Forex Trading in the British Virgin Islands and BVI FSC Forex Brokers

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For those of you considering Forex trading as an investment, the first hurdle you need to clear is to find yourself a Forex broker in the British Virgin Islands. This is possibly the most important decision you’ll have to make, aside from which currency pairs to trade, and will have a significant impact on your future trading success. It’s not the easiest of decisions to make either, because there are simply so many to choose from, and it can get a little overwhelming. There are a number of factors to bear in mind when choosing a Forex broker, but regulation should feature at the top of your list every time. After all, Forex trading is a risky enough form of investment without adding to the worry – so make sure you consider BVI FSC-regulated brokers first.

What is the BVI FSC?

Forex trading is a largely unregulated form of investment, as there is no single body responsible for supervising the industry. Instead, individual countries tend to oversee this form of investment and all participants thereof. In the British Virgin Islands, the responsibility is on the shoulders of the British Virgin Islands Financial Services Commission, or BVI FSC for short.

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The BVI FSC has ultimate responsibility for the supervision, regulation, and inspection of all financial services operating in the country. It is the watchdog for insurance, trustee banking, intellectual property, banking, company registration and management, and limited partnerships. The aim of the Commission is to safeguard the public against unauthorised or illegal financial service providers that offer services from or within the British Virgin Islands.

The BVI FSC is responsible for the following:

  • Protecting consumers – by ensuring that all companies and individuals are authorised to provide financial services in the BVI, and that they are financially sound and competent
  • Policing regulated activities  – including initiating and following up on enforcement actions, either against individuals or businesses breaking British Virgin Islands laws relating to financial services
  • Detecting financial crime  – and helping with any prosecutions
  • Sustaining confidence  – in both domestic and international markets, and providing for their development and growth
  • Ensuring a proper regulatory environment  –to enable financial providers to offer high-quality services and products for the economic benefit of the Islands
  • Improving public understanding  – including the risks associated with various financial products
  • Consulting with the financial industry  – in respect of financial services regulations, legislation, policies, and practices related to supervision
  • Provision of education  – for the continuing development of practitioners
  • Overseeing legislation – and monitoring its effectiveness
  • Promoting innovation – in relation to financial services providers
  • Communicating with international authorities – and taking into account international financial regulation and the financial industry’s business.

The British Virgin Islands Financial Services Commission is an autonomous body, but it maintains accountability with regular reports to the Virgin Islands Cabinet and House of Assembly, in accordance with the Financial Services Commission Act. It has a Board of Commissioners who are appointed by the Cabinet. The Board is responsible for determining policies in order for the Commission to achieve its primary objectives.

The role of the FSC in regulating Forex brokers in the British Virgin Islands

The Financial Services Commission of the British Virgin Islands was created in 2001, following the passing of the Financial Services Commission Act, 2001. Prior to this, regulation was taken care of by the Financial Services Department of the government. Following the passing of the Act, all financial services that took place in the British Virgin Islands became the sole responsibility of the Commission. This included BVI FSC-regulated Forex brokers, but also insurance services, investment business banking, insolvency services, and the formation and management of companies and intellectual property. The Commission is also responsible for handing out licences to anyone wanting to offer financial services.

When the Financial Services Commission Act came into force, a number of new firms decided that the British Virgin Islands would be a good place to set up business, but this meant they had to follow the new set of rules and regulations.

What the BVI FSC can do for you as a Forex trader

If you’re new to Forex trading your knowledge of industry regulation may be a little limited. But those of you with a little more experience will recognise the importance of regulation, and possibly be aware of some of the bigger names in the sector. For example, there is the FCA in the UK, and CySEC in Cyprus, as well as the CFTC and the SEC in the USA. There will also be a number of regulatory bodies you’ve never heard of, with the BVI FSC perhaps being one of them.

We should advise you that not all regulatory bodies work in the same way or offer the same level of protection, and picking a lesser-known regulatory body can be a little hit and miss. It seems that the popularity of the BVI FSC is growing, but unfortunately it has received some industry criticism. This is because a number of the better-known and more-respected regulators impose certain threshold conditions. This is not the case with the BVI FSC, though. BVI FSC Forex brokers are not required to keep a minimum level of capital, to segregate client funds, to participate in a compensation scheme, or to provide any information for customers with regard to an execution policy.

These basic requirements are used by the stricter regulatory bodies, and also form part of MiFID. For those of you who don’t know, MiFID stands for the Markets in Financial Instruments Directive of 2004, European legislation which is currently under revision, with new and improved requirements coming into force in a couple of years. This law was developed to provide harmonised regulation for investment services across all European Economic Area member states. The objective was to increase competition and consumer protection with regard to investment services, and is the cornerstone of the European Commission’s Financial Services Action Plan.

While the BVI FSC may be seen as having a light touch with regard to the regulation of the financial services sector, it does seem to be moving in the right direction. However, you will certainly be able to get a better level of protection from one of the more well-known and respected regulatory bodies. At least for the moment…

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