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Levels Of Jurisdictions for Forex Companies

Michalaki, Pitsillidou Law Firm > English Articles  > Levels Of Jurisdictions for Forex Companies

Levels Of Jurisdictions for Forex Companies

When a company or an individual would like to get a license to trade in Forex it is logical to question which will be the ideal jurisdiction to incorporate and license the future business. In this article we will divide the various jurisdictions into Levels by taking into consideration the complexity and time needed to obtain the license as well the cos and requirements.

In order to protect citizens from fraud, many countries have established state or private organizations to regulate the Forex market and usually these organizations are backed by the local governments. These countries include USA (NFA, CFTC) and Japan (FSA Japan). The jurisdictions can be classified as Level 1 jurisdictions

In order to be licensed, you have to prove the availability of 20 million us dollars of capital and very strict report requirements are in place as well as a high quality of provided services. Also companies need to have local offices in Level 1 jurisdiction and need to pay a significant annual membership fee.

Level 2 Jurisdictions are Great Britain and  Australia where they have lower requirements in terms of initial capital required but will require more reporting. Usually to get a license in these jurisdictions  there is a time frame of one year with approximate costs of 40000 us dollars. Also applicants need local offices on these jurisdiction and availability of 100000 us dollars of non client funds

Countries that offer certain level of protection such as Cyprus (Cysec), Malta (MFSA) and New Zeland(FSP) are considered level 3 jurisdictions. These jurisdictions will require a local office presence in their country, simplified reporting and offer an attractive tax regime. Depending the type of license initial capital required will start at 30000 US Dollars but the time frame of obtaining the license is similar to Level 2 jurisdictions. An important feature of legal registration for these countries is dealing with European clients and a simplified process of opening a corporate bank account.

British Virgin Islands and Belize will Level 4 jurisdictions. Level 4 offer official regulation and licenses but the clients of the brokerage do not differentiate between Seychelles and BVI/Belize. These areas are considered offshore. The process of obtaining license is quicker (3-4 months) and costs will be around 20000-30000 US dollars. Also opening a corporate bank account is quite easy.

Fifth level jurisdictions would be the rest of offshore where a Forex License is not mandatory such as Seychelles and St Vincent. After 1-2 weeks and few thousand dollars applicants can be owners of Forex companies. These countries are ideal for new Forex brokers that will take the first steps in dealing with forex.

  • Usually most of the Forex companies start without licenses in Seychelles and St. Vincent
  • Licensing in above Level 1 – Level 3 category costs 6 times more and there is a requirement of local office and a reasonable tax payment and registration will take around 6 – 12 months
  • When choosing a jurisdiction, a very important consideration is the business plan created by the new company

 

For more information and guidance get in touch with our lawyers or email iMPK Global Business Law Firm – Cyprus Lawyers – Michalaki, Pitsillidou & Co. LLC, at info@impklawyers.com .Tel. +357 99345000 – Fax +357 25 660097.

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