A Cayman business-friendly environment has made this territory a preferable center for foreign exchange brokers from many countries. To operate there and benefit from all perks of this low-tax zone it is mandatory to get a Cayman Islands Forex Broker License. This is an overview of the legal terms and the procedure for becoming authorized.
Outlook of a legal framework
An attractive tax haven, the Cayman Islands is home to many FX brokers, including some global ones that may run their offices everywhere, but decide on having their non-European and non-American clientele trade via the Cayman Island-incorporated firm. Operating there as a broker necessitates getting a permit that involves applying to the CIMA. The approval by this agency as a primary regulatory body allows to trade in futures and securities and many other activities described below.
The agency regulates the local sector of finances, including the currency issuance. It also partners with foreign agencies to assist with the consolidation of regulation. Additionally, it operates as the government advisor for all affairs in terms of supervisory, fiscal, and cooperative aspects.
Recently, it has introduced strict rules to prevent any cases of funds laundering or illegal tax evasion activities. Along with imposing due diligence procedures for entities applying for a license, CIMA has also prepared a separate set of AML policies to guarantee that all license applicants are not involved in any form of illegal practice.
Overview of the Cayman Islands Forex Broker License
Under the law, the following categories fall under obligatory authorization:
- investment management representatives and advisers;
- market makers;
- brokers and dealers;
- market agents.
Obligations for Cayman-registered institutions that offer foreign exchange services:
To become a licensed service provider, an applicant will have to incorporate a firm, especially for the purpose of providing foreign exchange activities. Also, will be needed a complete package of documents which will include the following:
- business plan;
- internal and external policies;
- data on the entity’s beneficial owners and
- employment agreements of all senior management;
- AML/CFT program including
- AMLCFT policy and procedure,
- Risk Disclosure policy,
- General terms and conditions and
- Operational policies.
- Also, an applicant must receive official approval before the employment of all directors, then nominee two directors who have financial sector experience with an appropriate education, and a certificate of good conduct;
- A firm also must contribute a paid-up capital of 100,000 KYD and provide the regulator with regular financial statements.
- The application fee is 1,000 KYD and the yearly commission is 10,000 KYD.
Normally, a submitted set of documents is processed by CIMA in 90 days. After the approval, a firm can deliver financial services including
- accepting funds;
- managing operations on the behalf of clientele;
- assessing financial instruments and
- managing securities.
According to the Cayman Island Tax Concession Law, a firm can be free from taxation for two decades by getting a special permit from the Tax Information Authority. In addition, a license applicant will need to submit fit and proper test data, which shows the firm`s perspective as an FX brokerage.
The process for applying for a CIMA Forex License is time-consuming. However, using professional assistance of our lawyers will make the procedure hassle-free. Please contact us for further information, if you consider getting a Forex broker license in the Cayman Islands.
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