Two Offshore Brokerage Companies Stop Providing Unlicensed FX Services

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Offshore Brokerage Accounts

Whether you are a professional day trader or simply a part-time hobby investor, opening a brokerage account for your offshore company, trust or foundation offers an opportunity to invest in international financial markets and manage your money directly through an online platform – no intermediaries, private bankers or brokers required. That said, help from a professional trader is always available by telephone.

You can trade world markets 24/7 using a tax-neutral international platform. Offshore Pro Group can arrange both corporate and personal brokerage accounts in jurisdictions such as Panama, Gibraltar, Switzerland and Singapore with full access to trade virtually every market in the world. We act as introducers to brokerages with online trading on sophisticated platforms as well as investment advisory, corporate finance and asset management solutions.

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All types of brokerage accounts can also be used to hold cash balances and precious metals etc. Some brokerage accounts offer additional features such as credit cards, wire transfers and cheque books.

Brokerage accounts can be opened remotely – no need to travel. All can be opened in the name of offshore companies, LLCs etc. If the assets are managed in a trust or foundation structure, the client is usually appointed as the investment manager or trader using a limited power of attorney, giving access to making buy and sell decisions but without any power to withdraw funds from the brokerage accounts.

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When you invest in stocks you take the opportunity to participate in a company’s progress. You can personally choose the sector, energy, banks, industrial,…, and the market, US, European, Brazilian, UK, Japanese, Australian, Canadian, Russian, Swiss any many more… All these stocks can be traded from an offshore brokerage platform in a jurisdiction that does not tax foreign investors or account holders on income or capital gains, such as Switzerland, Singapore, Gibraltar or Panama.

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Corporate ot government bonds provide income on your capital, as well as the return of principal…. subject of course to the solvency of the issuer! Those bonds from issuers with poor credit ratings are known as ‘junk bonds.’

INVESTING OFFSHORE IN MUTUAL AND INVESTMENT FUNDS, UNIT TRUSTS ETC
Our recommended offshore brokers provide access to literally thousands of funds authorised and regulated around the world. Through your chosen online platform, you can directly subscribe, and redeem all these funds.

Besides stocks, bonds, funds and ETFs you can trade a range of other investment products aimed at sophisticated traders including:

Please contact the Offshore Pro Group experts today to discuss your brokerage account requirements and find out what options are available to you.

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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:

  • 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)

Best Offshore Forex Brokers for 2020

Below you will find a list of Forex Brokers that mainly operate in offshore countries. Nowadays, constantly upgrading regulations impose many limitations and restrictions. For instance, due to the ESMA influence, European residents are forced to trade on the Forex market with maximum 1:30 leverage and stop-out levels at 50%. It’s even more complicated in the USA, not only the trading conditions are tight, the number of brokers that accept US clients is very limited. Certainly, going with an offshore forex broker is more risky, but at the same time, the range of trading possibilities is much wider. In addition, some companies are also regulated by local authorities.

It is somewhat coincidental that the “offshore” forex brokers featured in our list are literally speaking, off the shore in many island nations. You will therefore find many of them in the Caribbean Island nations of the Pacific, location-wise.

However, the context of this article will look at the forex brokerages that are categorized as “offshore forex brokers” from a regulatory point of view. While offshore brokers are generally recognized as forex brokers that are outside the common regulatory jurisdictions of the US, UK, Australia, Cyprus and other parts of Europe, they actually belong within a classification of forex jurisdictions, which sees regulatory coverage of the forex market divided into five levels (Levels A to E).

We have discussed the countries whose regulators and forex brokerages fall into Levels A, B and C in the section marked “regulated forex brokers”. The regulatory divisions that constitute Levels D and E are where you will find the offshore forex brokers.

1) Level D Forex Jurisdictions

Level D forex jurisdictions have a regulatory structure in place for the offshore forex brokers that operate in these areas. This regulatory structure is quite permissive and for this reason, the general regulatory community worldwide regards these jurisdictions as being the most lax regulatory environments in the world. Lax or not, offshore forex brokers in the Level D jurisdictions will need to have a license to operate, as well as a bank account to be able to receive and pay out funds to their clients. Vanuatu and the British Virgin Islands are the two countries that make up the Level D forex areas, with Vanuatu being the more popular location.

Typically, cost of license acquisition, incorporation and bank account opening for offshore brokers in Vanuatu are quite low, when compared with similar requirements for Levels A, B and C jurisdictions. Taxes are also low or absent in these areas. Furthermore, the process of obtaining a license as a forex brokerage is a lot faster. The relatively low barrier for entry into the forex brokerage business in these locations is what makes them very attractive to investors who want to open forex brokerages but lack the hefty bankroll that would have been required if the processes were to be done elsewhere. The entire costs incurred in the licensing process, including the capital requirements, are usually less than $200,000.

The forex market regulators in Vanuatu and the BVI are the Vanuatu Financial Services Commission (VFSC) and the BVI Financial Services Commission (BVI FSC) respectively. A look at our list will show that the following offshore forex brokerages operate either in Vanuatu or the British Virgin Islands: Circle Markets, LeoPrime, Accent Forex, Forex4you, NordFX, N1CM.

2) Level E Forex Jurisdictions

Jurisdictions categorized as Level E are St-Kitts and Nevis, St.Vincent and Grenadines, Seychelles, Belize and Marshall Islands. Some also add the Eastern European countries of Estonia and Latvia to the mix. Forex licensing is not required, which brings the cost of setting up an offshore brokerage in these locations down to very low levels. Indeed, with only a few thousand dollars, a forex brokerage can be setup and it takes only a week to complete the process. However, there is a downside. Most banks will not offer offshore forex brokerages in these locations access to banking services without a forex license. This not only restricts the funding options for traders in terms of access to card and bank payment methods, but it also poses a problem in terms of security of the trader’s funds and businesses, since there is no regulator to report to.

Some offshore forex brokerages have opted to adopt cryptocurrencies as a preferred method of depositing and withdrawing from their accounts. This completely bypasses the fiat payment systems, and puts the offshore forex brokerage out to the trading public more as an exchange than as a forex brokerage.

Hallmarks of Offshore Forex Brokerage Business

Despite the unregulated nature of Level 5 jurisdictions, offshore forex brokers in these areas are still seeing good patronage from across the world. Their cause has been helped by the imposition of leverage caps on forex trading in the EU, UK and of course the US. The trader demographics of the forex market shows that many unsophisticated investors still trade with as low hundreds of dollars in total capital. With many of these traders now unable to afford the steep margin requirements in the UK, EU and US, they have simply migrated to many offshore brokers operating in Level D and Level E jurisdictions, where they will typically get very low account opening requirements ($1 in some cases), and access to high leverage which enables their few trading dollars go a long way.

It must also be mentioned that the advent of cryptocurrencies has helped the cause of offshore forex brokers. Not only have these exotic assets excited the retail trading segment of the market to the point where regulation of exchanges that offer cryptos is no longer seen as a barrier for entry, but the existence of several unregulated but very strong and robust exchanges like Binance and Huobi seem to have spoken a message to retail traders: regulation of a brokerage may not really matter if the expectations of traders are being met. Let’s face it. Binance and several other crypto exchanges which are still standing and delivering value to their clients are unregulated, yet customers have never complained of being shortchanged or not receiving their profits when they are withdrawn. This seems to have given many retail traders confidence to place their money with offshore forex brokers who are generally regarded as being weak on regulation. Some of the brokers showcased on our list have also gone ahead to show by their business conduct that they can be relied on to deliver transparency and a sound trading experience, whether they are regulated or not.

The list on this page features several offshore forex brokers that are located across the Level D and Level E jurisdictions. One factor that they all have in common is that they tend to offer to their clients, what they cannot get elsewhere. For instance, the high leverages that they provide are virtually non-existent in the EU and UK. So if you are excited by some of these offerings and can take the risk of doing business with brokers that are softer on regulation, feel free to make a selection from the list below.

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