Exclusive: Belize IFSC Begins Enforcement of New Capital Requirements

Finance Magnates has learned that Belize’s financial services regulator, the International Financial Services Commission (IFSC), unfolded its plans to begin the enforcement of new capital requirements for registered derivatives brokers. The step comes nearly 14 months since the issuance of the 'Licensing Amendment Regulation' in late 2015.

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The commission said in a circular to stakeholders that with effect from today: “All companies having a license for trading in financial and commodity-based derivative instruments and other securities or license for trading in foreign exchange must provide evidence of statutory capital increase up to 500,000 US Dollars.”

The increase concerns brokers of Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term, options, futures, contracts for differences (CFDs), shares, stocks and interest rates. Prior to the hike, the minimum required capital was $100,000.

The Belize regulator published the new rules on 30th December 2015, and the companies already registered with the IFSC should have a grace period of two years to increase their capital. However, the commission is now requesting evidence of such increases from every licensee that is interested to keep the license, to be supplied as soon as possible. As for licensees that have already made a partial increase in the capital, they are required to provide evidence of this within a period lasting until March 2017.

Belize had been known as an offshore destination for brokers that want to meet fewer and ‎‎softer criteria and to comply with less strict rules and requirements than if they ‎‎registered in other jurisdictions.‎ However, the IFSC has recently made a number of ‎key changes to its fee requirements, with the IFSC application fee soaring to $1000, ‎doubling from just $500. The regulator also increased its annual license fee to ‎‎$25,000 from $5,000, in addition to the capital requirement hike to $500,000.‎

As per a new agenda outlined by the regulator, the increase may be executed by wire transfer directly to the licensee’s bank in Belize along with issuance of a letter to the IFSC stating that the funds are held as a statutory capital.

Industry comments

Commenting on the new compliance rules, Peter Tatarnikov, Chairman of the Financial Commission said to Finance Magnates: “Despite the fact, that new capital requirements of 500.000 USD were expected to come into effect only in 2018, I do not think that IFSC's decision was extremely surprising for the industry. However, such actions may seriously reduce the attractiveness of Belize regulation in the eyes of global forex dealers, and lead to some outflow of business. Regulation effectiveness, in terms of protecting customers and ensuring financial stability of the companies, cannot be achieved by only high capital requirements, instead, it can be achieved by adopting deep market expertise and knowledge, as well as by implementing effective supervisory measures.”

The chief of FinCom, an industry-specific dispute resolution service, added: “It is my opinion, that the most appropriate approach to improve regulation, is to develop set of standards, reporting requirements, Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term procedures and dispute resolution mechanisms. Anyways, there are many jurisdictions, which forex dealers may choose as an alternative to Belize, as well as self-regulatory bodies, such as Financial Commission, which uniting more than thirty international forex dealers.”

UPDATE:

Mrs. Neri J. Matus, Director General of the IFSC has confirmed to Finance Magnates that:

"Forex brokers have until 30th June 2017 to increase the capital requirement to US$500,000 and the fund must be deposited in a bank operating in Belize.

The IFSC then checks that the funds have been deposited and they are not allowed to be withdrawn without the permission from the IFSC.

Presently the amount is US$100,000."