Over the last 18 months, the forex sector has boomed. While it’s long been the largest and most liquid financial market globally, the brokerage sector has also gone from strength to strength.
There have been significant increases in new accounts across regular and emerging markets, and more interest from casual traders. As a result, we have seen many more requests for information on applying for a forex license. We have also seen people make mistakes during the setup process, and we want to help people avoid them. In this article, we will take a look at some of the most common mistakes made when applying for a forex license, and how you can avoid them.
Common mistakes when applying for a forex license
If you’re a startup or first-time entrepreneur, it can be easy to make mistakes. If you arm yourself with the knowledge to avoid pitfalls before you start the process, it makes things a lot easier. Here are some of the common mistakes to avoid when applying for a forex license.
Not picking the right partner
It’s highly unlikely you will apply for a forex license, open a bank account, and incorporate a company yourself. When applying for a forex license, typically a third party will take care of these matters. Who you partner with will impact many factors.
If you pick the cheapest provider around, most likely there will be a catch. They may cut corners, give bad advice, or leave you hanging when you ask for help. Similarly, some of the most expensive options are not good value for money. You should partner with someone who offers both custom-made packages and turnkey solutions. This way you will find a price point that suits you and your needs.
They must also be someone trustworthy and transparent with years of demonstrated experience in the sector. Ideally 15 years plus. Pick your corporate service provider carefully as they will play a big part in the success of your forex brokerage getting off the ground.
Not doing enough research
Before you start the application process, you really need to do your research! Start by researching different forex licensing jurisdictions. Check out the variations in the process when applying for a forex license. Note the benefits and the cons, plus factors like tax, corporate laws, limitations, and rules on currency exchange. Some locations might have a great licensing regime, but you might get stung with a less than favourable tax system. Others may benefit from good levels of privacy but have limitations on where you can offer your services.
It’s a good time to check out what competitors are offering and if there are any gaps in the market. Try to find a unique product or selling point to help you succeed. You can also get ideas on branding, marketing, and product portfolios.
Last but not least, research the state of the market. Projects and forecasts for the forex brokerage sector, trends, and regional differences are important to figuring out your niche.
Not paying attention to compliance
When you start applying for a forex license, you’ll be required to meet various standards and obligations. These include taking measures against money laundering and financial crime, verifying customers, and even providing information about your identity and source of funds.
Compliance varies depending on the jurisdiction, but it’s not an option. You must create policies for key aspects of your business and adhere to them. Most regulators will check to see how compliant you are and fines are steep if you don’t comply.
Entrepreneurs typically will work with a professional company that takes the legal and administrative burden off your team.
Not having a long term plan
Applying for a forex license is only a small part of the process. You need to have a solid plan for what will happen afterwards. This will include matters like ongoing license and company maintenance. Depending on the jurisdiction, there may be annual fees, reports, audits, and renewals. You may also need to submit annual statements. Any changes to structure and ownership will also likely have to be communicated to the authorities. It’s best to work with a provider who can offer a package for ongoing services.
Fast Offshore can provide a custom-made package or an off-the-shelf package to suit your needs. We will never charge you for something you don’t need, or try to sell you something you don’t want.
What else do I need to know?
Applying for a forex license is an exciting process, but going in with your eyes closed can have complex consequences. With various jurisdictions, licenses and company structures to chose from it’s helpful to have guidance.
At Fast Offshore, we have more than 23 years of experience in helping forex brokers get started. From incorporation to licensing, compliance to tax, we can provide expert advice and hands-on assistance. For any questions or queries, or to start the process, why not schedule a call with us today?
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