100000 Cayman Islands Dollars or about 120 000 USD.
On the Seychelles a potential broker is required to incorporate a Domestic company with a share capital of at least 50 000 USD, which must have at least 2 shareholders and 2 directors, but where a single person can act both as a shareholder and director.
Also, according to the regulations introduced by the Seychelles Financial Services Authority (FSA) initially the payed up capital should be deposited at a bank account in the Seychelles, but subsequently it can be used for the day to day business activities of the broker and does not need to stay in the bank.
On top of that the broker can use the same bank account to store clients money, which means that clients money will not be segregated as is the requirement with all broker regulated in the EU or the USA.
British Virgin Islands
The intriguing detail about the British Virgin Islands Financial Services Commission forex regulation is that the requirement for a minimum paid up capital is set on a case by case basis and can vary between 100 000 USD and 1 000 000 USD.
Initially the capital requirement for Vanuatu regulated brokers was as low as 5000 USD. Since July 2017, however, the minimum capital requirement was raised to 50 000 USD. Basically the Vanuatu Financial Services Commission wants the brokers to hold a security bond of approximately 50 000 USD with the local Registrar of the Supreme Court.
St. Vincent and the Grenadines
A year ago the Financial Services Authority (FSA) of St. Vincent and the Grenadines issued an official warning that they do not regulated forex and CFD brokers. The Authority do regulate the banking sector and that is all. So if you see a broker, that claims to be regulated by FSA in St. Vincent and the Grenadines you are most probably dealing with scammers.
The Marshall Islands are one of the few places, where you can incorporate a company on the internet, without ever setting a foot there. The Marshall Islands do not have a financial regulator.
The minimum capital requirement to obtain a Mauritius Global Business License, which under the local jurisdiction authorizes you to act as a forex and CFD broker, is between 25 000 EUR and 250 000 EUR, depending whether you will act as an introducing broker or not.
The minimum paid up capital required by the International Financial Services Commission (IFSC) in Belize for a forex license is 500 000 USD. This sum should be deposited in a bank in Belize.
The Securities Commission of The Bahamas (SCB) requires all forex and CFD brokers under its jurisdiction to hold a minimum operational capital of at least 300 000 USD.
St. Kitts and Nevis
The financial regulatory authority on St. Kitts and Nevis regulates only the banking sector. They do not pay attention to forex brokers registered on the islands as Limited Liability Companies.
What is interesting in this case is the local legislation, according which if you want to bring an action against a business incorporated in St. Kitts and Nevis, you will need to hire a local lawyer licensed in St. Kitts and Nevis and post a cash bond with the court.
In addition, attorneys in St. Kitts and Nevis are not allowed to work on contingency. So, you will have to pay for all legal services up front and in full.
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