Cyprus Forex license

To operate in the financial market of Cyprus, especially in the field of Forex, it is required to obtain a Cyprus Forex license, which confirms the compliance of the company with the established standards and requirements:

• The beneficiaries’ documents proving financial education and/or previous experience in the field of finance must be presented.
• The company must have at least two managing directors and CEO, an internal auditor, a risk manager, two certified traders, compliance officers, heads of brokerage, finance, and IT departments, senior accountant.
• Having a physical office in Cyprus is mandatory.
• Development of company structure, AML policies, and business plan.
• Opening an account in a local bank is required.
• Monthly capital adequacy reporting, annual internal and external financial audits, and annual reports.
• The minimum authorized capital depends on the services provided and may vary from 50,000 to 730,000 euros.

Registering a Cyprus investment firm (CIF) is one of the main requirements for obtaining a Cyprus forex license and is a key step for running a forex business in the European Economic Area (EEA), promising numerous benefits including access to the single market and increased client confidence.

The process of establishing a CIF in Cyprus requires compliance with several conditions, including adaptation to EU anti-money laundering and counter-terrorist financing regulations.

Basic requirements for the establishment of a CIF:

• The company must appoint a minimum of 4 directors, 3 of whom are required to be Cyprus residents.
• The board of directors must have an impeccable reputation and professional qualifications.
• A physical office is required to meet the local presence.
• The minimum share capital depends on the level of license, ranging from €50,000 for a basic license to €730,000 for a full license. These funds must be transferred to a local bank account.
• Opening a corporate bank account to hold the authorized capital, providing proof of deposit of funds.
• A risk manager, a compliance officer, and internal and external auditors are required, among which the internal auditors must be Cyprus residents.

Opening a corporate bank account is the initial and critical stage in the process of licensing a forex broker in Cyprus. Immediately after the registration of the company, the authorized capital should be transferred to the account, the amount of which depends on the type of financial services provided – from 50,000 to 725,000 euros.

To do this, the following steps should be followed:

1. Registration of the company and opening a bank account

You should register your company in Cyprus and then open a corporate bank account to transfer the authorized capital.

2. Crediting the authorized capital

The newly opened account is credited with the share capital, which should be frozen for the duration of the license, confirming the financial stability of the company.

3. Obtaining a confirmation certificate from the bank

Once the capital has been credited, you must obtain a certificate from the bank confirming that the funds are available in the account. This document is included in the set of documentation to apply for Cyprus Forex License (CySEC).

4. Submission of the set of documents to CySEC

The collected set of documents, including the bank’s confirmation of frozen funds, is submitted to the Cyprus Securities and Exchange Commission (CySEC) for consideration of the license application.

This sequence of steps not only ensures compliance with regulatory requirements but also serves as proof of the company’s serious intentions and financial reliability to the regulator and potential clients.

To successfully obtain a forex license in Cyprus, applicants must prepare and submit to the Cyprus Securities and Exchange Commission (CySEC) a complete set of documents:

• A comprehensively completed application for a license with CySEC in the prescribed form.
• Details of board members, senior management, and major shareholders.
• Legalized legal registration documents, including articles of association and memorandum of agreement.
• A certificate confirming that the company has a registered office in Cyprus.
• List and details of directors and company secretary.
• A structural and organizational overview.
• Guidelines for the execution of the company’s internal operations and activities.
• An overview of the company’s development strategy for the next three years.
• AML and KYC policies.

Each member of the management team and key shareholders must be provided with:

• Certified copies of passports.
• Certificates confirming place of residence.
• Professional resumes reflecting experience in finance.
• Educational certificates showing specialization in the finance field.
• Full set of identity verification documents (KYC).
• Criminal record certificates and proof of financial stability.
• Personalized application forms.

In Cyprus, entrepreneurs can obtain 1 of 3 main categories of licenses to conduct forex business regulated by the Securities and Exchange Commission (CySEC) under Law 87(Ι)/2017. These licenses vary in terms of the level of responsibility and capabilities provided to the company, including managing client funds and ensuring regulatory compliance. Here is a brief overview of the available licenses:

• Basic License

With a minimum capital of €50,000, this license is ideal for those who want to provide investment advisory or portfolio management services. It does not involve direct ownership of clients’ funds or instruments.

• Standard license

With a minimum capital of €125,000, this license expands forex business opportunities by allowing direct straight-through processing (STP) of customer orders. This means that the company can send trade orders directly to a liquidity pool without interacting with them directly. This creates some risks for clients due to potential fluctuations in liquidity and spreads.

• Full license

With a minimum capital requirement of €730,000, this license gives companies the right to process client trades independently, acting as a counterparty. This approach provides greater liquidity and protection from market fluctuations by charging a fixed spread. The company is authorized to hold client funds and other financial instruments.

To determine the appropriate type of license and a thorough understanding of CySEC requirements, it is recommended to seek professional advice. Gofaizen & Sherle’s experts can provide a detailed overview of the requirements and assist in selecting the most appropriate license for your business.