Forex Trading in Belize and IFSC Forex Brokers
An increasing number of Forex brokers are looking to set up their business in Belize. It might not be the first location that comes to mind, but there are a number of good reasons for its popularity. For companies wanting to set up their business, it is a very simple process, but the tax benefits available in Belize are possibly the biggest advantage. Forex brokers in Belize are not required to pay any tax on earnings made outside of the country, which is of great benefit for brokers offering their online services around the world. Another great advantage is the very strict secrecy laws, which make it almost impossible for researchers and governments to find out who the owners and shareholders of a company are. But what about regulation? Are Forex brokers in Belize regulated by a particular agency?
An introduction to the IFSC
The International Financial Services Commission (IFSC) is the agency in Belize responsible for regulating the financial markets. This includes all market participants and exchanges, along with responsibility for enforcing and setting the various regulations. The IFSC is an all-encompassing regulatory body, and has a lot of responsibility aside from overseeing the operations of IFSC-regulated brokers, including the following:
- The IFSC promotes, protects and enhances the status of Belize as a centre for international financial services.
- It regulates the arrangements for international financial services.
- It is responsible for the supervision and control of Licensed Investment Services Companies, investment consultants, and mutual fund management companies.
- It issues licences to all participants in the financial services market including brokers, brokerage firms, and other financial services providers.
- Any financial providers found to be breaking the regulations are at risk of facing administrative sanctions or disciplinary penalties imposed by the IFSC.
Do Forex brokers in Belize have to comply with strict regulations?
It’s already been mentioned that setting up an online Forex trading business in Belize has a number of advantages. But what about regulation? Is the IFSC as strict as other countries?
Unfortunately, Belize has gained a reputation for being a little on the soft side with regard to the regulation of financial services providers. A number of better-known regulators such as the FCA in the UK and the CFTC in the US impose far stricter requirements on financial services providers. The European Markets in Financial Instruments Directive (MiFID) is also under attack from experts, claiming that it does not offer sufficient protection for investors. The IFSC is thought by many to offer even lower standards. All we can say is that any level of regulation is better than nothing at all; and because Forex trading regulation is still considered to be in the development stage, we’re certainly hoping that things will get better.
So what are the current requirements for IFSC Forex brokers?
- IFSC-regulated brokers have to possess a reasonable level of unimpaired capital. When regulations were first introduced it was at least $100,000, but has been recently increased by the IFSC to $500,000.
- Client funds have to kept in segregated accounts.
- Monthly statements have to be issued to clients of IFSC-regulated businesses.
- IFSC-regulated companies have to submit monthly reports including details of unimpaired capital, and number and volume of trades.
- IFSC Forex brokers have to have a customer complaints procedure.
These are very basic requirements set by the IFSC, but the good news is that this regulatory body is looking to up its game and strengthen the regulations.
IFSC regulations for Forex brokers in Belize are getting a little stricter.
The fact that the regulation of online Forex trading is still quite a new thing means that the various regulatory bodies are always looking for ways to improve what they do. Assessments are made on a regular basis with regard to the usefulness and effectiveness of the rules. Many regulatory bodies are also members of international organisations looking to improve financial markets across the globe. The IFSC has recently made a few changes in respect of capital requirements and fees, which will help to offer investors and Forex traders more protection.
Before the changes, Belize had much lower capital requirements and fees than a number of other regulators. Following the introduction of a new agenda, all IFSC-regulated entities face an increase in application and licensing fees. Currently, a Forex broker offering financial services in Belize will have to pay $1,000 upon its application, which is non-refundable, as well as a $25,000 annual licensing fee.
It’s important to check the claims of any Forex brokers professing to be licensed and regulated.
When a broker is regulated you will generally find some reference to a licence on the website. Unfortunately, a number of scam brokers are also claiming to have a licence because it makes them look more reliable. If you find a broker you like and want to check whether a licence is valid, it is a simple process. Those of you considering IFSC-regulated brokers just need to visit the IFSC website and check a list. If you can’t find a broker’s name on the list, the advice from the IFSC is not to enter into any kind of contract with the broker. As well as checking whether a name is on the list, you should also verify the type of service a company is authorised to offer. List J is the one that will concern you the most, as it gives details of service providers licensed for trading in foreign exchange services.
Online Forex brokers from around the world are looking to Belize for its favorable jurisdiction. As a tax haven with a relatively lax framework for regulation, it has so far been very easy for this type of company to set up business. Anyone looking for the best Forex broker may well be tempted to pick one that is IFSC-regulated, but remember that there are a number of stricter regulatory frameworks imposed by other regulatory bodies.
Obviously, some level of regulation is better than none at all; but at the end of the day, the decision is yours. We can only provide you with the pertinent facts, and leave it to you to make the right choice.