Eternity Law International News Forex broker license in Estonia

Forex broker license in Estonia

Published:
February 13, 2017

The fact that a forex broker has a license to carry out professional activities is a key criterion in choosing a forex broker for traders. Licenses show which regulator controls the activities and quality of the company.

Estonia is an excellent choice when choosing a jurisdiction to obtain a forex license due to the fact that Estonia is a respected jurisdiction in the EU. Also, Estonian state authorities are loyal to this type of activity if all legal procedures and requirements are followed.
According to Estonian law, forex broker services are classified as “investment services”. Legal entities operating as a Forex broker need to obtain a special EFSA license, which is regulated by the Estonian Securities Market Act, as well as within the EU – MIFID – EU Directive on Financial Instruments in the EU Markets.

EFSA license – forex broker license in Estonia

EFSA is the licensing authority for legal entities registered in Estonia, with a registered office in Estonia and operating in Estonia.
The activity that is subject to licensing is trading in securities, as well as other services that are related to securities; Forex broker services, as well as electronic money services, require an investment license. When obtaining an EFSA license, you do not need to additionally obtain a FIU certificate.
In accordance with the Estonian Securities Market Act, securities include:

  • shares or other equivalent rights that are in circulation;
  • IOUs, convertible securities, other promissory notes that have been issued and are in circulation and are not a money market instrument;
  • rights to purchase securities;
  • share in an investment fund;
  • money market instrument;
  • derivative security or derivative contract;
  • the certificate in circulation about the deposit of the security.

To qualify for a license, a legal entity must be registered as a Limited Liability Company in Estonia.
The heads of any regulated legal entity must meet certain criteria – have proper higher education and work experience in this area (you must provide a resume, diplomas of education), including the need to have an appropriate reputation (no bankruptcy cases, revocation of licenses, convictions, etc.) and so on.
Founders, who have a significant part in the management of the company, must also have an appropriate business reputation and not have criminal offenses. Also, EFSA will review the financial position of shareholders.
In accordance with the Estonian Securities Market Law, there are the following requirements for the authorized capital for obtaining a forex broker license:

  1. 50,000 euros if the legal entity provides services:
  2. acceptance and transmission of orders related to securities;
  3. execution of orders related to securities on behalf of or at the expense of the client;2) 125,000 euros if the legal entity provides services:
  4. portfolio management;
  5. organization of the offer or issue of securities;
  6. custody and management of securities for the client, as well as related activities, including the transfer of securities, pledge of securities and other actions related to the encumbrance of clients’ securities and transfer for execution;3) 730,000 euros if the legal entity provides services:
  7. transactions with securities at their own expense;
  8. securing securities or guaranteeing an offer, issue or sale of securities;
  9. In each case, it is necessary to provide confirmation of the origin of funds.

To obtain an STP license, you need to contribute a share capital of 125,000 euros, for a Market Maker license – 730,000 euros.
After obtaining a forex broker license, a legal entity has the right to carry out certification of its activities in any country in the Eurozone.

To do this, you must submit the appropriate set of documents to the Supervision Authority, which includes: the name of the state in which the legal entity is going to operate, a business plan with a detailed description of the activities and services with the translation of the necessary documents certified by a sworn translator.

General organizational requirements for personnel – Forex broker license in Estonia

The employees involved must have sufficient skills, experience and competence to perform professional or official duties.
According to the legislation, the person concerned is:

  1. a manager of a forex company and a forex agent;
  2. manager of a forex agent of a forex company
  3. an employee of a forex company and its forex agent who is involved in the provision of investment or support services or the performance of investment operations;
  4. an individual who participates in the provision of services to a forex company and whose services are placed at the disposal and control of a forex company or its forex agent;
  5. an individual who provides the relevant services to a forex company or its forex agent under a transaction transfer agreement.

Forex broker company managers – Estonian forex broker license

  1. Only individuals who have higher education, experience and professional qualifications required to run a forex company and who have an impeccable reputation can be elected or appointed as a forex company executive.
  2. The board of a forex company must consist of at least two people.
  3. Members of the board of a forex company must have completed higher education or an equivalent education, as well as the experience necessary to manage the relevant company.
  4. To apply for an EFSA license, you must provide the following documents and information (some of which may relate to a current company and not to a newly incorporated person):
  • Memorandum or Resolution;
  • Charter;
  • A document confirming the presence of the paid up authorized capital;
  • List of shareholders (with definition of their parts);Information about the shareholders of the managing holding (if any);
  • Information about members of the board of directors and management (with a detailed description);
  • Information about companies in which the applicant or manager holds 20 percent or more of the shares (with a detailed description);
  • Information about the applicant’s auditor and those exercising internal control (with a detailed description);
  • Financial information (balance sheet, income statement, annual reports in the case of an operating company);
  • Documents confirming the amount of own funds together with the auditor’s report;
  • In case of holding – if the holding is owned by a foreign entity that is the subject of financial supervision, then a certificate issued by the supervisory authority of the corresponding state is required, which proves that the specified foreign company has a valid license to operate;
  • And, with the knowledge of the supervisory authority, its activities do not contradict the current legislation;
  • Business plan;
  • Information about IT systems;
  • Description of the organizational structure;
  • Accounting policies and procedures;
  • AML rules;
  • Other internal rules that are relevant to all regulated entities or specific services;
  • The EFSA examination, application and review process takes approximately 6 months. The state fee in Estonia for applying for a license is 1000 Euro.

The cost of our company’s services for the preparation and submission of a complete set of documents, including applications, internal rules, policies, other documents that are previously agreed to obtain a license, participation in the collection of all necessary documents is from 20,000 Euro.

In case of additional work, such as lengthy discussions on the compatibility of the business with the Estonian regulation, additional proceedings with EFSA (preparation of responses to their additional inquiries, participation in meetings), an additional fee will be charged based on hourly work.

Eternity Law International employees have huge experience in obtaining forex licenses, as well as other financial licenses in various jurisdictions.
If you need help in choosing a license, please contact our specialists by calling us at the phone numbers listed on the site, or by submitting the form located at the bottom of the site page.

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