New Regulatory Changes in Belize

Belize has become more popular as a regulatory jurisdiction for Forex Brokers over the past two years as there has been an exodus from Australia and New Zealand. This article discusses the recent financial regulatory changes in Belize, the impact it will have on Forex Brokers that currently hold licenses, and the future outlook.

First, here’s some basic information about Belize. “Belize is considered a Central American and Caribbean nation with strong ties to both the Latin American and Caribbean regions.”1 “Belize has 22,800 square kilometers (8,800 sq mi) of land and as of 2015, a population of 368,310.”2 It is bordered by Mexico and Guatemala. Here’s where it’s located:

 Belize - World Map2

 

Belize has been a regulated jurisdiction for Forex Brokers for quite some time. All of the license categories can be viewed here. Typically, the process of a Forex Broker obtaining a financial services license from the IFSC (List F) was fairly easy and took about 1 month, and the regulatory environment could have been described as “lax.” But on July 20, 2015 Mrs. Neri Matus became the new director general of the International Financial Services Commission (IFSC). This notice was published on the IFSC’s website on Oct. 16th 2015 and can be viewed here. Mrs. Neri Matus immediately began an overhaul of Belize’s financial regulatory system. Specifically for Forex Brokers, she has made it substantially more difficult and costly to obtain and hold a financial services license. The minimum net capital requirement was increased from $100,000 USD to $500,000 USD, and the annual fee was also increased to $25,000/year. Existing Forex Brokers that held IFSC licenses were granted a 2 year time window to increase their paid up capital from $100,000 to $500,000. According to the IFSC, Forex Brokers applying for an IFSC license (List F or J) need to include all of the following information in their application package in order for it to be considered:

(a.) The application forms must be properly completed and certified, and the application fee paid (which is non refundable.)

(b.) Certified Biographical Affidavits on Directors, Management, Shareholders, and Ultimate Beneficial Owners who are individuals. In the case of legal entities, the Directors, Shareholders & Beneficial Owners of the entity must also be identified.

(c.) KYC Documentation:

– Proof of ID
– Proof of Address
– Curriculum Vitae
– Professional Reference
– Bank Reference & Bank Statement
– World Compliance/World Check documentation

(d.) Business Plan – Detailed business plan including three (3) years financial projections, together with a diagram illustrating the company’s corporate structure.

(e.) Detailed Anti-Money Laundering Compliance, Complaints, and Internal Control Policies & Procedures.

(f.) Corporate Documents:

– Certificate of Incorporation
– Register of Directors and Members
– Memorandum and Articles of Association
– Certificate/Register of Shares

(g.) The proposed website name that will be used once the licence is approved.

(h.) The name of the external auditor that will prepare the audited financial statements on an annual basis.

(i.) Certificate of Qualification of Directors and Management – At least one person must possess the expertise relevant to the type of license the applicant is seeking.

(j.) Letters from either the Director, Shareholder or Beneficial Owner of the applicant company indicating awareness of the following:

– That a licensee should not offer services to residents of a country whose laws require such a licence prior to engagement of such services.
– The standard conditions attached to the type of licence.
– That the Memorandum and Articles of Association (MAA) of the Company, if already prohibits bearer shares, will not be amended to provide for the issuance of bearer shares while the licence remains in force.
– Alternatively, if the MAA provides for the issuance of bearer shares it must be amended to prevent the issuance of bearer shares and a copy of the amended MAA must be submitted to the IFSC.

As you can see from the above, the complexity of the application package has increased significantly. Additional rules have also been added that all Forex Brokers holding IFSC licenses must abide by. You can download these new rules below:

IFSC – Standard Conditions – Trading in Foreign Exchange

One of the new rules in particular stands out – “The Licensee shall not offer or transact any trading with a resident of a country whose law require a local license for this purpose, without obtaining a license.” Which simply means that if your Forex Broker holds a license from the Belize IFSC, you may not accept Australian clients without first obtaining a license from the Australian Securities and Investments Commission (ASIC). This rule seems to have been created by the IFSC so that they could protect themselves against backlash from other countries. It also calls into question the current worth of an IFSC license, as many countries in the world require a Forex Broker to be locally licensed in order to solicit the country’s residents.

Looking to the future, the IFSC has issued the guidelines below which require Forex Broker to submit quarterly trading and financial reports, require a local office, and require a local director to act as a meditor with the IFSC.

Enchanced Supervision:

– The IFSCR1 is now required to be submitted on a quarterly basis by Trading in Securities and Foreign Exchange licensees commencing 2016. It is an in-house balance sheet and income statement.
– Require a statement of net worth for all shareholders and audited statements if shareholders are companies.
– Require at least one local director to act as a mediator with the IFSC
– Require Trading in Securities and Foreign Exchange licensees to maintain an office in Belize.

Future Supervision:

– Review the IFSC Act with the intention to amend to include administrative penalties.
– Increase in capital as per the growth of assets or their risk weight. (Research to be conducted.)

*Note: in our conversations with lawyers in Belize, the IFSC seems to be placing special emphasis on complaint policies & procedures. It’s our impression that the IFSC has been trying to “reform” their image and do not wish to see it tarnished by complaints against IFSC licensed Forex Brokers.

*Note: The IFSC created a new category “Trading in Foreign Exchange Services” (List J) specifically for Forex Brokers, but it has still placed some Forex Brokers in “Trading in Securities Services” (List F), leading to some confusion.

 

Footnotes:
1“CARICOM – Member Country Profile – BELIZE”.www.caricom.org. CARICOM. Retrieved February 17,2015.
2“Mid-Year Population Estimates by Area and Sex 2008 – 2015”. Statistical Institute of Belize. Retrieved14 May 2016.

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